Atlas Iron (ASX: AGO) is an emerging iron ore company with iron ore projects near the world’s largest iron ore port, Port Hedland, in the Pilbara region of Western Australia.
The Pilbara region is the world’s premier iron ore region and is also well positioned to supply key steel markets in South East Asia.
AGO’s strategy is to grow production over time through aggressive exploration across its prospective landholdings and strategic value-adding acquisitions in the Pilbara region.
It’s acquisition of Aurox Resources and Giralia Resources are 2 examples.
The year to 30 June 2011 saw AGO report its maiden profit of $169 million as iron ore prices strengthened over the year. In the six months to 31 December 2011 (1H) AGO reported that mining, haulage and shipping were impacted by adverse weather while in January 2012 Tropical Cyclone Heidi also caused damage to the Utah ship loading facility in Port Hedland.
The 1H result saw strong underlying growth with a 77% increase in underlying profit to $62 million while revenue from ordinary activities leapt ahead by 69% to $341 million.
However, one off items affected the 1H reported result as non-cash write downs on both the Yerecoin magnetite project sale and the Balla Balla magnetite project sale saw reported profit fall to just $6 million.
Excluding the one-off items, AGO’s 1H result showed continued growth and the company remains in fine financial shape with cash of $377 million and a balance sheet equity ratio of 90% as at the close of the 1H.
Despite the iron ore sector coming off the boil in recent weeks, AGO’s long term future remains bright and its financial position alone makes it an attractive takeover target, while larger miners may look to take advantage of AGO’s lucrative iron ore assets.
The shares could remain weak in the weeks ahead which could present a buying opportunity.
Status: GROWTH BUY
AGO’s shares today traded at $2.89
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