Weak global coal demand hits Clive Palmer’s $250m ‘rescue plan’

Clive Palmer’s alleged $250m rescue package for his nickel refinery may be undermined by weak global coal demand.

Clive Palmer’s $250m ‘rescue package’ may be hit by weak coal demand. Picture: Lyndon Mechielsen

Weak global demand for coal is likely to undermine Clive Palmer’s alleged $250 million rescue package for his Queensland Nickel refinery, which could see his Galilee Basin coal tenements put up for sale.

The operating company for the federal MP’s Townsville nickel refinery collapsed into voluntary administra­tion last week, days after it sacked 237 workers.

Administrators are combing through the finances of Mr Palmer’s complex web of companies and will hold the first creditors’ meeting in Townsville tomorrow.

Two of Mr Palmer’s companies — Waratah Coal and China First, which have exploration permits over coal tenements in central Queensland’s Galilee Basin — became secured creditors of Queensland Nickel four days before it collapsed.

Insolvency experts said the move could be interpreted as an attempt by the Palmer companies to leap the creditors’ queue.

But The Australian under­stands Mr Palmer has told ­administrators the two companies’ coal holdings are valued at $250m, and could be sold or used as security for a bank loan to help keep the refinery afloat.

Waratah Coal holds 14 granted exploration permits for coal in the Galilee, and unapproved applicat­ions for two mineral devel­opment licences and two mining leases.

Yet a senior operator in the Queensland coal industry told The Australian there was no way that Mr Palmer’s Galilee Basin coal exploration permits could generate $250m, given the depresse­d coal price.

“It’s a stretch,” the coal executive said. “The coal price has been hammered and you can pick up assets cheaply, even producing assets, rather than development assets that require a lot of resources to get off the ground. In a better market, they might fetch that much or more. But not now.”

He also said it was unlikely banks would offer finance using coal deposits — rather than a producing mine — as security.

An affidavit sworn by Queensland Nickel chief financial officer Daren Wolfe in the Federal Court in Western Australian late last year revealed that Waratah Coal’s financial situation was parlous­.

Waratah Coal had little more than $21,000 in cash in the bank in October and had brought in only $2441 in revenue in the 2014-15 financial year. Mr Wolfe said it was struggling to meet the minimum spending commitment of about $4m required­ to keep the coal tenements in Mr Palmer’s control.

But The Australian under­­­sta­nds the threshold is less than $1m, and Waratah Coal is on track to meet the commitment.