Palmer propping up firm led by Wang

THE public company majority owned by Clive Palmer and led by his party's senator-elect Zhenya Wang is in financial trouble.

Successful Palmer United Party Senate candidate Zhenya Wang with Clive Palmer.

THE public company majority owned by Clive Palmer and led by his Palmer United Party senator-elect Zhenya Wang is in financial trouble and has been saved from the risk of insolvency in the past three months by cash injections from the resources tycoon totalling $421,000.

New financial accounts reveal Mr Palmer's cash transfers -- paid in three lots underpinned by a "letter of support" -- has kept the lights on and permitted Mr Wang to continue to draw a salary as chief executive of the cash-strapped ASX-listed exploration company Australasian Resources. Mr Wang will take up his Senate position on July 1 next year if a recount goes his way.

But at the company he leads, an ongoing austerity drive has seen the contract for his chief financial officer and company secretary ended, and his rehiring as a casual contractor. The company ceased paying directors' fees six months ago to save money until project funding is obtained.

The company lists among its assets a new bond for $5000, which is a deposit a bank has required as security for a company credit card facility. The value of plant and equipment is put at just $5778 after the purchase of a computer for $6481.

Mr Palmer and his private entity, Mineralogy, own 70 per cent of the shares in the company, which needs project funding to develop the iron ore resources in its tenements. Mr Wang, a civil engineer, joined the explorer in 2006 and became managing director in January last year.

The parlous finances of the public company, which holds undeveloped mining tenements in Western Australia, are revealed in statutory annual accounts released to the Australian Securities Exchange three weeks after the election on September 7. The independent auditors of Australasian Resources, Ernst & Young, have alerted the financial regulator there is "material uncertainty regarding continuation as a going concern" of the company.

Ernst & Young's partner in Perth, Gavin Buckingham, warned in his auditor's report that "there is significant uncertainty whether the consolidated entity will continue as a going concern, and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report".

The company's chairman, Domenic Martino, a former Deloitte chief executive, raised the risk of "an insolvency event" but added: "The board believes this event will not occur as it closely monitors cash reserves and has the support of Mineralogy and its major shareholder (Mr Palmer)". The company's cash position at June 30 was $6086.

Mr Martino warned that if working capital from Mr Palmer ceased and other funds were unavailable the company could be insolvent. Mr Palmer is reputed to have spent more than $10 million on his Palmer United Party's federal election campaign in which he pledged to grow wealth, jobs and the economy. But an examination by The Australian of some of the companies he owns or controls has identified examples of financial losses, operational failures and ongoing job cuts.

Mr Palmer's personal wealth has been previously estimated by him as being in the billions of dollars, however, he has been playing down his wealth in recent weeks and told the ABC's Lateline program last Wednesday: "I've never said I'm a billionaire." His earlier public claim he receives earnings of $500 million in royalties from Chinese company CITIC Pacific has been shown to be incorrect, as Mr Palmer has not been receiving such royalties.

Mr Palmer's Mineralogy and CITIC Pacific are locked in a Supreme Court battle over royalties he alleges are payable from the development of other iron ore tenements in the Pilbara. But in an interview in The Australian Financial Review yesterday, Mr Palmer hinted he was being "squeezed" financially by delays in the production of iron ore at CITIC's plant. He said: "If they delay our cash flow, it gives them a better negotiating position."

The newly released financial accounts of Australasian Resources show that Mr Palmer's three cash injections since June of ongoing working capital were in addition to loans of $579,000 from his other company, Mineralogy, in the financial year to June 30.

Separate financial statements released earlier this year show Mineralogy is also being propped up by funds from Mr Palmer, whose Queensland Nickel refinery in Townsville has been losing more than $5 million a month.

The Australian contacted Mr Palmer and Mr Wang for comment yesterday, however, neither returned calls, emails or text messages. Mr Palmer has launched Supreme Court of Queensland defamation proceedings over several articles published in The Australian.