Wollongong Coal’s liabilities outweigh its assets by more than $748 million, causing significant doubt on whether the company can remain solvent, the miner’s own auditor has stressed.
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The company’s half-yearly financial report has been posted on the Australian Securities Exchange, in sync with the financial calendar in India where its ultimate parent company Jindal Steel & Power is based.
With a $30.4 million loss over the past six months, the half-yearly financials show debts of $808 million, prompting auditor Hall Chadwick to write a special section emphasising the solvency issue.
“The conditions along with other matters … indicate a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern and therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business and at the amount stated in the financial report.”
Wollongong Coal said $741 million of the debt was “long term borrowings”. These had been classified as current debt because of “breach of financial covenants” – terms included in loan deals.
Its report said the Jindal group had committed to support the Australian miner and had provided substantial funds already.
But it also said the Jindal group had defaulted on some loan provisions resulting in those lenders accelerating their demands.
Wollongong Coal states in the report that given the increasing price for coal, and the continued support of its parent entities, it believes it can remain as a “going concern”. It had renegotiated payment deadlines for some offshore bank lenders and settled others, while continuing to try and find a lender willing to restructure its debt.
The warning from Hall Chadwick is not the first time an auditor has raised doubts about Wollongong Coal’s solvency.
In the report, Wollongong Coal has valued its non-operational Russell Vale mine at $478 million.
This is despite the fact the company does not have planning permission to expand under the water catchment and the mine is in “care and maintenance” mode.
Wollongong Coal’s court challenge against the Planning Assessment Commission’s assessment of its expansion plans was thrown out last week.