Sundance Resources the Australian based iron ore producer has announced extensive cost cutting measures and Boardroom changes amidst the continued slump in iron ore prices.
The company has stated that it has undertaken these critical measures to manage its cash flow and to ensure that it can ramp up production as soon as the pricing crisis stabilises.
The cost cutting includes a reduction in the number of board members to just five including three non-execs and a 10% reduction of salaries of all those remaining.
Mr Giulio Casello, MD of Sundance, said the difficult decisions made by the company were appropriate due to the conditions facing all iron ore development companies.
Iron ore slump continues
Iron ore prices have fallen for an eighth day in a row reaching a five-year low at the end of November. The commodity has lost about half of its value this year with continued surging supply and flagging demand predicted.
Morgan Stanley said that many of the mines that have gone into operation over the past decade were currently unviable due to an unwavering supply surge led by Australia. The investment bank reduced its 2015 pricing forecast by 9% overnight to U$S79/t. This prediction is at the upper end of broader market expectations.
Analysts globally, have had to revise their expectations for the next two years, with most now estimating prices at $60 to $70/t.
Other Cost-cutting measures undertaken
For Sundance, an internal review has identified a number of additional cost cutting measures, including the reduction of staff numbers and overheads. Together, these measures are expected to deliver a significant reduction in operating expenditure in 2015 whilst retaining the ability to move its world-class Mbalam-Nabeba Iron Ore Project into production rapidly when market conditions improve. The project is located on the border of Cameroon and the Republic of Congo in Central West Africa.
The measures will ensure the continued advancement of the project, which ranks as one of the best undeveloped iron ore projects in the world based on its high grade iron ore and largely complete in-country approvals and existing mining conventions.
“These are never easy decisions to make and we want to recognise the tremendous contribution and progress made by our staff and contractors to date,” Mr Casello said.
“We do, however, believe these decisions are in the best interests of Sundance shareholders and will ultimately allow us to deliver a world-class iron ore project.”