Wollongong Coal axes supply agreement with Gujarat

Wollongong Coal's Russell Vale colliery.
Wollongong Coal's Russell Vale colliery.

Wollongong Coal has terminated its supply agreement with former parent company Gujarat NRE Coke, removing one of the final ties between the Illawarra miner and Gujarat-based industrialist Arun Jagatramka.

The corporate divorce had been on the cards for months as the parties made clear their differences were becoming harder to reconcile.

They are locked in legal actions against each other, with Wollongong Coal claiming it is owed $60 million by Gujarat NRE.

But Gujarat counters that it is owed $90 million from its estranged former progeny.

Gujarat NRE was the parent company to Wollongong Coal (previously named Gujarat NRE Coking Coal) until Indian giant Jindal Steel and Power took a controlling stake in the Illawarra miner to rescue it in October last year.

On June 2, Wollongong Coal announced a $92 million loss in its preliminary final report for the 12 months to March.

The company put the result down to poor market conditions including low coal prices and an unfavourable exchange rate, plus reduced production, cashflow problems which put off suppliers, and delays in getting mining permission from authorities.

In a statement to the Australian Securities Exchange on Thursday, Wollongong Coal secretary Sanjay Sharma said the agreements with Gujarat NRE had been terminated "on the basis of breaches by Gujarat" relating to non-payment.

Late on Friday Mr Jagatramka hit back, telling the Mercury his company was owed money from Wollongong Coal, and had requested mediation to try to settle the matter.

But Wollongong Coal took the action to cancel the purchase agreements.

Mr Jagatramka said he would take the matter further.

"For this we would be taking necessary action as we are legally advised," he said.

"Of what use are these agreements in the present circumstance?"

The Illawarra mines had been his Indian operations' main source of coking coal, but he said he had since started buying from another Australian supplier.

Wollongong Coal shed about 152 workers in May as its coal production ground to a halt.

It lacks the proper planning permissions to continue longwall mining at Russell Vale, and a roof collapse buried the longwall miner at the Wongawilli mine.

The depressed price of coal has meant the cost to retrieve the machinery does not add up.

The mine has been placed in "care and maintenance" mode, with minimal crews kept on.

Shares in Wollongong Coal lost 3¢ on Friday to close at 3.2¢.


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