07/02/2014 - 13:14

Reed flags $26m write-down

07/02/2014 - 13:14

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Reed Resources has announced a $26 million write-down following the collapse of a potential sale by the administrators of the company's Meekatharra gold project.

Reed flags $26m write-down
Reed Resources' Meekatharra gold project.

Reed Resources has announced a $26 million write-down following the collapse of a potential sale by the administrators of the company's Meekatharra gold project.

Reed told the market it had resolved to write down to zero the carrying value of a $25 million loan to subsidiary GMK Exploration, the owner of the Meekatharra project, due to the uncertainty around potential returns to creditors.

Reed has also written down the value of its Comet Vale gold project from $3 million to $2 million, reflecting the value of a private bid for the project earlier this week.

GMK was placed into voluntary administration in August last year after a number of operational setbacks, prompting the resignation of Reed's then-managing director Luke Tonkin.

Administrators from Ferrier Hodgson secured an in-principle sales agreement for the Meekatharra project but the transaction collapsed when the bidder's financier withdrew its support.

Reed said the administrators were now canvassing other bidders and had proposed to GMK creditors a holding deed of company arrangement to allow further time for the sale of the project.

The administrators expect a "significant" dividend would be able to be paid to creditors based on the value of GMK's assets but said it was unlikely to be 100 cents in the dollar.

Reed shares were trading 1.9 per cent higher at 5.3 cents at 1:08pm WST.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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