The company already mothballed its Southern Iron operation this year in the wake of the slump in the iron ore price.

But since then, the iron ore price has fallen further, resulting in a new plan to lower the cash breakeven price for the Middleback Ranges operation to around $US50 per dry metric tonne for the 2016 financial year.

Arrium said at current prices, its new lower breakeven cost would deliver an average contribution of around $A16/dmt.

Broken down, the company is eyeing a free-on-board loaded cash cost of roughly $US26 per wet metric tonne and a total cost and freight into China cash cost, including capital expenditure, of $45/dmt.

The company is redesigning the orebody and re-optimising the pits.

Capital expenditure is being cut to just $4/t, down by around $A70 million from earlier expectations of $13/t.

Sales targets for FY16 are 9-10 million tonnes at around 58.5% iron, while further capex cuts of around $140 million beyond FY16 are expected to reduce sales to 6-8Mt in FY17-19.

The company said it was on track to realise group costs savings of $60-90 million in FY15-16.

Arrium expects to record a further asset impairment charge of around $320 million in its full-year accounts, mainly due to lower iron ore prices.

It adds to the $1.3 billion write-down announced in January and associated with the closure of the Southern Iron operation.

The latest impairment is expected to add three percentage points to Arrium’s gearing ratio, which stood at 32.6% at the end of December.

Debt at June 2015 is expected to be $1.75-1.85 billion, up from $1.4 billion at the end of December, due to lower earnings as a result of lower iron ore prices and foreign exchange impacts.

Underlying earnings before interest, tax, depreciation and amortisation for FY15 are expected to be $335-350 million.

The company posted first half underlying EBITDA of $189 million, but had flagged a stronger second half with underlying EBITDA of $180-190 million.

Arrium has started a strategic review of its business in light of the current iron ore price following a detailed assessment of its balance sheet and portfolio.

The company’s key priority is debt reduction, and it said it wouldn’t rule out the divestment of major assets.

Arrium managing director Andrew Roberts said the company had made progress in reducing costs across the business.

“Our Mining Consumables business is continuing to perform strongly, and we are seeing significant improvement in the performance of Steel,” he said.

“However, despite the benefits from restructuring Mining, and stronger earnings in our Mining Consumables and Steel businesses, the extent of the deterioration in iron ore prices means we have had to adjust our expectations around the timing and rate of debt reduction.

“The review will consider a range of options to deliver the best outcome for shareholders, a resilient business with a stronger and more robust balance sheet going forward.”

The company will provide more details of the review at the release of its full-year results on August 19.

Shares in Arrium dropped 1.8% to 15.7c.