Status Report for Creditors and Shareholders29 March 2004
The appointment of Voluntary Administrators and Receivers and Managers followed the unexpected fire incident at the Southland mine in late December 2003.
Progress of the receivership
As a consequence of the sale process for the gold assets and general restructuring efforts by senior management and other stakeholders, a significant number of parties engaged with the Receivers and Managers and stakeholders regarding the future of the Group.
On 11 March 2004, Gympie Gold Limited announced that a consortium of banks led by Mizuho International Plc ("Mizhou") and Investec Bank Australia Limited ("Investec") had replaced HSBC Precious Metals Australia and Fortis Banks as its principal bankers.
Given the appointment of new bankers, the Receivers and Managers, Ferrier Hodgson, have advised that the sale process previously put in place for Gympie Eldorado Gold Mine and the company's shareholding in D'Aguilar Gold Limited has been put on hold while the consortium concludes its appraisal of the situation.
Re-entry at the Southland mine, which was damaged by the fire on 24 December 2003, had been proceeding satisfactorily until 11 March 2004. However, re-entry was then halted due to unsafe conditions including the discovery of further damage and active fire in main-gate roadway about one kilometre from the longwall unit.
As a result of these events and consequent safety issues and impact on the re-entry plan then being pursued, the Southland mine was placed on care and maintenance with effect from 17 March 2004. The Receivers have commissioned an expert report on mine safety and the viability of re-entry options, if any.
A decision as to the future direction of Southland Coal will be made following receipt of the experts report and consultation with Mizuho/Investec, and Southland Coal's joint venture partner.
Managing Director, Harry Adams will be leaving Gympie Gold on 31 March 2004.
Update for creditors regarding the voluntary administration
On 22 January 2004, the Administrators obtained Orders from the Supreme Court extending the convening period for the second meeting of creditors of all 12 companies for which they were appointed until 26 May 2004.
The Administrators applied for the extension to enable sufficient time for the Receivers and Managers to investigate the position at Southland mine, offer the gold assets for sale and determine if any reconstruction or recapitalisation of the Group might be possible. The recent appointment of new bankers may also impact the Group's ability to promote a reconstruction.
At this stage and following the recent adverse developments at Southland mine, it has not been possible to conclude an evaluation of the position at the Southland mine to enable any reconstruction proposal to be properly developed. Those investigations are continuing.
At the time of convening the second meeting of creditors, the Administrators will send a written report to all creditors, which will include their recommendation for the future of the company. In the absence of any reconstruction or recapitalisation proposal, the Administrators would likely only be in a position to recommend the liquidation of the Group. Accordingly, the outcome of the investigation and appraisals by the new bankers and the Receivers and Managers needs to be completed to allow every opportunity for such a proposal to be developed in the interests of creditors and other stakeholders in the Group.
While every effort will be made to enable that process to occur prior to 26 May 2004 (the current period of extension granted by the Supreme Court of New South Wales), the timing remains uncertain because of the difficulties associated with Southland mine and other related factors.
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