Arrium Limited has turned its back on the iron ore expansion it built over recent years, announcing that it will close one of its two iron ore mining precincts in South Australia and cut its capital expenditure by 30 per cent.

On the day the iron ore price slumped to yet another five year low of $US66.79 per tonne, Arrium confirmed it would shut the Southern Iron operations it bought from WPG Resources for $320 million in 2011.

It also flagged asset write downs of $1.33 billion, the vast majority of which will apply to its iron ore business.

The Southern Iron operation was pivotal in the company's recent strategy to broaden its operations beyond being a vertically-integrated steel producer, to become a major iron ore exporter as well.

The strategy also precipitated the change of name from OneSteel to Arrium.

Arrium said on Friday that falls of about 45 per cent in the iron ore price had left the company "absorbing cash", and needing to "mothball" its Southern Iron assets.

The company's Middleback Ranges iron ore mines will continue to operate, but the change will see Arrium's annual iron ore production fall from about 12.5 million tonnes to about 9 million tonnes per annum.

"The redesign of the mining business announced today will provide a step-change in the mining business' cash costs and capital requirements," the company said in a statement.

Arrium expects its cost of production for product delivered into China to fall by 20 per cent to $57 per tonne.

The company expects its underlying earnings before interest, depreciation and amortisation to be between $180 million and $190 million.

The impairment warning comes just days after Citic Limited flagged a $US1.8 billion impairment on its Sino Iron project in Western Australia.

The Southern Iron assets were located close to OZ Minerals' Prominent Hill mine in the South Australian outback.