In a tumultuous turn of events, Queensland-based mining company Aurora Metals has collapsed, leaving a trail of debts totaling approximately $170 million.
The company's financiers have appointed receivers over the top of administrators, leaving small trade creditors at the back of the queue for potential repayments.
KordaMentha, the appointed administrator, is currently working through Aurora Metals' financial records. Initial estimates suggest that the company owes at least $170 million to both secured and trade creditors. Notably, the Queensland government is among the creditors, claiming unpaid royalties amounting to at least $18 million.
Aurora Metals' collapse came after WA mining services company Emeco (ASX:EHL) took legal action to protect its interests.
The company had provided ongoing care and maintenance services to one of Aurora's mothballed mines in Chillagoe, North Queensland. However, Aurora failed to fulfill its payment obligations, prompting Emeco to call in KordaMentha.
Emeco subsidiary Pit N Portal had been responsible for essential services at the mine since late 2021, including pumping water from the underground mine.
When Aurora Metals failed to make payments, Emeco sought a resolution by proposing a bailout package involving Avior Asset Management, which would have provided a $10 million facility to support the mothballed mine. However, the proposal also required the appointment of voluntary administrators, a move that Aurora's directors rejected.
As a result, Pit N Portal invoked its rights over the debt, leading to the appointment of administrators by KordaMentha.
Despite this action, KordaMentha's appointment was complicated due to a mistake made by Emeco in registering its security over Aurora's assets, where the wrong company name was used. This issue has since been resolved, with the appointment of Grant Thornton as receivers and managers on behalf of Mt Garnet Mineral Finance, Aurora's major secured creditor.
Aurora Metals' collapse is set to create significant challenges for smaller trade creditors and staff members who are owed substantial amounts.
The company's assets, which include underground mines such as King Vol and Mungana, as well as processing plants at Mt Garnet and Chillagoe, are currently under care and maintenance.
The collapse of Aurora Metals is reminiscent of the 2012 collapse of Consolidated Tin Mines, the company that Aurora's assets largely stem from.
The failure of Consolidated Tin Mines, once valued at $1 billion, had a detrimental impact on the local economy, with reports of owing as much as $95 million to regional businesses and contractors.
As the fallout from Aurora Metals' collapse unfolds, creditors will face an uncertain path to recover debts, while the broader mining industry keeps a watchful eye on the implications of the company's demise.
