From Fairfax comes a delay to the loan designed to save Arrium:
The syndicate’s concerns centre on ensuring EFIC’s loan is only secured over Arrium’s Australian mining assets and not its other assets which includes a port, steel-making operations, and its successful Moly-Cop grinding balls business.
“The lenders have made their position known – while some of the Australian trading banks are more comfortable with the position it may be that some of the overseas banks are not,” lawyer for administrators Leon Zwier said.
“We have not had a reply from Morgan Stanley,” Mr Zwier said.
…The Federal Court in Victoria heard earlier this week the $50 million loan would be used to pay Irish contractor CDE Global to supply and install two washing plants to upgrade the quality of the iron ore at Whyalla’s mines.
The new washing plants will boost supply to 10 million tonnes per year from around 7 million presently.
…”There is no certainty this is all about increasing likelihoods and probabilities. There is no guarantee. We have a $50 million borrowing and no one can say it will produce value back,” Mr Zwier told the court.
Has anyone stopped to ask why just $50 million invested in iron ore high-grading wasn’t done previously by ARI?
The iron ore business has a best case break even at $40, roughly double where the iron ore price is headed in the next few years. No wonder everyone is in such a rush. It’s doomed. Lenders are absolutely right to demand that the good assets are unencumbered by this 11th hour pump and dump by the administrators.
Even more perversely, as the iron ore price continues to collapse the steel business will see much better margins so long as it is not mining the dirt. There is also the issue that previous management was transfer pricing to make the above figures look better for iron ore versus steel, presumably to protect itself from criticism.
Meanwhile, Bluescope Steel is upgrading profits every quarter and the Whyalla smelter is eminently fixable:
All hail dirt!
