NRW Holdings Limited

ASX:NWH

NRW Holdings Limited

ASX:NWH
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$5.41 (+0.2%)
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Forum Topics NWH NWH SIMEC contract issues

Pinned straw:
Bear77
Added 10 months ago

19-Feb-2025: NRW Holdings (NWH), which I hold both here and in my SMSF called a Trading-Halt.PDF this afternoon regarding their SIMEC contract in South Australia - for more details of that contract see here: https://www.australianmining.com.au/golding-and-simec-agree-to-600m-contract/ [02-Feb-2022]. Golding is a division of NRW (NWH).

When that contract was entered into, it was with OneSteel Manufacturing trading as SIMEC Mining. Not sure if the persistently low iron ore price is biting SIMEC and/or the US tariffs proposed on steel imports into the US.

SIMEC Group Ltd is a British international energy and natural resources business focused on resources, sustainable power, infrastructure, and commodities trading. It is part of the Gupta Family Group ("GFG") Alliance, owned by members of the Gupta family, which had a combined turnover of more than USD13 billion and combined net assets of more than USD2.3 billion. Its activities span renewable energy generation, mining, shipping, and commodities trading. (Source: Wikipedia).

According to Google, when I typed in: "Does SIMEC export steel to the USA?" the answer is "Yes, Grupo Simec, a Mexican steel company, exports steel to the United States. Simec is a major supplier of special steel in North America."

Also (from Wikipedia):

SIMEC Group in Australia:

In 2013, SIMEC Group refocused itself – mainly on to sustainable power, mining and infrastructure. Among many developments since then, in 2017 it acquired Arrium Mining and OneSteel operations in South Australia[4] for USD750 million.[1] The mining assets of the former company included iron ore (magnetite and haematite) mines in the Middleback Range[7][8] and a dolomite mine (to supply blast furnace flux) at Ardrossan, South Australia.[9]

In 2017, GFG Alliance purchased Arrium's Whyalla Steelworks in South Australia, announcing that a new AUD600 million investment would lift production to 1.8 million tonnes a year. In 2018 the company announced it would build a new steel manufacturing plant next to the existing one. It would be capable of producing 10 million tonnes a year – making it the largest in the western world – and have infrastructure to eventually double that capacity.[10]

SIMEC Mining acquired mining leases in 2018 for the Iron Sultan and Iron Warrior mines in the Middleback Range, 50 km (30 mi) south-west of Whyalla, reflecting the need for significant sources of iron ore for its expanding capacity.[10]

Another member of GFG Alliance, SIMEC Energy Australia Pty Ltd, acquired a controlling stake in South Australian renewable energy and storage technologies company, ZEN Energy Pty Ltd, in 2017 and formed a joint venture named SIMEC Zen Energy. Sanjeev Gupta said his company was investing in large-scale power projects to meet its own industrial requirements. Describing the high cost of energy for Australian consumers as "a crying shame for a country so rich in resources", he said "it has been a priority for us to take decisive remedial steps."[6]

References:

  1. a b John, Nevin (1 July 2018). "Stress reliever". Business Today. Retrieved 20 November 2020.
  2. ^ "SIMEC Group". SIMEC Group. 2020. Retrieved 20 November 2020.
  3. ^ "About us". SIMEC Group. 2020. Retrieved 20 November 2020.
  4. a b "Our History". GFG Alliance. 2020. Retrieved 20 November 2020.
  5. ^ "Company Overview of Liberty House Ltd". Bloomberg. Bloomberg. Retrieved 7 April 2016.
  6. a b "Whyalla steelworks owner Sanjeev Gupta buys majority stake in renewable firm Zen Energy". 20 September 2017. Retrieved 20 November 2020.
  7. ^ "Arrium Acquired by GFG Alliance". 1 September 2017. Retrieved 11 December 2018. GFG Alliance has completed the acquisition of the Arrium Mining and Steel businesses ... the former Arrium Mining has been renamed SIMEC Mining and OneSteel re-branded as Liberty OneSteel
  8. ^ "Middleback Ranges". Mines and Quarries. Government of South Australia Department for Energy and Mining. Retrieved 11 December 2018.
  9. ^ "Ardrossan Dolomite Operation" (PDF). Retention Lease Proposal. SIMEC Mining. March 2018. Retrieved 11 December 2018 – via Government of South Australia.
  10. a b Hosie, Ewen (11 December 2018). "GFG Alliance drives SA iron ore sector with Whyalla steel expansion". Australian Mining. Retrieved 11 December 2018.


Expecting the announcement either tomorrow (Thursday) or Friday morning before the market opens.

It's not a thesis breaker because it's just one contract, but it should be interesting anyway.
Randy
Added 10 months ago

Hi @Bear77

By way of introduction I'm a brand new premium member of Strawman - so only just getting familiar with the platform & members.

However I saw your post & thought I'd chime in.

Sorry to be the bearer of bad news - but rather than US tarrifs - I think the trading halt is far more likely to be to do with today's dramatic action by the South Australian government to tip Whyalla (and associated iron-ore operations) into voluntary administration. Basically they have run out of patience with tens of millions owed to the government in unpaid royalties, and rumours are that Whyalla owes a lot more than that to various other suppliers etc.

Whyalla steelworks collapses: KordaMentha appointed administrator

I've followed the Gupta alliance group since he purchased Whyalla from the corpse of Arrium (which I owned a lot of & got very badly burned on - mental note - never assume an industry/company is vital to a Western nation's strategic & national interest & will be saved). His group is a very opaque international conglomerate of old-school industrial businesses that have hit harder times with international off-shoring & difficulty competing with cheap offshore labour & semi-state-sponsored/subsidised industrial capacity). Many have wondered how he can turn a sow's ear into a silk purse, when so many others have tried and failed.

His business was also integrally involved with Lex Greenhill's failed invoice-financing empire, which revealed a less than transparent (& possibly fraudulent) invoice financing operation. Sadly his empire seems to leave a string of unfulfilled promises & debts wherever it resides, including in the UK & numerous European operations. It has had the smell of fingers in the dyke, often finding last minute funds from one part of the empire to plug a hole in another part, just in time when the heat gets too much. Sadly I suspect the whole empire could crumble, and leave a pretty nasty trail of destruction & creditors behind. Suspect this is why the SA government moved - to protect its own interests & mitigate damages.

What this means for NRW is hard to say - much will depend on how current Gupta's iron ore operations are with NRW's invoices - and whether as a stand-alone entity the operation is currently profitable & therefore may be maintained on an ongoing basis by administrators.

Crossing my fingers for you & other NRW shareholders. The memories of Arrium's collapse still haunt me, hoping you folks are in for a less punishing experience.

Cheers

Randy


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Bear77
Added 10 months ago

Right you are @Randy - been a little busy this week and hadn't caught up with that VA news. What you've said makes perfect sense and I think it's safe to assume that Gupta's SIMEC probably owes NRW (NWH.asx) a few million too since they seem to be behind on paying everyone else. I still don't think it's a thesis breaker for NRW as they have a lot of contracts across Australia however the market may well sell them down further after their recent falls from that $4/share peak level in November (19-Nov-2024). Their (NRW's) CFO resigned in January, apparently with immediate effect (Chief-Financial-Officer-Resignation.PDF 13-Jan-2025) so hopefully there's not more issues than just this SIMEC contract.

Disc: Held.

6
Randy
Added 9 months ago

Hi @Bear77 - update on NWH's contract exposure to One Steel / Middleback mines just out today.

Unfortunately looks like they'll out of pocket c$120M of revenue (worst case assuming no recovery).

ASX NRW: Golding Contractors, owned by NRW, is owed about $120m in the fallout from the Whyalla steelworks collapse in SA

My gut feeling is the market has been already pricing in some degree of losses (or certainly the loss of future earning potential of the 3-year contract as company had flagged taking it back in house from Feb25). That said I think the magnitude of revenue arrears will still provoke an initially unpleasant market reaction - but depending on the initial reaction - could be an interesting opportunity to nibble / accumulate some shares on any over reaction.

Going to do a little homework on the company myself before the trading halt gets lifted later this week.

But frustrating for holders of NWH - do an honest days labour / service provision, and get screwed over by a "promise-the-world, deliver-very-little, smoke-and-mirrors financial charlatan.

7
Bear77
Added 9 months ago

25-Feb-2025: 3:50pm: NRW-Holdings-Whyalla-SIMEC-Update.PDF

NRW (NWH.asx) remains in a trading suspension however I would expect them to be trading again tomorrow and they'll likely report tomorrow (H1 report for FY2025) or Thursday (Friday at the latest, as Friday is the last day of the month).

NRW's Golding division continues to provide mining services to OneSteel under their MSA (Mining Services Agreement) which goes through until the end of January 2026, and Golding has received confirmation that it will be paid by the OneSteel Administrators for all services performed in accordance with the MSA on and from 19 February 2025. Meanwhile, as expected, OneSteel do owe NRW a lot of money for services Golding have already provided prior to that date (19th Feb, when the SA Government placed OneSteel into Administration due to unpaid taxes, royalties, etc), and today's announcement says that the amount owing is approximately A$113.3m.

That's a lot to be owed by a company that's been placed into Administration, however today's announcement also explains steps that NRW's Golding division had previously taken to protect its position: Golding previously obtained a guarantee and indemnity from both Liberty Primary Metals Australia Pty Ltd and Whyalla Ports Pty Ltd, as well as first ranking security over the assets and shares of Whyalla Ports Pty Ltd.

Liberty Primary Metals Australia is the parent company of Onesteel Manufacturing Pty Ltd, Whyalla Ports Pty Ltd and Tahmoor Coal Pty Ltd.

Whyalla Ports Pty Ltd operates the deep sea port at Whyalla, South Australia. The port is critical to OneSteel’s operations as it enables the export of iron ore from OneSteel’s mining activities and the support of its steel making operations.

The port also handles the import and export of a variety of commodities for third party customers. 

With NRW having first ranking security over the Whyalla Port (shares and assets), I think we can safely assume that NRW is NOT going to end up losing the full $113 million here - they might take a haircut, but they are going to get paid something, and possibly all of what they're owed.

The other good news is that even if NRW did have to write off $113m in bad debts - which they won't have to - they had cash and cash equivalent balances at a record high of $284.4 million at December 31st, which is further supported by available undrawn debt facilities of $330 million, so they have a very solid balance sheet than could absorb significant losses if required.

Good to hear that NRW's management are continuing to excel at risk management, and they had already taken steps to protect their position before the SA Government took steps to protect their own interests.

NRW said today: NRW has various options regarding the enforcement of its security and will make a decision on the path forward based on the best interest of its shareholders and other stakeholders in what is a complex environment.  

Good-o!

Disc: Held.

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