Aussie-owned West Coast mining company in trouble
Owner of controversial Tormin mine is in business rescue
Much of the West Coast has been the target of mining operations, including Australian owned Tormin mine. Archive photo: John Yeld
- Employees at Tormin mine on the West Coast have been told payment of their August salaries will be delayed because of a severe cash flow shortage at Mineral Sands Resources which owns the mine.
- Oil pollution from the recent wreck of the MV Ultra Galaxy cargo ship added to Tormin’s problems, but financial woes started earlier.
- The company now owes creditors “a lot of money”.
- The parent company in Australia is also experiencing difficulties, and has voluntarily suspended trading on the Australian Stock Exchange.
The controversial Australian-owned company mining heavy minerals on beaches near Lutzville on the West Coast has hit major operational and financial problems, and has appointed business rescue practitioners to help it pay creditors and stave off bankruptcy.
Mineral Sands Resources (MSR) owns the Tormin mine where production problems started last year. Things got worse in July this year when the Panama-registered cargo vessel MV Ultra Galaxy ran aground off one of the West Coast beaches where MSR holds mining rights.
The vessel spilled 500 tons of fuel oil and its full cargo of fertiliser into the sea before breaking up. Some of the beaches in the vicinity, not currently being mined, were polluted.
Workers at the company have been told that they will not receive their August salaries.
MSR is 50% owned by Australian parent company Mineral Commodities Ltd (MRC) that has also run into financial difficulties and has voluntarily stopped trading on the Australian stock exchange.
In its notice to shareholders, MRC cites the MV Ultra Galaxy wreck as a factor in its problems and says it can no longer make any payments to MSR.
Late last year, the two companies withdrew long-running defamation cases – described by the courts as SLAPP suits – against a group of South African environmental lawyers, community activists and a social worker. However, the executive chairperson of MRC, Mark Caruso, who had by then been ousted, has not withdrawn his personal damages claims against three of them.
The two companies’ latest financial problems were publicised on Friday 30 August in a lead story in the West Coast regional newspaper, Ons Kontrei.
Business rescue
In a sworn statement, MSR director Russell Tipper, who is also a non-executive director of MRC, said he and his director colleagues had resolved to place the local company in business rescue as it was “financially distressed” as a result of its 100% ownership of Tormin.
Business rescue refers to the legal process of bankruptcy protection for struggling businesses – companies, close corporations, and state-owned enterprises – under the Companies Act.
MSR’s litany of woes outlined in Tipper’s statement included:
- Throughout 2023 and 2024 frequent storms and heavier than usual seas continuously damaged the essential water supply drawn from the ocean.
- There were delays in finding an engineering solution for this water supply.
- in March this year, the liner of the main storage dam was damaged and the dam had to be drained to be repaired.
- The resulting insufficient water supply in turn reduced production , and this caused additional repair costs and “an environmental incident” [not explained].
- There were problems in March last year with the processing of minerals, including blockages and delays in the secondary processing plant.
- Multiple failures of the mining equipment fleet reduced the excavator fleet to zero and the trucking fleet to only two of six self-owned trucks.
- There were delays in sourcing rental equipment suitable for working in the harsh terrain, and additional fleet was rented at increased costs.
Tipper added that the MV Ultra Galaxy had been wrecked opposite a beach intended to be mined within two months, and subsequent oil spill from the stricken vessel on 29th July “presented risks to economic mining of the mineral sands”.
Also, flooding had blocked the access road for approximately two weeks, prevented deliveries which caused delays in payments from clients.
“The company is financially distressed and requires time to trade out of its difficulties and to pay its creditors. The Company will be in a financial position to pay its debts in due course,” Tipper said.
Johannesburg-based business restructuring firm Engaged Business Turnaround has been appointed to manage the business rescue.
Letter to staff
In a notice from the business rescue practitioners dated 20 August and headed “Payday August 2024”, all staff were told that the company did not have available cash and that payment of their August salaries would be delayed.
In a letter, Liam Royce, one of three business rescue practitioners, told staff they were negotiating with buyers of the company’s products, “so that money can start flowing back into the company”. But the company owed “a lot of money”, he said.
“We understand that this is a very difficult situation for our employees and that we cannot give you a clear answer on when normal operations will resume but we hope that we will be in a position to do so in the next week,” he said.
Share trading suspended
On 19 August, MRC requested the Australian Stock Exchange to immediately suspend trading in its shares.
In a quarterly report on its website, MRC said there had been discussions with a garnet producer about buying MRC’s interest in Tormin and a loan to MRC had been negotiated. But the loan had not been drawn down because of the wreck of the MV Ultra Galaxy.
“While there has been some immediate oil contamination, it is too early to assess the extent and impact on the mineral resources and mining areas on the Tormin beaches, a length of coastline that extends over 10km,” MRC said.
Wreck
In a press release on 23 August, the South African Maritime Safety Authority (SAMSA) announced that oil and fuel removal from the grounded MV Ultra Galaxy had become “a lost cause” and that the removal of the wreck was its next target.
The vessel had “completely broken up” and a tender had been issued to remove the wreck.
“Inspections conducted by foot, drone and helicopter indicate that the oil on the mining beaches has been cleaned and that there is no visible oil slick or contamination along the beaches, extending as far down as the Olifants River mouth and 5km north of the wreck.
“Clean-up crews remain on high alert and are on-site in full force, with any resurgence of oil only being sighted on the beaches immediately in front of the vessel.”
A spokesperson for MSR said they were not able to comment on Tuesday but should have more details later this week.
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