Controversy escalates over John Canavan-linked Queensland coal mine
Glencore has been locked in dispute with John Canavan’s company since July over more than $35m worth of cash calls.
The brother of former federal resources minister Matt Canavan lodged a $61.7m claim against the coal company he controlled only weeks before mining major Glencore called in receivers to seize control of its share in a Queensland mine.
Glencore called in McGrathNichol as receivers to ICRA Rolleston Pty Ltd over $35.2m in debts on December 8. ICRA bought a 12.5 per cent stake in the Rolleston coal mine from Japan’s Itochu in 2018 for an undisclosed sum. Its sole director is John Canavan, brother of the former resources minister.
Documents filed to ASIC by ICRA Rolleston’s administrators show a second company controlled by Mr Canavan, Winfield Group Investments, lodged a $61.7m claim with the administrators ahead of McGrathNichol’s appointment, as part of a running dispute with Glencore over coal sales from Rolleston that triggered the appointment of the receivers.
Glencore has been locked in a dispute with Mr Canavan’s company since July over more than $35m worth of cash calls to fund the mine’s operations, according to a case fought in the Queensland Supreme Court, after ICRA failed to make payments as the thermal coal price plunged amid the coronavirus crisis.
Glencore appointed McGrathNichol as receivers of ICRA’s 12.5 per cent share in Rolleston in early December, after the Queensland Supreme Court knocked back a challenge by ICRA to the validity of the cash calls made by the mining giant.
But, although McGrathNichol has already begun to seek potential buyers for the stake in Rolleston, any sale could be complicated by both the coal price and by ongoing litigation over ICRA’s core complaint against Glencore — that the mining giant breached the joint venture agreement at Rolleston by not doing all it could to get the best price for the mine’s coal as the price plunged as a result of the global pandemic.
Court records show that ICRA’s share of Rolleston’s costs were $14.4m greater than the sales revenue from the mine when the court case was launched in August, with Glencore forecasting another $4m shortfall by the end of the year.
But that was as thermal coal prices approached long term lows of around $US50 a tonne. Benchmark prices have now tracked back up to about $US85 a tonne, putting Rolleston back into the black, with documents filed by ICRA’s administrators showing Glencore is holding about $8.6m from ICRA’s share of coal sales from the mine, partially offsetting the $35.2m in unpaid cash calls.
Court documents seen by The Australian indicate ICRA sought to terminate Glencore’s right to sell its share of Rolleston’s coal in July, and instead sell the coal through Mr Canavan’s Winfield, arguing the mining giant was “stockpiling coal and not selling it, for whatever (presently unclear) reason, but then continuing to make cash calls against ICRA”.
“Glencore has ignored buyers which have been introduced by ICRA to Glencore, and has refused to report about its own marketing efforts, such that ICRA is unable to make informed decisions or understand its financial position. The consequence of this conduct has been to starve ICRA out of the Rolleston JV,” the court documents say.
Glencore has denied the allegations, although it accepted in its own filings to the Supreme Court there would be an issue to be tried, based on a shortfall in sales against the joint venture’s budget — although the company also argued those forecasts should be disregarded given the impact of the coronavirus pandemic and China’s coal bans on the broader market for Australian coal.
ICRA’s claims over the sales contract are due to return to the Queensland courts in early 2021, and documents filed with ASIC indicated Winfield’s $61.7m claim to the ICRA administrators relates to sales commissions that Winfield would get if it were allowed to sell its share of Rolleston’s coal.
Glencore controls 75 per cent of the mine, with Japan’s Sumitomo and ICRA each owning 12.5 per cent.
Filings to ASIC by ICRA’s administrators show Mr Canavan estimated ICRA’s total potential debts at more than $243m, although the overwhelming majority of those relate to contingent liabilities if the company defaulted on agreements with insurers and bond surety companies.
ICRA’s administrators accepted only $30.7m worth of debts for voting purposes at a December 21 creditors meeting, including $29.6m to Glencore. The $61.7m claimed by Winfield Group Investments was excluded as the administrators ruled it was a “future claim”, depending on the result of the litigation.
Mr Canavan declined to comment on the matter on Monday, as it was still before the courts.