Aurizon has lost almost $4bn of its market capitalisation in just over seven weeks, as the threat of losing a key WA iron ore contract fuelled investor uncertainty following a profit warning announced just before Christmas.
The Queensland-based rail operator, which was floated on the ASX in by the state government in 2010, has seen its share price slide to a close of $3.75 overnight, after peaking on December 1 at $5.62.
The $1.87 per share slide represents more than a third of Aurizon’s December 1 market capitalisation, the equivalent of roughly $3.96bn in value.
The company’s share price slid 12% on December 23, after the board downgraded its annual above rail forecast by roughly 8% and announced around $215m in asset impairments.
This was further compounded last week when Chinese steelmaker Ansteel signalled it may pull out of its joint venture with Gindalbie, the 7mtpa magnetite concentrate Karara mine in central WA.
If Ansteel pulls out of Karara, Aurizon could lose the haulage contract, which makes up a significant portion of its overall iron ore business.
This exposure to the struggling iron ore sector, coupled with the December 23 downgrade announcement, has left investors spooked, according to market analysis.
A column in the AFR this week also suggested the sudden departure of Aurizon’s head of operations, Mike Franczak, did not sit well with investors, either.
Franczak joined Aurizon from Canadian Pacific in 2013, and is credited with bringing Aurizon’s operating metrics in line with North American standards.
The AFR has suggested Fraczak wanted chief executive Lance Hockridge’s position, and grew impatient. His departure, scheduled for March 2016, was announced on December 16, 2015.