GFG Alliance will sell all or part of the Tahmoor coal mine to help pay creditors in Whyalla

Sanjeev Gupta’s GFG Alliance will sell all or part of the Tahmoor coal mine for about $800m with the money to flow to creditors of the Whyalla steelworks, and is about to settle its global debts.

Sanjeev Gupta, executive chairman of GFG Alliance.

The Sanjeev Gupta-led GFG Alliance has been thrown a lifeline, striking a deal with its global creditors, while also deciding to offload all or part of its Tahmoor coal mine for $800m to help repay creditors at the Whyalla steelworks.

The British industrialist said on Friday his company had reached an agreement with the main creditors of GFG’s former financier Greensill Capital, which collapsed in 2021.

The development is important for GFG’s local subsidiaries, Liberty Primary Metals Australia, which owns the Whyalla steelworks in South Australia and the Tahmoor mine in NSW, and long steel products maker InfraBuild, which is profitable albeit debt laden.

The global settlement will allow those two companies to finalise their financial reports for the 2024 financial year and avoid InfraBuild breaching a covenant around $US550m ($790m) in debt which could be triggered if the books are not filed by the end of March.

The Tahmoor sale announcement will give hope to the many creditors of the Whyalla steelworks and iron ore operations, which The Advertiser on Friday reported could be owed more than $300m, based on leaked documents.

GFG on Friday said the agreement with the company’s global creditors – which still needs to be finalised – would bring an end to the saga around the collapse of Greensill Capital, formerly led by Australian ex-pat Lex Greensill.

Greensill was the company’s main financier and was providing a complex form of invoice financing to the company on a huge scale. When Greensill collapsed in 2021, GFG’s debts were reported as being in the $US5bn range, however it is understood that figure has reduced to in the vicinity of $US4bn.

“This development marks the final chapter of GFG’s debt settlement which has been under negotiation since the collapse of Greensill Capital in March 2021,’’ GFG said on Friday.

“The agreement once implemented will significantly deleverage GFG, providing it with the platform to develop longer-term sustainable financing for its core operations in Australia, US, UK, Romania and Italy.

“In Australia, the development means that GFG’s successful InfraBuild business can finalise its FY 2024 accounts, and supports new capital for Liberty Primary Metals Australia, including the Whyalla steelworks.’’

The Whyalla steelworks recently came back online.

GFG will also look to sell all or part of the Tahmoor coal mine, where the company stood down workers last week.

“GFG has taken the decision to launch an expedited process to sell part or all of its equity in Tahmoor coking coal mine, with some of the proceeds being available for reinvestment in Whyalla to catch up with supplier payments and boost liquidity, subject to board approval,’’ the company said.

“Liberty’s businesses in Europe will also become free of any Greensill debt upon settlement, helping them to refinance and increase production.’’

Mr Gupta said in a statement it was an important development for the company.

“Today’s agreement with the Greensill creditors is a great relief for GFG and all our loyal workforce and suppliers,’’ he said.

“It will enable us to push on from the deep challenges caused by Greensill’s collapse in 2021 and now gives us a financial platform for recovery and growth.

“With signs of improvements at our operations and some upturn in our markets, we are confident of being able to access longer-term financing to build on the significant investments we have already made in our international businesses, and to rebuild stakeholder confidence.”

Tahmoor has been a cash cow for GFG in the past, with coal revenue for the 2023 financial year at LPMA coming in at $598.2m, down from $846.7m the previous year. LPMA is understood to have racked up significant debts with contractors at Tahmoor, and stood down workers last week on full pay for four weeks.

Mining and Energy Union district secretary Andy Davey said at the time that two consortia had already approached GFG to buy the mine, which has a resource which would last another 30-40 years.

The Whyalla steelworks has ceased using coking coal from Tahmoor, switching off its coke ovens in late 2023.

The closure was at the time promoted by the company as part of its eventual transition to a “green steel” operation, however plans for a new electric arc furnace and direct reduced iron plant have since stalled, after originally being scheduled to be built this year.

Two extended outages at the Whyalla steelworks over the past year have plunged that operation into the black, with creditors including the company’s rail operators Aurizon and Pacific National downing tools following non-payment of debts.

Mr Gupta said this week the company was also close to finalising a $US100m debt package to bolster the Whyalla operations, and vowed the steelworks would emerge from the current crisis “stronger than before”.

“This funding, along with the important gains already made through the ongoing implementation of our Back to Black initiative, is part of our unshakeable path to creating tangible financial headway with our creditors,’’ he said. “It is a key plank to achieve normality again and realise our future ambitions.’’

LPMA owes the South Australian government “tens of millions” in royalties and another $15m or so to SA Water.

Mr Gupta said this week that the steelworks was steadily ramping up production after returning to steelmaking in January.

“Our revenue, through additional steel sales, is continually increasing and we have already reduced our losses in the steelworks by more than 30 per cent since the restart of the blast furnace,’’ he said. “While we still have considerable work ahead, these clear improvements are vital as we work to catch up with our creditors – who have shown remarkable patience – and to whom we extend our deepest gratitude.’’

Originally published as GFG Alliance will sell all or part of the Tahmoor coal mine to help pay creditors in Whyalla