As Arrium's mining consumables sale drags on, the prospect of an...

As Arrium's mining consumables sale drags on, the prospect of an ugly corporate restructure must be weighing on chairman Jerry Maycock's board.
Street Talk understands Arrium is mulling a $1.1 billion offer for its prized grinding media arm - well short of the board's expectations and not enough to end the company's debt woes.
The grinding media business, which supplies consumable steel balls used by miners to crush ore, is the only money maker in Arrium's stable.
Arrium had debt worth $1.75 billion at June 30, but analysts estimate that number is now closer to $1.9 billion.

Even with $1.1 billion proceeds to reduce debt - and a haircut from its banks - Arrium's legacy iron ore and steel businesses would struggle to service the leftover debt.
The high cost iron ore business is sucking cash and has limited scope to further lower its cost base. For the three months ended December 31, Arrium Mining reported an average total cash cost of $57.60 a tonne and sales at just $51 a tonne.
The steel business, which includes South Australia's Whyalla steel works, is being hammered by depressed steel prices driven by global oversupply and huge growth in Chinese steel exports.
These businesses cannot simply be turned off. Mothballing a blast furnace costs hundreds of millions - just ask BlueScope Steel.



Breaking contracts and cleaning-up a shuttered iron ore exporter would further punish a stretched balance sheet. Closure would be hugely political due to the job losses in areas without much work.
Then there is the prospect of a government bail-out. When BlueScope threatened to shut its No.5 blast furnace at Port Kembla last year, NSW gave the company a pay-roll tax holiday.
Boart Longyear, Mirabela Nickel, and Alinta Energy had their flirtations with the corporate graveyard. Clive Palmer's Queensland Nickel, which has entered voluntary administration and has a rumoured $1 billion clean-up bill, stands as interesting test case.
But if Arrium goes under, it may prove to be the most complex corporate restructure in Australian history.

Distressed debt players, including Sankaty Advisors, are watching the situation closely. KKR & Co is understood to be the only private equity fund which has engaged with the Arrium board