GFG Alliance has struck an agreement for $US100m in new debt to bolster Whyalla steelworks

The company, run by Sanjeev Gupta, has negotiated $US100m in new debt funding, which will provide critical capital for the Whyalla steelworks and mining operations.

Steelmaking remains offline at the Whyalla steelworks.

GFG Alliance says it has negotiated $US100m in new debt to provide capital for the Whyalla steelworks, with the money to be used to fund ongoing maintenance work and payments to suppliers.

The company said on Tuesday it had signed a term sheet for the $153m in funding with an unnamed “major global credit fund”.

“This milestone funding initiative will bolster cash flow and part of the proceeds will be used to provide critical capital into the Whyalla steel and mining operations to support its suppliers, employees and the ongoing maintenance work at its blast furnace,’’ GFG said in a statement.

“This additional round of fund raising, expected to complete by the end of the year, builds upon the $400 million support provided by the (GFG Alliance ) group to Whyalla steelworks over the past two years to help navigate its businesses through challenging conditions, further demonstrating its commitment to its operations in the region.’’

Executive chairman Sanjeev Gupta said his “commitment to Whyalla and our transition to green iron and steel remains resolute’’.

“Our new round of funding reaffirms my faith in Whyalla and our Back to Black plan, which aims to restore sustainable profitability and support the future of steel and mining operations in the region,’’ he said.

“We thank the community and our vendors for their patience and look forward to providing an update on these efforts shortly.”

Meanwhile the Whyalla steelworks’ blast furnace remains offline, with the company working to bring it back online after it stopped producing steel in September, following an extended outage earlier in the year.

Mr Gupta told The Australian last month that the company had a plan to bring the steelworks back to profitability and up to full production of about one million tonnes per year, once the blast furnace was back up and running.

He said the steelworks would return to profitability under this scenario, helped by macroeconomic tailwinds such as an improvement in steel prices and lower commodity prices on the input front.

Mr Gupta said at the time that his broader GFG group was propping up the Whyalla operations to the tune of about $1m per day, and more than $400m had been contributed to the Whyalla operations over the previous two years.

The blast furnace went offline for the second time this year in mid-September when unwanted materials were introduced into it and is yet to come back online.

This followed the blast furnace being offline from mid-March to early July, with damage to the blast furnace's shell during attempts to bring it back online extending that outage.

GFG said on Tuesday: “We are on track for a resumption of steelmaking very soon.”

The steelworks’ owner, GFG subsidiary Liberty Primary Metals Australia, has been cutting costs this year on the staff front, shedding about 50 white collar jobs in August, and later stripping out about 100 jobs from the mining division in a staged process.

Suppliers in Whyalla have also complained of the company paying its bills late, with rail operator Aurizon briefly suspending haulage operations in late October citing “unresolved contractual issues’’.

Ratings agency Moody’s in October downgraded the rating of the debt held by fellow GFG business Infrabuild which operates in Australia to a lower tier of junk, citing its “material decline” in operating performance over the previous 12 months.

GFG plans to replace the existing blast furnace at Whyalla with a new electric arc furnace and a direct reduced iron plant, however the timeline for that $1bn-plus project is now up in the air, with Mr Gupta telling the Australian last month that its go-ahead was predicated on new gas supplies being committed to Whyalla.

The new infrastructure was initially planned to be in place by 2025, then 2027.

Originally published as GFG Alliance has struck an agreement for $US100m in new debt to bolster Whyalla steelworks