In brief - Sound legal, financial and business strategies can
help you weather cyclical upheavals
Miners, explorers and mining service providers should be aware
of their options for capital raising, restructuring, director and
officer risk avoidance and company risk management.
Iron ore price predicted to continue to fall
The iron ore price recently hit a five year low, at under $75 a
tonne, falling almost 50% in a year. Most are predicting it will
continue to fall to as low as $60 a tonne next year. Comparisons
have been drawn to the troubling recent experiences in the aluminum
and nickel markets when China flooded supply to drag down
Voluntary administrations an indicator of difficult
While the price should still be significantly above the largest
miners' break-even points, analysts are saying that junior
producers, many of which operate in the $85-$100 a tonne range,
will struggle to break even. This is borne out by the flow of
voluntary administrations – Termite Resources in June,
Sherwin Iron in July, Western Desert Resources and WDR Iron Ore in
September and Pluton Resources Limited in November.
More than $10 billion of value has been wiped from four of
Australia's largest iron ore miners this year alone. Smaller
operations have been even harder hit, with Arrium's share price
diving 50% since September.
The depressed conditions don't only reduce producers'
profits. They also limit the availability of capital to explorers.
They affect the flow of work (and risk) to mining service
providers, including consultants, suppliers and contractors. And
they contract the appetite for investment.
Strategies to help mining industry participants survive and
Successful resource companies don't just weather cyclical
upheavals. They know that they often present the best conditions to
outperform the market and their competitors. To take advantage of
these conditions, they make sure that they are aware well before
their competitors of the range of legal, financial and business
strategies available to their business.
For example, miners, explorers and service providers usually
have a range of strategies for:
Capital raising, including backdoor listings,
bonds, investment, divestitures and off-take arrangements
Structuring and restructuring, including
consolidation, cooperation and deeds of arrangement
Director and officer risk avoidance, including
in relation to regulatory requirements relating to trading,
listings, corporations law, environment, health, safety and
Company risk management, including in relation
to procurement, compliance and insurance
Importance of preparation, experience, sound judgment and good
There can be dire consequences when such legal, financial and
business strategies are not in place. This was underscored most
recently when Forge's liquidator claimed an entitlement to $50
million in turbines which Forge was leasing from APR - something
that might have been avoided if APR had registered an interest in
the turbines on the Personal Property
Securities Register (PPSR).
There is no substitute for preparation, experience and sound
The article examines the regulation of the oil and gas industry and breaks down the regulatory process state by state.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).