Reed Resources chairman David Reed has thrown the struggling company a $3 million lifeline, but the loan could be called back in if shareholders move to dump him or other Reed board members.
Reed shares slumped 2.5ï¿½ to 2.4ï¿½ yesterday on their return to trading since the appointment 10 days ago of administrators to GMK Exploration, the subsidiary that runs its Meekatharra gold mine.
The plunge came despite yesterday's news of a mass-restructure at Reed that will see it cut costs, sell assets and refocus on its titanium and vanadium projects as it waits for the administration of GMK to play out.
A raft of non-core assets, including a gas offtake deal and early-stage gold assets, are to be offloaded in what, when combined with Meekatharra's likely sale, could spell the end of the Reed family's gold mining ambitions. Its biggest remaining asset would be the Barrambie vanadium asset in the Mid West.
The axe has also fallen on Reed managing director Luke Tonkin who will depart next month, leaving Chris Reed as the company's sole executive director, albeit on a 30 per cent reduced salary of $295,000.
The size of the Reed board will also be slashed and the company said it expected to halve management levels and head office costs over coming months.
Although Reed's $880,000 wage bill over the next three months includes a significant provision for staff redundancy payments, Chris Reed told _WestBusiness _ that Mr Tonkin had "kindly foregone his redundancy payment", and waived termination payments under the service contract he entered into in April last year.
With the company carrying only $1.6 million cash at bank, plus $483,000 in trade receivables owed, David Reed said he had offered to underwrite a $3 million standby facility to fund its operations over the next year. The loan deal also stipulates Mr Reed can demand repayment within 90 days if shareholders refuse to approve the deal, if he is removed from the board, or there is a "material change in the Reed board not approved by the lender".
Mr Reed's family controls 2.7 per cent of its shares, excluding an 18.4 million (about 3.5 per cent) package owned by Chris Reed but held in a share pledge agreement as security for a loan.Reed yesterday said it would book about $70 million in impairments in its full-year accounts, including a $62.3 million write-down on the value of the still-running Meekatharra mine.