Heavy cost-cutting coming at Whyalla to limit cash burn Share...

Heavy cost-cutting coming at Whyalla to limit cash burn

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http://www.copyright link/content/dam/images/g/o/7/9/n/t/image.related.afrArticleLead.620x350.gobvuh.png/1461220960817.jpg <img src="/content/dam/images/g/o/7/9/n/t/image.related.afrArticleLead.620x350.gobvuh.png/1461220960817.jpg" alt="The Whyalla steelworks is in for some heavy cost-cutting to limit the ''cash burn'' says Arrium administrator Mark Mentha." width="620" height="350" class="lazy620x350"/>
The Whyalla steelworks is in for some heavy cost-cutting to limit the ''cash burn'' says Arrium administrator Mark Mentha. Brendan Esposito
by Simon Evans
Heavy cost-cutting is on its way at the Whyalla steelworks owned by the collapsed Arrium, because administrator Mark Mentha says he needs to limit the "cash burn" quickly.
Mr Mentha was in Whyalla on Thursday for a series of meetings with key management at the steelworks and the iron ore mining operations in the nearby Middleback Ranges. He said speed is important now in slicing substantial costs out of the operations.
"We need to limit the cash burn now that the administrators are running the business," he told Fairfax Media on Thursday.
He would not divulge how much needs to be pulled out of the Whyalla operations but said it was an urgent priority.

"It has to happen quickly, because time is of the essence."
Mr Mentha said substantially lower costs will also enhance the prospect of a recapitalisation proposal from a new owner of the Arrium business, with a lower-cost steelworks being central to the success of any future plans.
"We have to prove up the business model to make it attractive for a recapitalisation," he said.
Mr Mentha's firm KordaMentha last week took over as administrators of the collapsed Arrium. Another firm, Grant Thornton was elbowed aside by big banks and unions on April 12, after being appointed by the Arrium board six days earlier.


The first creditors meeting was held in Sydney on April 19. A banking syndicate of 35 entities is owed about $2.8 billion, with Arrium's creditors owed an overall total of $4 billion.
Mr Mentha and South Australian Treasurer Tom Koutsantonis will meet in Whyalla on Friday with local small businesses which are worried about the knock-on effect of cash flow problems for suppliers to Arrium.
Arrium has 1,500 direct employees who work at the steelworks and the iron ore operations in the Whyalla region. A further 1,600 people work as contractors to the company.
Arrium has a global workforce of 8,300 people, with 80 per cent of them in Australia, so the ripple effect of any poor outcome of the administration will be vast.

The big four banks in Australia – ANZ, Commonwealth Bank, NAB and Westpac – are owed a combined $1 billion.
The Moly-Cop mining consumables business, which has its headquarters in the United States, is the most highly sought after asset in the Arrium stable, but it is not in administration.
Private equity buyers including US firms Argand Partners and Cerberus Capital Management, which have taken advice from former Bradken managing director Brian Hodges, have been eyeing that business.
Bradken, a mining services and engineering services firm listed on the ASX, on Thursday announced it had rejected a new $150 million recapitalisation proposal from private equity firm CHAMP which had been put to the company on March 14.

It was the latest in a long-running saga because CHAMP and Chilean firm Sigdo Koppers jointly injected $70 million into the Bradken balance sheet in June 2015, and then spent two months in due diligence trying to hammer out a merger between Bradken and the Chilean operations, without success. Bradken then decided to go it alone.


Read more: http://www.copyright link/business/heavy-costcutting-coming-at-whyalla-to-limit-cash-burn-20160421-gobvuh#ixzz46RYiA01a
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