Refinery head speaks out in defence of Palmer

Posted February 1, 2016

Mensink QN

The managing director of Queensland Nickel (QN) has launched a defence of the refinery’s owner in the face of an extended coverage of Clive Palmer’s actions leading up to the declaration of voluntary administration.

The $6m-plus legacy owed to more than 230 staff made redundant is in question.

This is in the face of moves by Mr Palmer to remove himself from direct responsibility over the day-to-day running of the operation and set up his Waratah Coal and China First companies as secured creditors to QN.

That’s only part of the story, according to QN managing director Clive Mensink whose unabridged response is printed below:

When Clive Palmer’s companies acquired Queensland Nickel Pty Ltd (QN) in 2009, the price of nickel was around $7 a pound. At the time I made the decision to make redundancies at Queensland Nickel the price had been as low as $3.50 a pound. In 2009 I estimate QN’s production cost was close to $8 a pound and seven years later it’s closer to $4 a pound. QN’s improvement and efficiency in productivity are the best in any industry in Australia during the period of ownership of Mr Palmer and that is a fact.

In 2009 the Queensland Labor government wanted assistance in keeping QN’s operations going because of the significance to the North Queensland economy. In 2009, it was estimated that QN provided 2400 jobs in the community. QN is the largest private employer in North Queensland and the largest user of the Townsville port. QN exports are between $600,000,000 and $700,000,000 each year and it provides approximately $1.4 billion dollars a year to the Townsville economy. QN workers pay approximately $50,000,000 each year in group tax and the company pays around $20,000,000 each year in GST. QN is responsible for payments of $12,500,000 a year to the Queensland Government. The current structure under which QN operates was established in 1991 when the Queensland Government held more than 25 per cent of the shares in QN and provided substantial guarantees to ore suppliers and other creditors.Mensink QN

Since 2009 QN has invested over $4,000,000,000 in North Queensland’s economy by its operations and kept thousands of people employed each year, of which would have had no jobs over the last seven years if it was not for the actions of the new management of the company from 2009. While the press concentrates on issues which have no bearing on the operations or the decisions I took to place the company in administration, I thought this is a good time to set the record straight in respect of recent events.

Queensland 2015

In the last 12 months, around 22,000 jobs have been lost in the Queensland resource sector, primarily because of falling commodity prices. The media have failed to cover those tragedies and it’s disappointing how the media and politicians try to benefit from our company misfortune. It has been an extremely poor performance from government that there has been little to no real action to support the workers and the communities that have been devastated. Unfortunately, most of the companies have just closed down and closed operations permanently. The actions taken by QN needs to be seen in that light and it needs to be clearly understood by current and former workers and management of QN that what QN has done and what our strategy has been.

LME Stocks and prices

The prime reason for QN administration and associated events is the price for nickel, which is at its lowest for 15 years and as stated previously was around half of what it was when BHP wanted to close the plant. QN’s performance is more than twice as good as BHP’s management was when they had the plant - the numbers prove it.

Nickel spot price

During the weeks prior to the redundancies, the QN management team was working on plans to further improve our existing operations and identify how QN could keep the maximum number of people employed in this low nickel price environment. Various options and cash flow models were considered and QN actively sought financial assistance, which was looking positive. I determined firstly on a cash flow basis there would have to be a reduction in workers and output to provide QN with a positive cash flow to continue. In this regard we had to make 237 employees redundant and when each of those employees was made redundant, they left their employment with two weeks’ wages which had already been paid in advance. I immediately took steps to have their entitlements calculated and I then had to consider the impact and likely impact on future creditors and other financial efforts. I formed the view that QN’s best chance of survival and restructure was for QN to go into administration.

Once the administrator was appointed he or she has the power to decide how entitlements will be dealt with, my powers as a director are suspended during administration. When we consider that there is approximately 2400 jobs in Townsville dependent on QN activities in one form or another, by reducing the QN workforce by 237 jobs and restructuring operations, QN has effectively saved 2150 jobs by continuing to operate in administration. It would have been easier and less controversial to do what other resource companies have done and just closed operations and not be concerned about more than 2,000 families that depend on our operations.Ni Industry cost curve

We recently celebrated 40 years in operation in Townsville and I firmly believe QN is capable of operating for another 40 years. QN can emerge from this administration as a stronger company.

The reports in the press about the management team are untrue. I hope the administration will properly investigate and deal with these matters. I have refrained from public comment and have not attended this (creditors’) meeting as, like many, I am a creditor of the company. I, and our shareholders, wanted all creditors including the workforce to feel free to raise any concern they may have with the administrators without being in any way restricted by my or our shareholders’ presence at the meeting. The operations are ongoing and employ over 550 people and impact another 1600 jobs in Townsville. Queensland Nickel must continue to provide the security for our community to function.

On a personal note, how anyone could attack the strong commitment Clive Palmer has shown to Townsville since 2009 is difficult to understand. He invested his money to save our operations when no one else would. In good times he gave away 55 Mercedes Benz and over 1300 overseas holidays to staff. While 237 jobs have been lost because of low nickel prices, we are trying to save over 2000 jobs. I don’t see anyone else trying save jobs in North Queensland.

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