Aurora Metals collapse gets messy, with up to $170m owed

Collapsed Queensland miner Aurora Metals is believed to owe about $170m to its creditors.

Collapsed Queensland miner Aurora Metals is believed to owe about $170m, with small trade creditors now sitting at the back of the queue after its financiers appointed receivers over the top of administrators KordaMentha.

KordaMentha is still sorting through the company’s books, but The Australian understands Aurora collapsed owing at least $170m to secured and trade creditors – including at least $18m to the Queensland government in unpaid royalties.

KordaMentha was appointed as the company’s administrator by the federal court last week, with WA mining services company Emeco calling in the insolvency group after Aurora failed to make good on promises to pay for ongoing care and maintenance services at one of the group’s mothballed mines at Chillagoe in North Queensland.

Legal action launched by KordaMentha to protect its position suggests those investigations could spell trouble for Aurora’s former directors, with submissions made to the court indicating its board had previously refused to appoint voluntary administrators despite falling behind on a repayment plan to key creditors.

Court documents show Emeco took the unusual step of enforcing its rights over the debt by calling in KordaMentha after Aurora directors refused to agree a bailout package that would have seen Perth-based lending group Avior Asset Management put up a $10m facility to back their work at the mothballed mine – required to keep the mine in a saleable state – but which would also have required the appointment of voluntary administrators.

Emeco subsidiary Pit N Portal has been providing those services, which include pumping water from the underground mine, since late 2021 – when the mine was closed down by its operators.

But Aurora failed to pay, and in April Emeco registered a security over Aurora’s assets, as part of a forbearance deed and repayment plan.

Federal Court judge Michael Feutrill confirmed KordaMentha’s appointment this week, and said in the reasons for his decision that it was clear that “Aurora Metals failed to comply with the repayment plan set out in the deed of forbearance and repayment”.

“Pit N Portal had proposed that directors of Aurora Metals appoint administrators and that Avior Asset Management provide funding for the administration in accordance with a proposed term sheet. The directors of Aurora Metals rejected that offer and, thereafter, Pit N Portal immediately took steps to appoint the administrators,” he said.

But KordaMentha’s appointment was complicated by a mistake made by Emeco in registering its security over the company’s assets, after the wrong company name was used on the required documentation.

While Justice Feutrill resolved that issue this week and ratified KordaMentha’s appointment, trade and other unsecured creditors will now sit behind the company’s major secured creditor, Mt Garnet Mineral Finance, which appointed GrantThornton as receivers and managers this week.

Mt Garnet registered a security over all of Aurora’s assets in March 2022 – only shortly after the company was first registered, according to ASIC records.

Aurora’s major customer, China Railway Materials, also holds security over Aurora assets, ASIC records show, including mining equipment and other assets.

The prospect of another messy process to recover debts over the company’s operations will not thrill smaller trade creditors and staff believed to still be owed substantial sums after Aurora mothballed its mines in late May.

Formerly known as Consolidated Tin Mines, the bulk of the company’s assets are the legacy of collapsed base metals play Kagara – a company once worth as much as $1bn, which collapsed in 2012 as metals prices plunged at the end of the last mining boom.

Kagara’s collapse had a devastating impact on the economy in the region, with the company said to have owed as much as $95m to regional businesses and contractors when it went bust. Its failure to pay its debts is believed to have triggered the failure of dozens of other small and family businesses that relied on the company in the region.

Aurora has four underground mines including King Vol and Mungana, a 500,000 tonne a year processing plant at Mt Garnet and a 600,000 tonne processing plant at Chillagoe – all on care and maintenance.