Atlantic bids for Windimurra

The long-running saga of the Windimurra vanadium project has taken a new turn, with listed company Atlantic pitching a low-ball offer to buy the $560 million development from one of its own subsidiaries.

If the deal proceeds, Atlantic would effectively buy the project from its heavily indebted subsidiary MIdwest Vanadium Pty Ltd (MVPL), which was put in receivership in February last year.

Atlantic has offered to pay $250,000 for the project, with the money to be distributed to unsecured creditors in accordance with a deed of company arrangement.

It also plans to pay a refundable $1 million deposit to the receivers, to secure the proposal.

Atlantic said its intention was to institute a care-and-maintenance plan for the project with a view to redeveloping it when market conditions improved.

The final payout to creditors is likely to depend on the quantum and distribution of future insurance payments flowing from a fire that destroyed the project’s beneficiation plant – and effectively shut down the project – in February 2014.

Atlantic and MVPL have so far been paid $93 million by the project’s insurers, and Atlantic believes further material amounts are due and payable.

It has proposed that MVPL would retain future insurance payouts along with certain other assets, including existing cash and finished vanadium inventory.

However, Atlantic has also proposed that it may receive a proportion of any future MVPL income tax refunds to offset the reimbursement of insurance payouts allocated to Atlantic but paid to MVPL.

Atlantic’s major shareholder, Indonesian investor Anthony Salim’s Droxford International, has agreed to waive its entitlement to any priority part payment of its $29.7 million secured loan with MVPL.

Atlantic said today that $560 million had been invested in the Windmurra mine and plant and equipment to date, including its original construction by Precious Metals Australia in the late 1990s, and subsequent rebuild after it was dismantled by Xstrata (Glencore).

The project will require substantial further investment before production can resume.

The new owner will need to complete a rebuild of the crushing, milling and beneficiation (CMB) circuit, which Atlantic has previously estimated would cost about $130 million.

The rebuild of the CMB circuit is needed to make the project economically sustainable and is separate from the rebuild of the fire-damaged beneficiation plant.

Engineering contractor Primero Group was due to complete the $30 million rebuild of the beneficiation plant last year, but the work was halted when the company went into administration.

Matthew Caddy, Keith Crawford and Norman Oehme of McGrathNicol were appointed receivers and managers of MVPL last February.

That was one day after MVPL’s directors appointed Darren Weaver, Martin Jones and Ben Johnson of Ferrier Hodgson as administrators.

The receivership came after a breakdown in negotiations between MVPL’s noteholders and Atlantic’s major shareholder, Droxford International, over a restructuring and additional funding.

The receivers appointed Gresham Advisory Partners last year to find a buyer of the project.