Queensland Nickel shutdown caused by debts with suppliers

Adam Leach is a freelance business journalist
20 April 2016

Queensland Nickel was held to ransom by its suppliers over unpaid debts and told to pay up front for any further supplies, leaving little option but to shut down production at the Australian nickel refinery, its administrators have said.

In its report on the company’s finances since being appointed as administrator in January, FTI Consulting recommended the company be put into liquidation. It revealed that a series of debts with critical suppliers left it unable to secure materials required to carry out operations.

It explained that on appointment, the company owed its principal nickel supplier $4.8m and would be forced to pay at least a further $2m in order to secure further supplies, while assorted other suppliers demanded a further $2.5m in debts before resuming deliveries.

As a result of the demands, combined with the companies dire cash flow position, the administrators were forced to shut down operations at the Townsville based refinery in February.

“Overall ore and NHC [an intermediate nickel product] availability was insufficient to feed continuous production and the administrators were required to transition the refinery to a production shutdown from late February 2016,” said the report.

Detailing the situation with regard to NHC, the report explained that it was unable to either settle the debts owed or pay for further supplies “due to cash shortages”, while a “critical” supplier of iron ore also refused to conduct any business with it until $2.8m of debt had been paid. These, the administrators held, placed a “substantial strain on the ongoing operations”.

The conclusion of the report was that the company should be liquidated in order to sell all available assets to try and settle its debts. The decision on whether or not to take that step will be decided this Friday, when its main creditors meet. 

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