The sliding iron ore price has claimed its first high profile victim and delivered a substantial blow to one of Australia's richest men.
Just nine months after starting production, Northern Territory miner Western Desert Resources has been placed into receivership after its lender, Macquarie Bank, refused to provide short-term funding.
It's failure will hit the pockets of its high profile backers, including billionaire Bruce Mathieson, former Billabong director Scott Perrin and Coles Myer's ex-chairman Rick Allert.
The miner was hit by a slide in iron ore prices, which have dived 38 per cent since the start of 2014 and dropped to a five-year low of $US83.60 last Friday.
BBY mining analyst Mike Harrowell said Western Desert needed a spot iron ore price of more than $US100 a tonne to get by, which was a precarious position to be in given BHP Billiton recently warned it did not expect prices to climb back above that level.
"Western Desert produced basically a lower quality iron ore at a relatively high cost," he said.
Mr Mathieson stands to lose tens of millions of dollars through the collapse.
He owns more than 21 per cent of the company through a joint investment with Mr Perrin and was forced to cough up at least another $14 million earlier this year when investors snubbed a $60 million capital raising.
The 70-year-old is worth an estimated $1.2 billion, according to BRW's Rich List, and made his fortune in the hospitality industry, where he has a lucrative partnership with Woolworths' liquor arm.
Others affected include the company's chairman, Mr Allert, who owns nearly four million shares or options, and chief executive Norm Gardner, who holds more than eight million shares and another six million options.
Meanwhile, mining service business Ausdrill is owed around $8 million by Western Desert.
Western Desert is the second iron ore business to fold in the face of the lower iron ore price, following fellow NT producer Sherwin Iron which went into administration in June.
Mr Harrowell said more producers could be forced to close if the price slide continued.
But he believes a recovery is likely in the next few weeks, with the market pricing in a return to $US95 a tonne.
He said newer producers in the Pilbara would be able to survive at current prices.
"On our numbers, at least, the guys that are producing in the Pilbara can survive at these levels, it's not very pleasant but they can survive," he said.
Share
