170 miners were left without work.
170 miners were left without work.

CQ mine’s $55M shortfall ahead of collapse

WITH $55 million needed to keep Cook Colliery afloat heading into the new year, the writing was on the wall that the Blackwater coal mine was on the brink of collapse.

On Tuesday, 170 mine contract workers were left without jobs after the mine entered voluntary administration.

In his address to the Bounty Mining Limited annual general meeting last month, chairman Rob Stewart outlined the company's financial position.

Recapping what could now be considered a series of unfortunate events, Mr Stewart outlined the timeline of Cook Colliery over the past two years, starting with Bounty's aquistion of the troubled asset from Glencore and liquidated Caledon in December 2017.

Trouble began to brew in October 2018, when Mr Stewart said Bounty was 'tight for cash'.

"A further $10M was raised to cover equipment issues, working capital and other capital works," he said.

"In December 2018, again suffering a shortage of cash to pay operating expense, Bounty entered into a $20M debt facility with its major shareholder Amaroo. This was later increased to $35M."

Mr Stewart said the 80,000 tonne per month target of mine production remained beyond Bounty's reach and the company did not have sufficient cash to meets its need for working capital.

"The transaction in December 2018 provided Bounty with interim funds to give time to negotiate of a larger transaction with Amaroo. This was concluded in 3 August and rejected by shareholders on 30 September," he said.

"On 7 October, Bounty signed debt and guarantee facilities with another shareholder, QCoal. "The QCoal facilities totalled $90M and enabled payout of all debt owing to Amaroo and Xcoal, completion of the acquisition of assets from Glencore, and provided guarantee facilities for obligations related to rehabilitation and contingent royalties. These facilities with QCoal did not provide Bounty with sufficient funds for the company's needs to achieve consistent profitability."

In what should have been a positive sign, Bounty continued to increase plant reliability and productions and produced a new mining strategy, mine plan and business plan for Cook Colliery.

But a reduction in monthly revenue of more than $4 million due to a 33 per cent fall in metallurgical coal prices in early November, combined with the financial blow of two rock falls at Cook Colliery in October, put pressure on Bounty.

"There were two major consequences of these falls - immediate lost production with mine shutdown 23,000 tonne and loss of developed reserve for high productivity recovery (sumping) of 135,000 tonne," Mr Stewart said.

Mr Stewart said Bounty needed further funding. This included $10M to cover the loss of revenue from the rock falls, $15M working capital to cover unforeseen events and cover ongoing operating loss, $10M for the work needed to establish Place Change panel three and $20M to meet a repayment commitment in July 2020.

"We are currently working on a number of potential funding options to meet the funding needs including discussion with QCoal, surety bond issuers, prepayment on a new thermal offtake agreement, capitalisation of interest, leasing of equipment and a potential rights issue later in this financial year," he said.