Gujarat NRE Coking Coal workers were able to breathe a small sigh of relief on Friday as the company’s new managers announced plans to inject up to $350 million into the struggling mining company.
The newly formed Gujarat board told the Australian Securities Exchange (ASX) that Jindal Steel would follow through on its promise to save the company’s two Illawarra mines.
In a letter to the ASX, Gujarat’s company secretary Sanjay Sharma said Jindal would immediately take up 53.63 per cent of the mining company’s shares and outlined a short-term funding plan to pay workers.
Gujarat shareholders voted to allow Jindal to take control of their company at a meeting held in Towradgi two weeks ago, but they have been waiting to find outwhether the Indian steel giant would follow through on the deal.
Mr Sharma said the new board – now headed by Jindal Steel boss Jasbir Singh after Arun Jagatramka stepped down last week – had met and resolved to approach Jindal for a $50million short-term debt facility, which Gujarat would be able to draw on in $500,000 lots to pay wages and keep the company running.
The board also plans to raise up to $300million through an issue of new company shares, at a price that is yet to be determined.
These plans were approved by Jindal on October 29, but their terms will be subject to formal documentation, the letter said.
Construction, Forestry, Mining and Energy Union district vice-president Bob Timbs said the announcement was a huge relief for workers, as it would help secure the future of hundreds of coalmining jobs in the Illawarra. He said the union looked forward to discussions with the company to settle the outstanding wages and entitlements owed to its workforce.
Mr Timbs thanked union members and their families for their resilience in recent months.
‘‘The last six weeks have been extremely tough for Gujarat mineworkers, who have gone without pay and had no certainty about the future of their jobs,’’ he said.
‘‘Throughout this ordeal, we have held the hope that the mines would be able to trade through this difficult period and continue to produce high quality coal and employ Illawarra mineworkers for many years into the future.
‘‘Now that there is a commitment to invest in the mines, paying all outstanding wages and entitlements must be the company’s first priority.’’
Gujarat told the ASX it was actively engaged in discussions with the CFMEU and Collieries Staff and Officers Association, which represents mine supervisors and staff, to resolve payments of workers’ entitlements.
Additionally, Gujarat NRE yesterday published its latest quarterly activities report, which reveals coal production and sales dropped significantly during the company’s financial turmoil. Figures show both Illawarra mines produced and sold less than half the amount of coal in the three months from July to September than at the same time last year. Run-of-mill coal production was down from 544 tonnes in September 2012 to 268 tonnes this year, while sales were down from 486 tonnes in 2012 to 216 tonnes.
In the report, the company listed its quarterly highlights as ‘‘continued production’’ at both mines, as well as completion and submission of its preferred project report for the Russell Vale mine expansion and ‘‘consistent safety achievement’’ .
Bid to resolve court action
Gujarat NRE Coking Coal is considering challenging a winding-up order initiated against it by a mine supply company, but believes the order is likely to be withdrawn soon.
Mine servicing and equipment company RUS Mining notified the Australian Securities and Investments Commission last week it intended to pursue court action for a winding-up order against Gujarat NRE Coking Coal and related company Gujarat NRE Wonga in order to recoup its debts.
In a statement released to the Australia Stock Exchange yesterday, Gujarat NRE said it was in negotiations with RUS Mining.
The company was considering challenging the application, but believed the discussions would lead to RUS Mining withdrawing or dismissing the order.
‘‘The company is of the view that the applications have not been validly commenced and is considering its options regarding a formal challenge of these applications,’’ the statement said.
RUS Mining declined to comment yesterday.
The matter is still scheduled to go before the Supreme Court on December 4.