One more thing that seems odd regarding adequate disclosure from the Arrium Board.
When they reported to the market on 17th of February 2016 for the period ending 31/12/2015, they were upfront disclosing that if Whyalla Steelworks had to be closed and the MBR Iron Ore Mines had to be closed, roughly what those costs would be.
The directors then mentioned, that if so, it "may" impact the future potential of the company to remain solvent. The total costs were around A$200 million for Whyalla closure and around $350 million to close MBR Iron Ore Mines and pay out the contracts.
This begs the question: If they had the decency to disclose those items which were materially relevant now, why when that $754 million rights issue was done in September/October 2014, did Mr Smedley and his directors NOT disclose that if they iron ore price falls below US$73 per tonne for a sustained period of time and Southern Iron Mine has to be closed, who much money it will cost Arrium Shareholders????
Arrium shareholders were not told of this in any detail in the rights issue prospectus for the A$754 million. There is Smedley with his gleaming dickgrin on his face saying the benefits of investing more money and that it would be used for Debt Reduction. It now appears a large amount of that money was used to close SI only 3 months later and to keep paying the ongoing contractor payments to Genesee and Wyoming to June 2017. Net debt then was around $1.70 Billion, yet by February 2016 it had ballooned out to $2.08 Billion (it should been only around the $1.10 Billion mark). Oh, and by April 2016 when KM were given the keys to the boardroom, it was $2.80 Billion (according to the media, and we still are not told how much is in cash account)
Pity these idiots did not due better due diligence when they bought WPG for around A#365 million in October 2011. Had they done so, (and as the only bidder for the asset they had the bargaining power to do so), they would have at least to minimized risk, by lowering the length of time of the contract from 5 years to 3 years. At least by February 2015 (when SI was closed) they could have paid GW 60 days pay and that would have been it. As it is, they were still paying out more than $50 million per year in haulage contract fees for another 2 years for doing nothing. The last payments will be made around June 2017. Disgrace.
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