Pluton hits JV problem

Pluton Resources has disclosed that its joint venture partner at the Cockatoo Island iron ore mine wants it removed as manager of the project and has called for it to halt mining operations. 

Pluton told the ASX late yesterday that it plans to continue mining, despite the demand from Wise Energy Group.

“It is the position of the company that the document that Wise seeks to rely on, being a letter dated 15 April 2004, does not give rise to legally enforceable obligations on the parties,” Pluton said in a statement.

Pluton said it is also seeking an explanation from Wise as to why it has failed to pay “significant called sums payable by Wise under the joint venture”.

The demand from Wise follows the failure of Pluton to complete the planned purchase of the Wise assets, which comprise a 50 per cent stake in the joint venture.

In a supplementary prospectus issued earlier this month, Pluton acknowledged the possibility that Wise could seek to have it removed as manager of the joint venture and halt mining.

"This would have a severe detrimental effect on the company's cash flows and potentially its solvency," the Pluton prospectus stated.

The dispute with Wise is the latest in a series of challenges facing Pluton.

It is still seeking to finalise the audit of its 2013-14 financial statements, and advised the market this week that the release of its annual report had been delayed until 6 November.

Pluton recently completed an extended $47.8 million rights issue, although most of this was from creditors agreeing to convert their debt into equity.

Eligible shareholders subscribed for just 1.75 per cent of their potential amount.

Major shareholder General Nice Resources underwrote the offer to $20.9 million, which included a $13.9 million debt for equity swap and the balance in cash.

Pluton has also substantially restructured its contract with Watpac Civil & Mining, which is owed $19 million.

Of this amount, $3 million will be converted into equity, $4 million will be repaid and the balance will be restructured into a secured promissory note paying 12 per cent interest.