Pluton on the brink

Struggling miner Pluton Resources is teetering on the edge of total disaster after its estranged business partner tried to remove the company as the manager of the jointly owned Cockatoo Island iron ore project.

The move could trigger Pluton's collapse, according to earlier disclosures by the troubled company because stand-still agreements with major creditors depend on it remaining in charge.

China's Wise Energy Group has demanded Pluton immediately halt mining on Cockatoo and stand down as manager with 30 days.

Pluton belatedly advised the market of its new crisis late yesterday, in response to _WestBusiness _queries about the termination notice. The Wise letter was sent to Pluton chairman Paul D'Sylva on Tuesday.

The move came after the two companies failed to finalise a $US21 million ($24 million) buyout of Wise's half share of the project by an October 13 deadline.

Pluton said it had put the matter in the hands of its lawyers.

Acting chief executive Jeremy Bower said Pluton would not stand down its workforce on Cockatoo and did not believe the April exchange of letters agreeing to the buyout would be upheld in court.

"The company's position is that the letter Wise is seeking to rely on to take this action is not legally enforceable," he said.

An October 13 Pluton market disclosure said a successful push by Wise to terminate mining at Cockatoo and seek a new project manager "would have a severe detrimental effect on the com- pany's cash flows and potentially its solvency".

It could also trigger the collapse of a critical stand-still agreement between Pluton and mining contractor Watpac, which is owed $19 million for work on Cockatoo.

Watpac agreed this month to restructure $13 million of that debt into a promissory note payable over time but reserved the right to terminate that agreement and seek immediate, full payment if Pluton was dumped as manager of the project.

Pluton told shareholders last night it was working with Watpac to prepare a new mine plan.

It said it had earlier sought an explanation from Wise as to its "non-compliance with its obligations to meet significant called sums payable by Wise under the joint venture agreement.

Pluton shares have been suspended from trading since May as it finalised a capital raising at 1¢ a share. It last traded at 3.4¢.