Tahmoor Coal workers stood down as Sanjeev Gupta’s cashflow woes infect another operation

Workers at Tahmoor Coal in NSW have been stood down on full pay and production curtailed, as rumours swirl that Sanjeev Gupta’s debt worries have spread beyond Whyalla.

GFG Alliance executive chairman Sanjeev Gupta. Picture: AFP

Hundreds of workers at GFG Alliance’s Tahmoor coal operations in NSW have been stood down on full pay while operations are run at reduced capacity, as rumours swirl that Sanjeev Gupta’s global group has accumulated significant debts with contractors in the region.

The Tahmoor colliery, owned by SIMEC Mining which is part of Mr Gupta’s beleaguered GFG Alliance, has been a cash cow for the global group since it was purchased from global commodities giant Glencore in 2018.

However, it is understood that Tahmoor Coal has run into financial problems and is not paying contractors, mirroring issues in South Australia, where GFG subsidiary Liberty Primary Metals Australia (LPMA) – which operates the Whyalla steelworks – owes contractors and the state government large sums of money.

The SA government this week revealed that LPMA owed a figure in the “tens of millions” of dollars for unpaid royalties, while rail haulage operators Pacific National and Aurizon stopped hauling freight for LPMA some months ago due to non payment.

Numerous contractors have spoken on and off the record about not being paid by LPMA, which sacked about 50 white-collar workers around the middle of last year in a cost-cutting measure.

Sanjeev Gupta during a tour of the Whyalla steelworks.

A spokesman for GFG on Friday said: “At Tahmoor colliery employees are being paid in full while mining operations are at a reduced capacity for a short period.

“We expect to return to normal production soon.’’

Tahmoor Coal employs about 400 people directly or as contractors.

Coal revenue for the 2023 financial year at LPMA came in at $598.2m, which was down from $846.7m the previous year, providing a solid financial underpinning for GFG’s Australian operations in those years.

LPMA’s financial accounts for the 2024 financial year have not been lodged with the corporate regulator and are overdue.

The company this week told The Australian it was working with its auditors to have the documents filed.

LPMA was debt free at the end of the 2023 financial year, but Mr Gupta told The Australian late last year the Whyalla steelworks and iron ore operations had been costing it $1m per day, and had plunged into the red after previously achieving profitability.

LPMA is currently trying to bed down a new $US100m debt facility to fund operations and capital works at Whyalla. However, that deal was expected to be signed off by the end of December.

The company this week said it now expected the debt deal to be done “in the next few weeks’’.

The steelworks was out of action for two extended periods last year.

The company experienced two extended steelmaking outages at Whyalla in South Australia’s upper north last year, and the blast furnace came back online in early January.

Mr Gupta has plans to convert Whyalla to a “green steel” operation by installing a new electric arc furnace and direct-reduced iron plant.

The timeline for those projects, which would easily cost more than $1bn, slipped initially from 2025 to 2027 and now there is no set deadline, as Mr Gupta said the company needed extra gas supplies to Whyalla before any plan could go ahead.

He last year told The Australian that debt funders would be lining up to finance the new infrastructure. But sources have told The Australian that the business would struggle to raise new debt funding.

Ratings agency Moody last year downgraded the debt held by Mr Gupta’s other Australian company, InfraBuild, to a lower tier of junk with a negative outlook, given its “material decline” in operating performance over the previous 12 months.

The Australia-based steel products maker’s credit rating was downgraded from B3 to Caa1, indicating the debt is “speculative, of poor standing and are subject to very high credit risk’’, according to Moody’s criteria for debt ratings.

“The downgrade of InfraBuild’s ratings reflects the material decline in operating performance over the last 12 months due to softening market conditions, resulting in credit metrics breaching thresholds set for the previous rating as well as pressure on InfraBuild’s financial covenant levels,’’ Moody’s said.

“We understand the company received a covenant waiver for August 2024 and remains in late stage discussions with lenders on amendments to its covenant thresholds.’’

Moody’s said it was its view that the company’s current capital structure was unsustainable “given its materially high debt costs which we expect will result in negative free cashflow over the next 12-18 months and continue to put pressure on InfraBuild’s credit metrics and liquidity profile’’.

The Australian this week reported that a Singapore-based subsidiary of Mr Gupta’s Liberty Group – part of GFG – had been hit with a $US52.8m judgment in London’s High Court, in a case where Liberty argued it could not afford legal representation.

Coal has been mined at Tahmoor since the late 1970s.

Originally published as Tahmoor Coal workers stood down as Sanjeev Gupta’s cashflow woes infect another operation