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08-09-2014, 10:32 PM
Western Deserts collapse will hurt contractors
THE AUSTRALIAN SEPTEMBER 09, 2014 12:00AM
Paul Garvey
Resources Reporter
Perth
A HOST of mining contractors are set to end up out-of-pocket as a result of the collapse of iron ore miner Western Desert Resources, with Leighton and Ausdrill among those exposed.
And the private mining contractor owned by Western Desert managing director Norm Gardner will also be hard hit by the miner’s collapse into administration with debts of at least $96 million.
Administrators and receivers were appointed late on Friday after the company’s key lender, Macquarie Bank, withdrew support for the group. The miner had been struggling to meet its production targets in the nine months since it started operations at its Roper Bar mine in the Northern Territory, and a plummeting iron ore price condemned it.
There had been about 270 employees and contractors working across the project, the bulk of which were employed by Leighton subsidiary Thiess.
It is understood that Thiess, the biggest contractor at Roper Bar, stood down on Saturday morning and began withdrawing its staff from the project. Leighton declined to comment.
Perth-based contractor Ausdrill provided drill and blast services at the project, and told investors yesterday that it was owed about $8m for its work.
“Ausdrill is not certain as to its ability to recoup all or any of the moneys owed to it by (Western Desert), or as to the effect of the appointments of voluntary administrators and receivers and managers on Ausdrill’s revenue for the current period,” Ausdrill said in a statement.
Like most contractors, Ausdrill was already battling headwinds and a sharp drop in profitability amid a downturn in activity and squeeze on costs across the mining industry.
The pain of Western Desert’s collapse will be particularly felt by Mr Gardner. In addition to his $460,000-plus a year salary and the $8.6m in now worthless Western Desert shares he owned, Mr Gardner’s contractor, Remote Contracting Services, was generating significant revenue from the Roper Bar operation.
The equipment hire and civil works business earned at least $14m in revenue from Western Desert over the past year, including $3.45m in the June quarter.
The ability of Western Desert’s trade creditors to recoup the money owed to them will depend on the efforts of the administrators and receivers.
While mining operations at Roper Bar have ground to a halt, it is understood there are several iron ore stockpiles at the project’s port, which may still be shipped and sold.
Confirming Western Desert’s slide into administration, the company highlighted the value sitting within its hedge position.
Western Desert had been insulated from the full impact of falling iron ore prices courtesy of its hedge position, but the protection was expected to drop away to only a quarter of its expected output.
The company said the hedge position was “in the money” by about $25m.
Western Desert’s last quarterly cashflow statement showed that the company burned through $34.3m in operating cashflows in the June quarter, with the $39.3m in product sales swamped by $62.2m in production costs and $9.5m in administration, exploration and developments costs.
In addition to the $80.6m owed to Macquarie, Western Desert owed $11.3m under a leasing facility and another $5m to pokies billionaire Bruce Mathieson, who was a director and major shareholder with a 21.5 per cent stake.
The administrators and receivers are likely to explore an outright sale of Roper Bar. Hong Kong-based commodities trader Noble Group had an offtake agreement in place and may be interested in the project’s future.
THE AUSTRALIAN SEPTEMBER 09, 2014 12:00AM
Paul Garvey
Resources Reporter
Perth
A HOST of mining contractors are set to end up out-of-pocket as a result of the collapse of iron ore miner Western Desert Resources, with Leighton and Ausdrill among those exposed.
And the private mining contractor owned by Western Desert managing director Norm Gardner will also be hard hit by the miner’s collapse into administration with debts of at least $96 million.
Administrators and receivers were appointed late on Friday after the company’s key lender, Macquarie Bank, withdrew support for the group. The miner had been struggling to meet its production targets in the nine months since it started operations at its Roper Bar mine in the Northern Territory, and a plummeting iron ore price condemned it.
There had been about 270 employees and contractors working across the project, the bulk of which were employed by Leighton subsidiary Thiess.
It is understood that Thiess, the biggest contractor at Roper Bar, stood down on Saturday morning and began withdrawing its staff from the project. Leighton declined to comment.
Perth-based contractor Ausdrill provided drill and blast services at the project, and told investors yesterday that it was owed about $8m for its work.
“Ausdrill is not certain as to its ability to recoup all or any of the moneys owed to it by (Western Desert), or as to the effect of the appointments of voluntary administrators and receivers and managers on Ausdrill’s revenue for the current period,” Ausdrill said in a statement.
Like most contractors, Ausdrill was already battling headwinds and a sharp drop in profitability amid a downturn in activity and squeeze on costs across the mining industry.
The pain of Western Desert’s collapse will be particularly felt by Mr Gardner. In addition to his $460,000-plus a year salary and the $8.6m in now worthless Western Desert shares he owned, Mr Gardner’s contractor, Remote Contracting Services, was generating significant revenue from the Roper Bar operation.
The equipment hire and civil works business earned at least $14m in revenue from Western Desert over the past year, including $3.45m in the June quarter.
The ability of Western Desert’s trade creditors to recoup the money owed to them will depend on the efforts of the administrators and receivers.
While mining operations at Roper Bar have ground to a halt, it is understood there are several iron ore stockpiles at the project’s port, which may still be shipped and sold.
Confirming Western Desert’s slide into administration, the company highlighted the value sitting within its hedge position.
Western Desert had been insulated from the full impact of falling iron ore prices courtesy of its hedge position, but the protection was expected to drop away to only a quarter of its expected output.
The company said the hedge position was “in the money” by about $25m.
Western Desert’s last quarterly cashflow statement showed that the company burned through $34.3m in operating cashflows in the June quarter, with the $39.3m in product sales swamped by $62.2m in production costs and $9.5m in administration, exploration and developments costs.
In addition to the $80.6m owed to Macquarie, Western Desert owed $11.3m under a leasing facility and another $5m to pokies billionaire Bruce Mathieson, who was a director and major shareholder with a 21.5 per cent stake.
The administrators and receivers are likely to explore an outright sale of Roper Bar. Hong Kong-based commodities trader Noble Group had an offtake agreement in place and may be interested in the project’s future.