Arrium’s buyer GFG Alliance looks to renewable power, new technology and exports as Whyalla’s saving grace
WHYALLA is celebrating after a British billionaire sealed a last-minute deal to buy the Arrium steelworks. This is how Sanjeev Gupta says he will turn around the struggling operation and save thousands of jobs.
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READ BELOW: Jubilant workers say it’s time to build the future
LOW-cost renewable energy, investments in new technology and a boost to exports are key elements of a turnaround plan Arrium buyer GFG Alliance will bring to South Australia to save the Whyalla steelworks and mining operations.
Australian taxpayers have also dodged a bullet, with a spokesman for Federal Industry Minister Arthur Sinodinos saying the GFG deal was not conditional on government support, although the State Government has previously budgeted $50 million towards a deal to save Whyalla.
GFG executive chairman Sanjeev Gupta said on Wednesday night the jobs of Arrium’s more than 2500 Whyalla employees were safe, and the steelworks there had “all the attributes” of a successful business.
“There’s no reason why it can’t be profitable,’’ he said.
No details of the amount to be paid by GFG have been released, with Kordamentha aiming to get the best result possible to pay back Arrium’s $2.8 billion in debt.
The administrator has previously sold off Arrium’s Moly Cop business for $1.6 billion late last year
UK-based GFG lodged a last-minute bid on Tuesday night, understood to be “far superior” to its previous offer which had been edged out by the Korean preferred bidders lead by Newlake Alliance.
After the Koreans missed a deadline to get their funding in place by last Friday, GFG was invited back into the process and lodged a new bid Tuesday night which was on Wednesday announced as the winner by administrator KordaMentha.
The GFG deal will not involve job losses at Whyalla, with Mr Gupta saying his family had never acquired a business then set about slashing jobs.
In contrast, the GFG approach in the UK, where it claims to have secured the jobs of more than 4000 industrial workers via a number of takeovers, is based on investing in the steel business, low-cost green power and other businesses which use steel.
If Arrium had closed in Whyalla, a report from Flinders University’s Industrial Transformation Institute last year estimated up to $530 million and 3940 jobs would have been lost from the town’s economy, including the 2500 direct employees, with 5363 full-time equivalent jobs lost statewide in total.
GFG said on Wednesday it will bring its GREENSTEEL strategy to Australia, which “has been well proven in the UK’’.
That strategy involves three main elements:
BUILDING electric arc furnaces next to blast furnaces (such as there is at Whyalla) to provide a lower cost method to recycle scrap metal:
INVESTING in low-cost, long term renewable energy as close as possible to steel plants, and;
INVESTING in engineering companies which use the steel produced to make components for the advanced manufacturing sector.
GFG did not give chapter and verse on its plans for Whyalla on Wednesday but indicated the long-term viability of the mines and steelworks was its goal.
“We have a vision to create a vertically integrated and sustainable industrial business that
encompasses mining, metal recycling, primary metal production, engineering and distribution, and which also includes the use of renewable energy consistent with our GREENSTEEL strategy,’’ Mr Gupta said in a statement.
“We aim to leverage the advantages of integration across the value chain, from raw materials and metal production to high-end engineered products, coupled with supply chain and value added financial solutions.
“The Arrium business fits perfectly with this strategy and we believe it has an exciting future
leveraging our GREENSTEEL vision which has been well proven in the UK.
“Looking forward, we will continue to explore opportunities to further grow our presence in Australia in adjacent and complementary industries, including renewable energy, metals and mining.’’
It is good news for the Upper Spencer Gulf Region, which has been rocked by the closure of the northern power station at Port Augusta last year and the associated Leigh Creek coal mine.
The development director at GFG, Michael Morley, previously worked internationally at Nyrstar which is currently finishing a large upgrade of its smelter at Port Pirie.
Mr Morley said Arrium was well placed to benefit from an expected increase in infrastructure spending in Australia, and the company has already benefited from a $74 million deal struck with the planned Adani coal mine in Queensland.
“Whilst the Whyalla Steelworks has faced well-publicised operational and financial challenges over recent years, we have developed a comprehensive plan to secure its long-term future and that of the local community,’’ Mr Morley said.
“Our plan focuses on reducing the cost of iron ore feed, targeted modernisation investments, energy generation, expanding production and creating high value export opportunities.
“We are particularly excited by the opportunity for the Whyalla Steelworks to directly supply intermediate steel products to our UK rolling mills that are currently sourced from third parties.
“Whilst our plan remains subject to reaching agreement with Government, we have had regular and constructive discussions with both the Federal and South Australian Governments throughout the sale process and look forward to continuing those discussions now the acquisition has been agreed.”
The deal is contingent on Foreign Investment Review Board approval, which is expected to be given as soon as today.
The Arrium committee of creditors also has to agree to the deal.
A spokesman for Industry Minister Arthur Sinodinos said the deal did not require a sweetener from the Federal Government.
“The agreement reached between the administrators and GFG Alliance was not conditional on Government support,” the spokesman said.
Premier Jay Weatherill said on Wednesday the sale was “a great victory for Whyalla and an extraordinary victory for South Australia”.
“I think there’s going to be reinvestment in the steelworks. I think everybody can look forward to a secure future,” he said.
“I have spoken to Mr Gupta this morning to offer my congratulations and he reaffirmed his strong commitment to the long-term future of the Whyalla operations. This has been an extraordinary turnaround from the brink of collapse to now a very bright future.”
Treasurer Tom Koutsantonis said it was “far too early” to discuss details of the deal but said the State Government was “well advanced in discussions” with the Federal Government “about what we can offer”.
Mr Koutsantonis said there had been assurances from GFG that 5500 direct and associated jobs — more than 2500 in Whyalla — would be maintained.
“This city is completely linked to the operations of the steelworks,” he said.
“Think of the pressure that this community has been under. There have been divorces, financial stress and strain, redundancies. We finally now have clear air.”
Whyalla Mayor Lyn Breuer said she felt the clouds that had been hanging over Whyalla for the last 14 months had lifted.
“GFG are experienced steelmakers and miners and that adds up very well for Whyalla,” she said.
Federal Treasurer Scott Morrison labelled the deal “great news” for Whyalla and the Australian steel industry and expected no issues with Foreign Investment Review Board approval.
“The next steps are the approvals of the creditors but also the Foreign Investment Review Board process, which will move speedily,” he said.
“We have already been in a position to agree the conditions around the Foreign Investment Review Board process and I expect to sign off on that later today, which I think will give the added certainty for the workers in Whyalla.”
Uncertainty lifted — now it’s time to build for the future
By Jade Gailberger
FOR fourth-generation steelworker Larisa White, Arrium is not just a big machine.
It’s a place where real people, who she knows and loves, have spent their hardworking lives — and now where her family will have a future.
Ms White, 32, has worked as a metallurgist — a materials scientist that specialises in metal — for the past decade and comes from a long line of true-blue steel workers.
The announcement that a deal to buy the Arrium steelworks and mining operations had been signed on Wednesday parted a cloud of uncertainty that has hung above the city for 15 months.
Ms White, who met her partner, Dylan Wohling, at the steelworks, had fallen pregnant two weeks before Arrium announced it was entering administration. Daughter Laura is now seven months old. She said lots of workers had put their lives on hold, and had she and Mr Wohling known, they may have reconsidered having a second child.
But now with a new deal, it “felt like closure”.
“I’ve got no doubt that there’s now a future,” said Ms White.
“It’s not just a job, it’s a career and something I am really passionate about.”
Businesses were abuzz over the announcement on Wednesday. Foreshore Motor Inn owner Barbara Derham said her phone had been constantly ringing as people shared the good news.
“This is absolutely fantastic for the city of Whyalla,” she said. “It’s been a very uneasy journey, people were not spending money, wondering if they would have a job in the next few weeks, months.”
Whyalla High School senior leader Don Gapp said the announcement would benefit the education system, as teachers had been working hard to maintain a positive outlook for students in a stressed community.
“If we can get back to some normality we can actually start addressing the high levels of child trauma, suicide and violence which has been pretty high here for 18 months to two years,” he said.
Blights Real Estate principal Fiona Quinn said the announcement would help boost house prices that decreased in value over the past 15 months.
“This was the announcement the town had been waiting for,” she said.
“People have been looking at places but said ‘I won’t make a decision until I know that an Arrium announcement has been made’.”
Ms Quinn said “eventually (the announcement) will have a positive effect on the prices”.
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