BIGGER is no longer better in the world of iron ore, with investors punishing Atlas Iron on the day it spruiked a 70 per cent increase in its reserves.
Close to $45 million, or nearly 4 per cent, was wiped off the company's value yesterday, despite the massive upgrade to its iron ore reserves and a set of quarterly results that met guidance.
Atlas rebounded from a cyclone-hit March quarter to deliver 1.5 million tonnes in the June quarter, and that result helped it meet guidance by exporting 5.57 million tonnes during the 2012 financial year.
The company said plans to export 12 million tonnes by December 2013 and 46 million tonnes by 2017 also remained on schedule, with the latter expansion reliant on the development of a new railway line through the Pilbara.
Having a transport solution has long been more important than the size of a company's assets in the infrastructure-constrained iron ore sector, and that dynamic is becoming more pronounced as investors grow fearful Chinese demand is waning.
With companies such as Fortescue Metals, BHP Billiton and Rio Tinto about to bring hundreds of millions of extra tonnes into the iron ore market in the next couple of years, analysts said investors were looking for companies that could get extra tonnes into the market swiftly, and the 2017 timeline on Atlas's 46 million tonne target raised fears of missing the best of the market.
Atlas sought to allay such fears, saying it had made spot sales to several new customers in recent months, which would hold it in good stead in coming years when it had more ore to sell.
Despite Atlas' results containing no discernable demons yesterday, the stock was punished, losing 6.5¢ to close at $1.685.
Credit Suisse analyst Matthew Hope said there was no cause for disappointment in Atlas's figures, but the market pessimism was due to the continuing slide in the iron ore price.
The benchmark price for sales into China fell to $US122 per tonne yesterday: it stood at $US134 per tonne last week.
The price is not expected to improve dramatically in the short term, but most investment banks expect it will average around $US135 for most of next year.