Answers forthcoming for Wiluna collapse

Investors in Wiluna Mining (ASX:WMC) hope to start getting answers next Monday as to why their company suddenly collapsed late last week and went into administration.

The Administrators from FTI Consulting have to provide a first report to creditors eight days after being appointed, which would be August 1.

Wiluna shares were suspended from trading on Friday before trading started. They had closed Thursday at 20.5 cents a share.

Since the collapse and appointment of administrators there have been no answers as to why a company that had just raised more than $60 million to fund a revamp of the area in WA where Wiluna has been exploring, suddenly collapsed and was placed into administration.

Wiluna became the first listed resources company to collapse thanks to the surge in inflation and costs, Covid infections, labour shortages and the supply chain constraints that are impacting all areas of business.

Some shareholders would like to know if that was the case and if the full $60 million raised was in the company’s accounts.

Wiluna announced the appointment of FTI Consulting as administrators on Friday despite the millions raised from shareholders and a change of management at the start of July.

The administrators said they intend to continue operating Wiluna Mining on a ‘business as usual’ basis while reviewing operating and recapitalisation options.

They said they will work closely with Wiluna Mining employees, suppliers, secured lenders and customers to quickly stabilise operations and preserve value for stakeholders.

The administrators told the ASX in a statement that they had been advised by management that due to the impact of increasing cost pressures, tightening terms of creditor payments, the impact of COVID on staff availability, project ramp-up issues and worldwide shipping constraints, the company had had insufficient working capital to carry out its reset mine plan.

Wiluna Mining had investigated ways of improving that cash by getting financial accommodation from creditors and shareholders, but directors said it became apparent that those options would not successfully address the cash flow shortfall in the time needed.

But some investors apparently would like to see a timeline of events to see if these problems were evident as the company raised $63 million in May and June.

Wiluna ran a capital raising in May and early June aimed at raising between $50 million and $84.5 million from shareholders. That was raised at 40 cents a share. The shares ended at 20.5 cents, so the company’s problems were in the market.

It managed to raise $60 million and it looked like that would be enough to allow the company to reset plans to mine the 5.5 million ounces in the area in the WA goldfields.

This was the latest fund raising by a company that has spent an estimated $750 million in a decade exploring and mining for gold.

When former owner APEX Minerals took on the Wiluna project in 2007, it launched at least eight capital raisings in five years before going into receivership in 2013.

Blackham Resources acquired the mine in January 2014 and launched several placements in the years leading up to its 2020 rebrand as Wiluna Mining Corp.

Wiluna announced a $24.5 million capital raising in December 2020, with similar financial initiatives to follow throughout 2021, including a $53 million share placement in November 2021. The recent $60 million raise was the latest. That’s more than $137 million in 18 months.

Wiluna had been targeting a mining run rate of 110–120,000 ounces a year for its Stage 1 concentrator by the end of 2022.

So will the administrators try to keep that plan going while looking for buyers?

Wiluna has been exploring in the North-Eastern Goldfields of Western Australia, about approximately 750 km northeast of Perth.

In May Wiluna revealed solid results from drilling with the first hole at the East Lower lode returned 9.40 metres at 4.87 grams of gold to tonne.

Wiluna said optimistically the existing development at Golden Age and Calais may provide for rapid and low-cost access for further drilling of these new sulphide zones, subject to further results from the current drilling program.

The latest fund raising was to help drive this work and push towards an early mining restart.

But judging from the statement on Friday from administrators, there was not enough money for the plans, leading questions about just what was known in May and June about the real cost structure at Wiluna and its plans.