More than 600 Atlas Iron workers face an uncertain future as the Pilbara miner fights for survival after its credit rating was downgraded.
Atlas is considering asset sales and possibly mothballing its Pilbara mine sites as it undertakes an urgent review of its finances over the next fortnight, in response to a plummeting iron ore price.
The Perth-based company cut 11 per cent of its workforce four months ago, and hundreds more workers now face the prospect of being let go.
Atlas has declined to offer further updates to workers and investors until its review is complete.
The former market darling borrowed heavily to fund the expansion of its mines two years ago, drawing debt of $338 million and net debt of $169 million by the end of 2014.
Ratings agency Standard and Poor's expects Atlas to generate losses in the March quarter and says the company could burn through all of its $169 million in cash within the next 12 months.
S&P downgraded the company's corporate credit and secured debt ratings to CCC from B- on Wednesday because of concerns its liquidity position could weaken.
"Although we believe Atlas Iron should have sufficient liquidity to fund its interest payment due in June 2015, failure to arrest the negative earnings trend could quickly deplete its cash holding within the next 12 months," Standard & Poor's credit analyst May Zhong said.
The price of Australia's top export is about US$48 per tonne, indicating Atlas is losing around US$10 to US$15 per tonne on its shipments to China.
S&P estimates Atlas' all-in break-even cost is between the "high US$50s and low US$60s" per tonne.
"A structural improvement in Atlas Iron's cost profile is key to its operating efficiency and its ability to ride out the iron ore downcycle," Ms Zhong said.
The company's share price has plunged 89 per cent in the past year as major iron ore miners BHP Billiton and Rio Tinto continue to flood the market despite weaker Chinese demand.
Mine Life analyst Gavin Wendt said China's reluctance to build up its stockpiles had already led to the collapse of small, high cost iron ore producers such as Sherwin Iron, Western Desert Resources and Shree Minerals in 2014.
"Companies like Atlas are the last companies standing in terms of the independent juniors and it's not going to get any easier," Mr Wendt said.
BC Iron has a bit more wriggle room than other junior companies, he said.
Atlas shares have been suspended from trading until the completion of the review, and last traded at 12 cents.
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