Mining contractor RStar dumps Sanjeev Gupta over continued broken promises

Sanjeev Gupta’s Tahmoor Colliery in NSW.

Auditors, insurers, contractors, workers – the list of people who have finally cut Sanjeev Gupta loose is snowballing.

The latest is mining contractor RStar, which finally stood down its workforce at Gupta’s Tahmoor colliery over the weekend.

Gupta has kept the contractor on the go for more than a year after agreeing a payment plan with the family-owned businesses almost a year ago.

Each month just enough cash was delivered to keep RStar paying the workforce – never quite what was promised, we hear, but enough to keep RStar on the hook.

Because it’s RStar that has been paying the bulk of Tahmoor’s contracting workforce, not Gupta. Now even they have had enough, and pulled their services over the weekend – despite fresh promises, outlined in Margin Call on Friday, that a rescue package is only weeks away.

British tycoon Sanjeev Gupta.

Who could believe that, given Gupta’s history?

For months the British businessman has been lurching around like a punch-drunk boxer, ducking creditors, making a minor payment here and major promise there – anything that might hold off the final blow.

But so toxic are Gupta’s affairs that even his insurers have decided he’s a bad risk.

Tahmoor hasn’t had industrial special risk insurance – covering property damage and business interruption – since April, the company’s accounts show. The mine’s workers compensation insurer is trying to wind the company up over $4.7m in unpaid premiums.

These days they can’t even find anyone to insure the directors. Hardly a surprise, given what Tahmoor’s auditors said about their trust in board and management.

Surely this last blow is enough to convince Gupta to sell up and begone?

Although, having said that, this column has already called enough “final nails” in Gupta’s corporate coffin to keep even Dracula from rising. And he still keeps going.

The Tahmoor Colliery in NSW where RStar’s employees have been stood down.

This time it’s lender-of-last-resort Global Loan Agency Services that is supposed to be syndicating a $US95m ($145.3m) facility, of which the first tranche has already been paid. But the rest relies on the company getting insurance, convincing creditors to drop liquidation action and accept yet more payment plans, and getting the mine back going by January.

Good luck with all that, particularly now RStar has walked away.

Gupta’s GFG, of course, is still promising payment. A spokeswoman told Margin Call it had started making payments after receiving $25m from its lending syndicate, but a “delay in the next draw down of these funds” meant it didn’t pay in full. Again.

RStar is believed to be owed around the same amount as the NSW government – Gupta hasn’t paid NSW taxpayers about $29m for selling the coal they collectively own.

That’s enough for almost any family-owned business to walk away, and RStar has already shown far more loyalty to its workforce than most companies would be willing or able to risk.

Margin Call hears Rstar is meeting with unions and workers on Tuesday. No doubt there will be plenty of people angry about losing their jobs.

There’s really only one person to blame.