Short sellers have switched their focus to Atlas Iron from the larger Fortescue Metals Group, as the benchmark iron ore price prepares to fall below the key $US100 a tonne mark for the first time in 20 months.
Australia's most lucrative export commodity was fetching $US100.70 over the weekend, its lowest price since September 13, 2012.
The price has fallen 25 per cent since January 2 as booming exports from Australia and patchy demand in China take their toll.
Credit Suisse analysts have noted that tight credit conditions in China and weakness in the property market are making life difficult for the steel mills that buy Australian iron ore and say downside risk will persist for iron ore prices.
All Australian iron ore producers remain profitable at the current prices but the slide is tempting short sellers to return to the sector and bet that share prices will continue falling.
According to the latest data compiled by the Australian Securities and Investments Commission, short sellers appear to be circling Atlas rather than their traditional target in times of iron ore weakness, Fortescue.
The percentage of Fortescue shares sold short has barely changed since the bull market for iron ore in late October 2013 and was standing at 5.45 per cent at the last count on May 12. The percentage of Atlas shares sold short over the same period has more than doubled, from 4.84 to 11.53 per cent.
The situation is at odds with the previous big iron ore price fall on September 5, 2012, when 7.39 per cent of Fortescue shares were sold short compared with just 1.24 per cent of Atlas shares.
The differing mood appears to reflect growing confidence in Fortescue's ability to service its debt. Atlas was debt-free in September 2012 but now has a fully drawn $272 million debt facility.
Atlas' inability to secure a rail solution for some of its stranded iron ore deposits also appears to have attracted the shorts.
Atlas managing director Ken Brinsden said the debt facility was accompanied by $372 million of cash in the bank at the company's most recent results, meaning there was no need for concern over its debt.
''We're well and truly net cash with plenty of liquidity there so we are not agonising over the payment of debt,'' he said. ''Nobody wants to see the iron ore price go down but we can still make decent cash flow.''
Atlas is continuing to expand production towards 15 million tonnes a year and Mr Brinsden said he was confident that long-term ore prices would be sufficient to make healthy profits. ''On average, we still think we have relatively healthy iron ore pricing and as a result we think we have a strong niche in the Pilbara,'' he said.
Of 22 analysts counted by Bloomberg, 13 rate Atlas as a buy while only one is recommending a sell.
Fellow iron ore exporters BHP Billiton and Rio Tinto had less than 1 per cent of shares sold short on May 12.
Rio boss Sam Walsh said investors should get used to prices around $US100 a tonne and, as the lowest-cost producer, Rio was untroubled by the falls.
''If you look at the forward curve, if you look at forward development, prices around where they are today are going to continue for some time,'' he said on Friday. ''Regardless of what the price is, we will be the last one standing.''