Allmine Group goes under as downturn takes hold

The downturn in mining is claiming more victims, with the collapse of Allmine Group.

The parent company of engineering firm Arccon was placed into administration yesterday.

In a letter to the Australian Securities Exchange, WA insolvency Solutions said that it had been appointed as administrators for the contracting group.

The West Australian reported the company had been suspended from trading since May while it undertook a financial review. Shares in the company had dropped nearly 80 per cent this  year.

At the time, Allmine said it was in discussion with its main banker over breaches ogf a loan.

March quarter figures showed the group had a negative cash balance of $7.5 million, with $2.4 million cash at hand. It had drawn $11 million from $16.5 million in loan facilities.

Last month, FTI Consulting warned mining services firms will face the brunt of the downturn and predicted many companies could go under.

“Insolvencies in the mining services sector can be expected to risk in the coming year,” the report said.

“Although the mining sector is not a large overall employer in Australia, early signs of the mining investment boom drawing to a close can be seen in the dramatic rise in the unemployment rate in Western Australia, rising from 3.9 per cent in March 2012 to 4.7 per cent in March 2013, or a 20.5 per cent rise.”

The firm’s warning comes in the wake of a number of profit downgrades in the mining services sector in the recent past.  

This includes UGL, Boart Longyear and Worley Parsons, among others. Ausdrill shares dipped in April after the contractor said profits would fall.

FTI senior managing director Michael Ryan said smaller companies would be affected as it is not as easy for them to diversify their business.

“In Western Australia and Queensland the contraction and slowdown is evident in the mining space and this is flowing on to the mining services guys.

“Unless things improve in terms of commodity prices or sentiment in the mining sector, you could see a fair bit of fallout.”

Image: smh.com.au

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