Update: Atlas Iron Is Rationalizing Its Portfolio Further

Aug.22.14 | About: Atlas Iron (ATLGF)


Atlas Iron announces further corporate restructurings by relinquishing and selling tenements.

This wasn’t generally expected and could be a good move, given the fact this will save the company $10M per year.

The investment thesis was solely focused on the production assets and not on early exploration tenements, so there’s no change.

Atlas Iron (OTC:ATLGF) has announced it is taking additional steps to reduce the outflow of cash from its treasury. Atlas is planning to sell some non-core tenements and to relinquish other tenements and the company expects this will save the company approximately $10M per year in annual expenditures which would have been needed to spend to keep those properties in good standing. Another good plan is to sub-lease office space, but this will obviously have a much lower impact than relinquishing some tenements.

This announcement comes shortly after a previous announcement whereby Atlas Iron announced it was selling its interest in Shaw River Manganese as Atlas Iron is falling back onto its core iron ore tenements. Additionally, the company is hinting at a $25M impairment charge on other investments as it is now planning to adopt a mark-to-market valuation for its interest in Centaurus Metals (OTC:CTTZF) which has iron ore operations in Brazil.

I think it's good to see Atlas Iron is rationalizing its portfolio and it generally is a good idea to scrape some fat off the corporate structure, and giving up uninteresting tenements and sub-leasing office space is a good move. However, the company needs to make sure it doesn't limit its options in the future. I can understand the need to sell its stake in Shaw River Manganese, but I would like the company to hold onto its stake in Centaurus Metals as it would diversify Atlas Iron's country exposure. That being said, I would still prefer to hold Fortescue Metals (OTCPK:FSUMF) as exposure to lower-grade iron ore.

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