Avebury Nickel Mine: Cash crunch puts mine at risk, with $31m owed to greatest shareholder and creditor
An outstanding debt owed by a state-owned entity in Myanmar, a failed takeover bid, and an inability to list on the stock exchange have contributed to putting a West Coast mine in danger.
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A newly restarted nickel mine on the state’s West Coast is peering over the abyss amid a cash crunch caused by a swelling to debt its largest shareholder, leading to a failed takeover bid, and its inability to list on the Australian Stock Exchange.
Shareholders of Mallee Resources, owner of Avebury Nickel Mine at Zeehan, last Thursday voted down a takeover bid by the company’s biggest shareholder, Hartree Partners.
The deal, which would have provided an extra $15m of funding to Mallee Resources, but made the company privately owned, was voted down by 55 per cent of shareholders.
In advance of the vote, Mallee’s managing director, John Lamb, wrote to shareholders warning that the company’s “solvency... will be threatened” were the vote to fail.
A tiny bit of breathing space has been won, with the company getting its hands on an additional $4.2m by selling 60 million shares at $0.05 each, and selling $1.2m of nickel-cobalt concentrate to Hartree, Mr Lamb said in an August 1 update.
However, if Mallee cannot achieve a “fulsome refinancing and material cash injection to put the company on a sustainable footing as soon as possible,” Hartree may move in via a hostile takeover.
A standstill agreement, wherein Hartree agrees not to attempt the manoeuvre against the distressed company, has been signed to “[allow] for loan principal and interest payments due at the end of July to be repaid in two weeks’ time,” Mr Lamb said.
Mallee owes Hartree $31m, most of which, $25m, was provided at the end of June as an incremental loan.
Mallee, which previously had mining interests in troubled Myanmar, the government of which was ousted in a 2021 coup, reopened Avebury in November last year after it lay dormant for 13 years.
Things began positively for the mine. According to a January 31 ASX announcement, 170 staff were employed at the mine, it made $18.7m from the sale of nickel-cobalt concentrate in the quarter, and metallurgical performance improving.
However, dark clouds were already brewing.
Mallee had hoped to relist on the ASX, allowing its shares to be traded publicly and drive further investment into the firm, but it was knocked back due to its undercapitalisation.
In part this was due to $10.2m US Dollars it is owed by Myanmar Airways International Company Ltd, a state-owned airline, for the sale of Mallee’s former wholly owned subsidiary Bright Mountain Resources Myanmar Ltd.
Only $3m US Dollars have so far been repaid, with the company having to agree to a “revised” payment schedule, according to an April 6 corporate update.
And while the mine’s performance has mostly continued to improve, there is a laundry list of outstanding infrastructure needed to allow the mine to consistently achieve its “nameplate concentrate production,” i.e. optimal output.
This includes “equipment for grade control, the installation of an onsite laboratory and necessary infrastructure such as the tailings dam lift and filter press,” Mr Lamb said. Several of these projects have been commenced, using funds drawn from the $25m incremental loan.
And without a fresh injection of capital, Hartree looms.
“Without an additional source of external financing, Mallee will be unable to service the short term debt repayments as they fall due,” Mr Lamb said.
Mr Lamb was contacted for comment.
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Originally published as Avebury Nickel Mine: Cash crunch puts mine at risk, with $31m owed to greatest shareholder and creditor
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