Lake Johnston mine could close PDF Print E-mail
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Friday, 22 February 2013 08:57

Russian mining giant Norilsk Nickel is on the verge of closing its only remaining Australian mine, with Australian managing director Edwin van Leeuwen warning staff that its Lake Johnston operation in Western Australia will close in April if a buyer is not found.

More than 180 jobs are at risk if Lake Johnston closes, although a letter from Mr van Leeuwen to staff last month said Norilsk hoped to sell the mine as a going concern and transfer staff to the buyer.

According to company documents, Norilsk has struggled to pay suppliers and contractors since at least December, after a settlement deal between feuding Norilsk shareholders United Co Rusal and billionaire Vladimir Potanin led to a change of leadership at the world's top nickel supplier.

Internal emails provided to _WestBusiness _ show mining contractor Australian Contract Mining withdrew its services twice in the past three months over payment disputes. On Friday the mine's caterers, Action Industrial Catering, put the mine on restricted service, refusing to clean site offices and restricting hot food service over "ongoing non-payment by Norilsk".

Norilsk also failed to make its most recent pay run on time, with Mr van Leeuwen forced to write to staff last week to reassure them that funds were available, saying payment was only delayed due to "internal technical changes to the financial approval process".

Norilsk put the mine on the market last month. At the time Mr van Leeuwen told staff and contractors a "number of Australian and international companies have expressed interest in acquiring Lake Johnston".

"However, in the event that Norilsk Nickel Australia is unable to successfully divest Lake Johnston, the operation will be placed on care and maintenance as from the 22 April 2013," Mr van Leeuwen said in a letter.

He said the sales process was expected to take from three to five months.

Sources say many mine suppliers moved Norilsk to cash-only terms last year, as its debts began to mount and payment became patchy. Producing only 9000 tonnes of nickel last year, Lake Johnston is understood to have struggled for profitability as nickel prices sank in the second half of the year.

Lake Johnston was acquired by Norilsk through its $7 billion takeover of LionOre mining in 2007, after a heated bidding war with Xstrata at the top of the market. Norilsk has since taken heavy losses on the acquisition.

All the former LionOre mines, including Lake Johnston, Black Swan, Cawse and Waterloo, were shut in late 2008 and early 2009, as the global financial crisis crunched commodity prices. Norilsk restarted operations at Lake Johnston in mid-2011.

 



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