Australian Contractor Culls 1,300 Jobs, Plans Asset Sales

   By Daniel Stacey 
 

SYDNEY--Australian mining services company Forge Group has laid off 1,300 workers after calling in insolvency specialists, ahead of a planned sale of assets in South Africa, Asia and the U.S..

The job losses are the latest blow to Australia's mining services sector, which is bearing the brunt of resources spending cuts on new projects by companies like BHP Billiton Ltd. (BHP) as commodity prices soften. BHP's planned US$20 billion expansion of its Port Hedland harbor facilities and Woodside Petroleum Ltd.'s (WPL.AU) US$40 billion Browse gas-export project in Western Australia lead a list of delayed investments Down Under.

Forge called in insolvency specialists late Tuesday after its lenders withdrew financial support, citing cost overruns and profit warnings on two power projects. The Perth-based company's collapse prompted several customers to sever engineering contracts with it.

"There is no money to pay employees and no work to perform," said Mark Mentha, of KordaMentha, which was appointed as Forge's receiver this week.

Among those to cancel contracts with Forge was Roy Hill Holdings Pty Ltd., which is building a new US$10 billion iron ore mine in the Australian outback, a spokesman for KordaMentha said. Forge had been building a A$1.47 billion processing plant at the site with Spanish joint venture partner Duro Felguera SA (MDF.MC).

Forge may owe as much as 500 million Australian dollars (US$447 million) to lender Australia & New Zealand Banking Group Ltd. (ANZ.AU) and trade creditors, the spokesman said.

Still, Forge's offshore construction and engineering arms--known as the Taggart and Webb Groups--are continuing to operate ahead of moves to find a buyer.

Forge was valued at A$362 million as recently as late November, when it shocked the market by warning of a deep annual loss as two power projects soured. It employed 1,753 workers in Australia and 814 workers overseas prior to its collapse.

-Write to Daniel Stacey at [e-mail]

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