KordaMentha administrators ‘shocked’ by state of Whyalla steelworks which were running ‘hand to mouth’

When the new administrators of the Whyalla steelworks arrived on site two weeks ago, one of the first things they noticed was the traffic lights on the way in weren't working.

As they looked over its assets and finances, things only got worse.

"I was quite shocked," KordaMentha partner Sebastian Hams said during an exclusive interview with Stateline.

"Clearly very little maintenance has been done since we were last here."

The Whyalla steelworks was losing $1.5 million a day before the SA government tipped it into administration, according to administrators KordaMentha.  (ABC News)

KordaMentha was last at the steelworks in 2016/17, when previous owner Arrium went into administration — so they had a benchmark to assess it against.

And despite reports of how troubled the operations there had become, they were still shocked.

Administrators told creditors on Monday the plant was running "hand to mouth" with only $8 million in the bank, and safety had become a matter of "luck".

Sanjeev Gupta's GFG Alliance is a privately run family business, not answerable to shareholders, meaning there was a lack of public information about operations in Whyalla.

Most updates about problems there have come from insider tips or businesses contracted to do work for the company.

Sanjeev Gupta is chief executive of GFG Alliance, a conglomerate that owned the steelworks. (ABC News: Che Chorley)

The appointment of administrators at the steelworks has laid bare how bad things at the steelworks had really become.

After a terrible 2024, with the blast furnace out of operation for months, the company was losing $1.5 million a day, and had debts of $1.3 billion.

The steelworks has 'upwards of 10' interested buyers

Now KordaMentha has taken the reins, the first item of business is what it's calling the "stabilisation phase".

That's doing things like fixing the traffic lights, improving safety, getting better deals for gas, electricity and diesel and making sure the plant has enough coking coal stockpiled.

Supplies of raw materials and equipment to the Whyalla steelworks were dwindling before the administration, according to KordaMentha.  (ABC News: Che Chorley)

Then it will move onto the "capital expenditure" phase, looking at expansion plans at the magnetite mine, and a plan to move towards "green steel" with infrastructure such as an electric arc furnace.

The administrators will also be looking for a buyer, a difficult task when you have run-down facilities and Chinese steel flooding the market, pushing down prices — something that could get worse as the United States hikes tariffs.

Timeline of GFG's crisis-plagued steelworks

Photo shows Buildings at a steelworks.

Whyalla's steelworks has gone into administration for the second time in under a decade. Here is a look at how events have unfolded in the city in recent years. 

The saving grace is a massive funding package from the state and federal governments.

Some of the $2.4 billion of taxpayer money promised is going towards financing the administration of the plant, and making sure small local creditors are paid, but the bulk — $1.9 billion — is earmarked for a new owner to use on upgrades.

"It's going to be challenging, but that said we're really blessed and very lucky and grateful to the state government and the federal government for putting the stabilisation package in place," Mr Hams said.

"That is going to be a material advantage in finding a buyer."

KordaMentha administrator Sebastian Hams says he was "quite shocked" by the condition of the Whyalla steelworks.  (ABC News: Che Chorley)

And there's already been "upwards of 10" companies contact KordaMentha expressing interest.

"It's early doors. You get a lot of emails from people who perhaps might not be around at the back end of the process," Mr Hams said. 

"We know who's interested in this, there's domestic players, there's international players. This is a big piece of expenditure so it's not going to be a fly-by-night operator, it's going to be a really established steel maker."

KordaMentha did its 'due diligence' when it sold the steelworks to Gupta

KordaMentha has been widely seen as the best choice as administrator — the company was the administrator in 2016, knows the business inside and out and has been able to hit the ground running.

But last time they ultimately selected Sanjeev Gupta's company to take over.

KordaMentha partner Mark Mentha speaking with Premier Peter Malinauskas at a meeting of Whyalla steelworks creditors.  (ABC News: Che Chorley)

KordaMentha says it wasn't a mistake — at the time Mr Gupta's fortunes were still on the rise and he hadn't been dealt the devastating blow of the collapse of financier Greensill.

"We did our due diligence at that point in time. Our investment bank that was acting for us at that point in time did their due diligence," Mr Hams said.

"Various things have happened around the world, including the Greensill collapse so look when we sold this business to Mr Gupta back in 2017 we did our due diligence, we went through that process. What has transpired in the last eight years, nine years has happened."

Was GFG trading insolvent?

Given the poor financial state of the Whyalla operations, the question has been asked — was it trading while insolvent? 

That's something KordaMentha is also investigating.

"We don't currently have a view on that. We need to go through the books and do that examination," Mr Hams said.

"If it was trading insolvent, that is a significant issue for the directors but that's an investigation we're duty bound to undertake and we will do that."

It's something ASIC has an eye on too, issuing a short statement.

"ASIC is aware of the concerns regarding the entity operating Whyalla steelworks and is actively monitoring the situation."