Plunging iron ore price puts Western Desert Resources into administration

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Image credit: flickr User: Bingley Hall

Western Desert Resources, an iron ore mining junior from Darwin, has been put into administration due to the iron ore price slump which recorded a 38% decline this year.

Plunging iron ore price puts Western Desert Resources into administration
Image credit: flickr User: Bingley Hall

The Northern Territory producer floated in 2007 and its shares have been declining since reaching peak value over $1 at the beginning of 2012, before the iron ore price fell.

Western Desert Resources had struggled to ramp up output to its target rate of 3 million tonnes a year due to poor ore grades and shipping constraints. The company requested a trading halt on Wednesday, reports The Australian.

Stephen Duncan of Korda Mentha’s Adelaide office and Mark Mentha in Melbourne will manage the administration.

According to Business Insider, Western Desert entered into voluntary administration following the failed negotiations for further financial support from Macquarie Bank.

“WDR have been in ongoing negotiations with MBL (Macquarie Bank) regarding the restructure of its project finance facility term, debt repayment profile and short term working capital funding requirements,” company secretary Mark Seatree said.

“Regrettably, acting on legal advice, WDR directors have no alternative but to appoint a voluntary administrator,” Seatree said.

Western Desert Resources has reportedly lost ten million dollars and had been in the process of restructuring around $80 million of debt.

The company began exporting to China last December, however big low-cost miners, such as BHP Billiton and Rio Tinto, have been increasing volumes to cope with lower prices, pushing smaller companies out of the market.

The Age reports that aside from shareholders, engineering group Thiess will also feel the consequences as it was contracted by Western Desert Resources to work as the company’s mining contractor until January 2017.