A Wollongong miner has been given a lump of coal for Christmas by the corporate regulator and has been suspended from trade on the stock exchange.
The problems stem from Wollongong Coal’s valuation of its two mines at more than $385 million each, an estimate which has a major impact on the company’s financial viability.
The Australian Securities and Investments Commission (ASIC) has now questioned these valuations, issuing Wollongong Coal (WCL) a “please explain” notice.
It questioned the “reliability of the fair value estimate” of the Wongawilli and Russell Vale mines, which were valued by the company at $385 million and $390 million respectively.
WCL has now asked for, and been granted, a suspension from trade on the Australian Securities Exchange.
The company’s annual report for the 12 months to March 31 this year said the claims of the assets’ worth had been based on an “independent valuation”.
Australian accounting laws require assets to be valued and major “impairments” can on assets’ values can have a significant impact on a company’s bottom line – and whether the company remains solvent.
WCL’s annual report justified its high valuation of the Russell Vale operation by saying it is “legally permissable” to build a coal washery there, which would increase the value of the coal mined there, enable more flexibility to mine other areas, and generate higher yields.
Gavin Workman from the group Illawarra Residents for Responsible Mining said WCL’s proposal to continue mining at Russell Vale should be rejected by the Department of Planning and Environment (DPE).
“Wollongong Coal’s half-yearly report stated that they had lost $57.6 million and that their parent company, Jindal Steel and Power, had bailed them out once again with a further $100 million loan,” he said.
“Surely there must be a cut-off point when the DPE say that this planning proposal is not viable,” he said.