KordaMentha claims government funding top up is vital in billion-dollar Whyalla rescue

The administrator warns it can’t keep propping up Whyalla steelworks and mines unless immediate government action is taken.

New court documents reveal Whyalla Steelworks administrator is pouring millions into the ailing business and claim without more government dollars “it is unlikely we can continue OneSteel business operations beyond six months from our appointment”.

KordaMentha’s team claimed “time is of the essence” to get the Whyalla steelworks and mines on the market following its appointment as administrator of OneSteel Manufacturing in February.

Funding concerns were raised as the administrator started its fight to wrestle control of the steelworks’ port from GFG Alliance in the Victorian Federal Court on Monday.

Administrator Mark Mentha claimed in a filed document that the sale of the OneSteel business could not continue until the port – used to export iron ore and copper concentrate – was brought under its control.

“Currently the day-to-day operations are continuing to generate losses in excess of $1m a day,” Mr Mentha said.

“In addition, we are continually required to inject capital into the steelworks because of the poor state of the OneSteel plant and equipment, including operations relating to the port.”

A $2.4bn government funding package was announced to support Whyalla and its crisis-ridden steelworks and mines after GFG Alliance was ousted by the State Government.

This included $400m to fund the administrators and staff, paying BlueScope steel as an expert adviser, and to pay for general working capital of the business.

Ships previously were stranded in waters outside Whyalla Port when workers downed tools over owner GFG Alliance failing to pay bills, and Mr Mentha said port services were integral to operations and a sale.

GFG Alliance creditors meeting in Whyalla during March. Administrator Mark Mentha and Premier Peter Malinauskas. Picture: Brett Hartwig

The lodged document said that “if the issues in relation to the port are unable to be resolved as a matter or urgency, we will not be able to continue to run the business as usual, stabilise the business or prepare the business for sale.”

Mr Mentha’s document claimed the OneSteel sale needed to happen soon “because of the quantum of the current daily losses, the limited funding of the administrators”.

“If the administrators run out of funding or the sale and recapitalisation process cannot be undertaken before that time, or the sale process fails because of an inability to pass title to key assets or it is otherwise unsuccessful then OneSteel’s operations may need to close down,” it said.

In its Federal Court statement, KordaMentha and OneSteel Manufacturing – the owner of the steelworks which is now in administration – wanted a “purported lease” struck out.

The lease was entered into by OneSteel and Whyalla Ports on June 29, 2018.

Federal Court judge Justice Mark Moshinksy ordered on Monday that parties head to mediation, and listed the case for hearing on May 5.

Premier Peter Malinauskas has previously indicated the state government would consider further funding to ensure the sale process was supported.

While Energy Minister Tom Koutsantonis today said “we have full confidence in the administrators and support any action they deem appropriate in regard to Whyalla Ports”.

GFG Alliance was contacted for comment.