Arrium raising not a clarion call

Arrium raising not a clarion call. Arrium has become the first of the iron ore miners to raise equity in response to falling prices. The company announced it would tap shareholders for $750m to pay off debt, more than doubling its share count and devastating per share profits. In its half-yearly report, Arrium reported cash costs of about $50/tonne so it would appear to generate comfortable margins even at current prices. After adding capital expenses, however, total costs climb closer to $90/tonne. Arrium is dangerously close to losing money from every tonne it mines. Although it is not distressed today, without prices rising, it surely would have been. By surprising the market and raising money now, the company was able to access a large pile of cash on reasonable terms. Without action now, the entire business could be threatened. (VIEW LINK)