GFG Alliance boss Sanjeev Gupta says he aims to get Whyalla steelworks back to break-even by mid-year

GFG Alliance boss Sanjeev Gupta hopes Whyalla will return to break-even by mid-year as rival BlueScope flags a potential interest in the loss-making steelworks.

British industrialist Sanjeev Gupta at the Whyalla steelworks.

Sanjeev Gupta says the Whyalla steelworks is turning over $13m-$14m per week, and he hopes the operation will be breaking even by mid-year, after being at “death’s door” in recent months.

But the executive chairman of GFG Alliance would not give a specific date for when creditors at the steelworks will be paid in full, saying they will be paid progressively as the business ramps back up to full production.

GFG last week struck a crucial agreement with its global creditors, bringing to an end a four-year process precipitated by the failure of the company’s financier Greensill, which at the time landed GFG with a $US5bn debt burden.

Mr Gupta announced on Friday that a deal had been agreed to – although not legally finalised – which would wipe the company’s slate clean globally – while also announcing GFG would sell all or part of the Tahmoor coal mine in NSW, with bids expected in the $800m range.

GFG is also trying to finalise a $US100m debt package, with that money to go towards operational costs and paying creditors at Whyalla.

Mr Gupta told The Australian that the plan for the rest of the financial year was to execute on the company’s “Back to Black” plan, normalise its payment terms with creditors – rumoured to be owed in the vicinity of $300m – and get the steelworks to a break-even point.

The steelworks has been quiet in recent months as the blast furnace was brought back online.

“Back in December we were basically at death’s door, and my best people, even despite the best efforts throughout the year were losing hope, so it was bringing that back from the jaws of death,’’ Mr Gupta said.

“So I’m very happy that we managed to rescue the plant, the plant is still delicate of course.

“That was part one of the plan. Now we’re starting the steel production phase, the ramp up phase, so revenue is starting to flow.

“We’re in double-digit territory per week, we’re generating $13m-$14m per week, which starts to normalise things.

“That’s the most important part of this equation, we need operating revenue, which will help us normalise everything.’’

Mark Vassella, the CEO of rival BlueScope, said he would run a close eye

over the Whyalla steelworks and related iron ore mines in South Australia if they hit the market.

“We’re watching that situation closely,” he said. “We feel for the people in Whyalla. We’ve assisted over the last year or so where we’ve been asked from a technical and an operational point of view.”

Mr Vassella said Whyalla was a “critical asset” that BlueScope had looked at and that he recognised the potential for direct reduced iron (DRI) production as part of efforts to reduce carbon emissions in steelmaking.

“There’s the significant iron ore reserves as part of the Whyalla assets that we’ve talked about publicly as potentially an opportunity around DRI, and there are enablers in South Australia that lend themselves to DRI production,” he said. “Of course, we’d be interested in having a look at the right time.”

Mr Vassella said BlueScope had no exposure to the Whyalla steelworks at present and would not take on any exposure.

The Whyalla steelworks was plunged into a loss-making position after two major outages over the past year, and returned to steelmaking in January. Mr Gupta has said in the past the broader business has pumped more than $400m into Whyalla to keep it afloat during this time.

Mr Gupta said the company had made the “difficult decision” to sell the Tahmoor coking coal mine, which would generate a “surplus of equity capital which we can deploy on whatever investments we want to make and certainly Whyalla is amongst them’’.

“What is important for Whyalla is the short to medium term which is steady production, production revenues, debt capital and equity capital coming from within the business.’’

Mr Gupta said there was not a specific date at which the company’s creditors would be paid in full, but said the creditors at Whyalla, who continue to work with the company, would be progressively paid as the business recovered.

“An operating business, its prime source of money is its revenue,’’ Mr Gupta said.

“At the moment our revenue has come back to the tune of $13m-$14m per week, it used to be much higher than that.

“These are operating creditors, they’re our suppliers, they’re our partners, they are supplying goods and services to us, and we’re paying them for those, and because of the stoppages last year they’ve been stretched.

“They all turn constantly and as the churn starts to get going they’ll turn faster and terms will get more normalised and shortened.

“They understand the problems, some of them are impatient obviously, nobody likes to be delayed, but they are working with us collaboratively.’’

Mr Gupta said the $US100m debt package would provide a “sugar rush”, but that the fundamental solution was for the steelworks to return to profitability.

He said he had given his team the target of achieving “run-rate break-even” within this financial year.

“Whether we’ll achieve it or overshoot a bit we’ll see, but that’s the target,’’ he said.

Mr Gupta said GFG had been using revenue from Tahmoor to help prop up Whyalla, which then caused a shortage of capital at Tahmoor, where the company recently stood down most of the workforce on full pay.

“It’s a very profitable business. People who were involved in the business around us saw that there was a shortage of capital,’’ he said.

“That incited some unsolicited bids. We had some good unsolicited bids which prompted the board to consider its options.

“As we step out of Greensill into the new era we need capital, we need to have freedom of liquidity, and that prompted the sale process.’’

Mr Gupta said it would be an “expeditious” process, however would still take likely three to six months to finalise.

Mr Gupta said regarding the Greensill debt deal, “it has been an intense four years, four years of purgatory for us’’.

“Now we have finally got a commercial agreement, we do need to turn that into legally binding documents, which is a process in itself,’’ he said.

“In the long term that means we have normal global debt and hence we have freedom of capital.’’

Mr Gupta said the past four years had been difficult not only because of Greensill, but the pandemic, Ukraine war, and oversupply issues last year had also challenged the company.

“We’ve faced all of those challenges and come through, so yes I am positive about the future,’’ he said.

“The market’s already showing signs of recovery this year, even in terms of geopolitics my view is that things will settle down even better than they were previously, and we will see some stability, interest rates will come down, housing starts will start again.

“It’s a cyclical business, things will turn again and Greensill will be gone, so the combination of those things does give us positivity.’’

It was revealed recently that GFG subsidiary Liberty Primary Metals Australia, which operates the steelworks, owes the SA government “tens of millions” in unpaid royalties and a further $15m or so to SA Water.

Originally published as GFG Alliance boss Sanjeev Gupta says he aims to get Whyalla steelworks back to break-even by mid-year