AUZ has placed an ad in The West Australian today seeking...

AUZ has placed an ad in The West Australian today seeking expressions of interest for the mining equipment from Blair Mine. All underground machinery and associated mining equipment is up for sale. They obviously need to reduce the outstanding $4m hire purchase debt.

With this move it would be safe to assume all projects including Blair are now up for grabs. Unfortunately it's about the worst time possible to be trying to offload nickel assets or even mining gear but I guess they have to quickly reduce debt or face an even worse fate.

Maybe Woodline could attract some interest being a gold project but it hasn't managed to sell so far which would be a concern to management. That would have at least bought AUZ a bit more time just in case the nickel price turned around. Selling off the machinery is a big step backwards but first priority has to be survival.

A rights issue is very likely soon but it is going to have to be at a giveaway price to get many shareholders to part with money now that there is no real possibility of mining in the near future. And it will need to be attractive to entice an underwriter to take the risk. Expect something drastic like a 1:1 at .005 to raise about $2m after costs. It may sound extreme but AUZ have even less options available to them than they had in 2005 when the last rights issue was pitched at 2:1 at .01. At least then they had the option to change from a contactor operated mine to owner-operator in a plan to run more efficiently. It helped them survive at the time and even prosper for a short while but plunging nickel prices has killed off any prospect of mining at all. Now it is simply about survival.

Marriots would probably have been attractive to Xstrata at one stage but they have been forced to cut back production and look at selling their own non-core projects as their share price has lost around 85%. Even large miners are starting to worry about their debt levels now that metal prices have plunged and their ability to raise any additional capital is becoming more difficult.

Even those investing in seemingly large, safe miners will see their holdings heavily diluted through any share placements unless they are able to find the money to take up their full entitlements. Those with deep pockets such as the Chinese are about to make more money now than at any time during the boom as they underwrite capital raisings at close to ridiculous prices and then wait for the turnaround. Currently its metal producers being mugged and very soon oil producers will feel the same pain.

A raft of small miners have already slipped into administration in recent times and there may be quite a few more heading the same way. I don't like seeing genuine companies that are having a real go get impacted so badly when many small so-called explorers do nothing for years except waste investors money before changing tack and follow the next hot trend, which inevitably means the shareholders cough up money for over-priced projects that are promoted by the board and in many cases owned by board members. The directors get their money upfront by vending in projects then milk the rest of the capital through inflated salaries and expenses.

These are the companies that deserve to go out of business but often escape unscathed because they never really attempt to achieve anything other than pay directors wages. They just lay dormant until the next upturn then promise the world when they need to raise more money. Even worse is the way the same directors control a string of similar companies, all operating from the same address and each using investors money to fund the cosy lifestyle of the lazy bludgers.

Good luck to AUZ holders, I hope your company survives as at least they had a go.