Kimberley iron ore miner Pluton Resources is teetering on the brink of disaster, warning shareholders yesterday it faces a struggle to remain viable if it cannot raise at least $47.5 million through a rights issue.
Pluton bought the historic Cockatoo Island iron ore mine from Cliffs Natural Resources in 2012, banking on a recovery in the iron ore price to deliver profits.
But a damaging brawl with joint venture partner Wise Energy Group has forced the company to cover the whole costs of mining at Cockatoo. Operational issues, combined with this year's iron ore price slump, have put Pluton on the brink of disaster despite a $17 million raising in May.
Pluton said yesterday it has liabilities of $53.7 million and, though creditors owed $17.5 million have agreed to a debt-for-equity swap, it needs to find at least $47.5 million through the equity raising. Pluton is targeting an $80 million total though the nine-for-one rights issue at 1Â¢ a share.
As well as paying off trade creditors, including mining contractor Watpac, which is owed $9.2 million, Pluton needs to restructure a series of disastrous off-take agreements to return prepayments. It also needs to find $US21 million to buy Wise out of the joint venture.
The offer is not underwritten. Lead manager Patersons Securities wore 60 per cent of the $17 million May issue.
Pluton shares last traded in May, closing at 3.4Â¢ before suspending its shares ahead of the resignation of the majority of its board.
At the time, it had 889 million shares on issue. If the latest raising closes fully subscribed that will blow out to more than 8.9 billion.
Pluton will call a shareholder meeting in August to approve the issue.