Atlas Iron is considering asset sales and could potentially mothball its Pilbara operations as it launches an urgent review amid plunging iron ore prices.
The junior iron ore producer will review its finances over the next two weeks after the price of the steel-making commodity sank to a fresh 10-year low.
Analysts say the Australian iron ore sector is ripe for consolidation as junior miners struggle to stay afloat while the big miners, BHP Billiton and Rio Tinto, ramp up production.
Atlas said the review was prompted by an uncertain outlook as the price of Australia's top export fell below $US47 per tonne.
"Atlas has already commenced discussions with a number of its stakeholders in relation to various initiatives intended to further reduce costs and preserve value," the company said in a statement on Tuesday.
The Pilbara miner noted the iron ore price had fallen 24 per cent since it reported a first half net loss of $1.09 billion in February.
Atlas has slashed jobs in an attempt to cut costs, while its net debt had climbed to $169 million by the end of 2014.
The ongoing price weakness has forced the Perth-based company and other junior miners to continually cut costs to break even.
Atlas' share price has plunged 89 per cent while the iron ore price has halved in the past year.
Shares in Atlas have been suspended from trading while the review is carried out. The stock last traded at 12 cents.
Despite the junior miner's woes transport contractor McAleese is standing by Atlas, saying it will continue road haulage and support operations for the company.
Last week, junior Pilbara miner BC Iron cut short a five-year mining contract with Watpac as it slashed costs to combat lower prices.
Meanwhile, Australia's major iron ore miners BHP Billiton and Rio Tinto continue to flood the market despite weaker Chinese demand.
Morningstar Resources analyst Mathew Hodge said rationalisation in the iron ore sector was inevitable because of BHP and Rio's expansion.
"The majors are putting a lot of pressure on the companies lower down the cost curve so if you've got debt like Atlas you're in a really bad position for this downturn," he said.
"There has to be rationalisation of supply in one way or another."
Mr Hodge added that the West Australian government's royalty relief package was insignificant for high-cost producers like Atlas.
Mine Life analyst Gavin Wendt said ongoing weak Chinese demand could drive prices lower and force Atlas, Mount Gibson Iron, BC Iron and Fortescue to mothball mines.
"There's a definite prospect of that happening," he said.
"It's already been happening with some of the junior producers so if prices stay where they are it's inevitable other companies will have to bite the bullet."
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