Clive Palmer's Queensland Nickel is underwater, needs capital injection

Clive Palmer's Queensland Nickel will require a capital injection of "tens of millions of dollars" to avoid liquidation unless there is a rapid improvement in the price of nickel, a joint administrator of the company said on Friday.

The disclosure came as it emerged that the total debts of the company could exceed $110 million, with between $70-80 million owed to creditors and $30.8 million currently owed to employees, of which $16 million is owed to staff who were sacked this month.

Queensland Nickel creditors and observers signing on at the meeting  in Townsville on Friday. The company sacked 237 ...
Queensland Nickel creditors and observers signing on at the meeting in Townsville on Friday. The company sacked 237 workers at its Yabulu refinery near Townsville earlier in January and is now in administration.  Photo: AAP

However Ben Swan, Queensland secretary of the Australian Workers Union, said if the company went into liquidation then the range of outstanding commitments to employees would soar to between $65 to $70 million. "So the scale of this is just gargantuan" he told Fairfax Media after the initial creditor's meeting held on Friday morning in Townsville.

Earlier this month 237 employees at the company were sacked, due to the deteriorating financial position of the company.

John Park from FTI Consulting, is a joint administrator appointed to Queensland Nickel.
John Park from FTI Consulting, is a joint administrator appointed to Queensland Nickel.  Photo: ANDREW RANKIN

"We've an ability to trade the business the next 1-2 months, based on nothing unforeseen [happening]," John Park, a joint administrator appointed to the firm, said.

The company could trade until April 30, based on current cashflow projections, he said. "We would need capital injected to subsidise the present operating losses. They're underwater and running cashflow negative."

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Mr Park said the company was losing US50c per pound of the 60 million pounds of nickel treated annually at its Yabulu refinery, which is near Townsville in northern Queensland. He put its fiscal 2016 losses at $US30 million before taking into account various administration costs, depreciation and other costs.

"It would be a sizeable loss north of $50 million," Mr Park said of the overall financial position of the company.

Mr Palmer had indicated he would like to participate in any "deed of company arrangement" drawn up to avoid the company being liquidated, Mr Park said.

Late last year, Mr Palmer entered into a deal to give Queensland Nickel the ability to borrow against coal tenements held by other of his group companies, First China and Waratah Coal, in return for paying him $135 million in two equal payments which are due in late 2016 and 2017.

"That's not an overnight solution," Mr Park said of this deal. "You need to borrow against those assets at a time of depressed coal markets."

Mr Palmer had estimated the coal assets were worth $250 million, Mr Park said, "which is at the upper extreme of valuations".

"It is possible but difficult" to borrow against coal assets, he said.

Additionally, there are "domestic and international entities which have expressed interest in recapitalising or acquiring the business", Mr Park said, although the status of these approaches was unclear.

"The primary driver is the nickel price," Mr Park said of the reason for Queensland Nickel's collapse. "But we have to clarify whether there are any other drivers."

Mr Park said the withdrawal of funds, estimated at more than $20 million, which were paid to political entitles associated with Mr Palmer "has bearing" on the financial position Queensland Nickel is in"

Mr Swan, who has been appointed to the creditor's committee, said the mood at the two and a half hour meeting on Friday was professional and "courteous" but that proxies for Clive Palmer and his wife Anna had got short shrift when they attempted to get the couple onto the creditor's committee.

"The meeting overwhelmingly said 'get stuffed' and voted accordingly, so he [Palmer] is not Mr Popularity," Mr Swan said.

Earlier on Friday, the chief executive of Queensland Nickel, Clive Mensink, blamed the low price of nickel for the company's woes, which had forced the company to retrench workers, with its inability to fund their payout forcing it into administration.

"The prime reason for QN administration and associated events is the price for nickel, which is at its lowest for 15 years," Mr Mensink said. The price was about half the level it was when Mr Palmer took control of the refinery.