The South Australian government says it has sought advice from insolvency experts about the situation at the Whyalla steelworks — and has acknowledged the possibility that the site's owner, which has fallen behind on its royalty payments, could go "into administration".
Treasurer Stephen Mullighan told state parliament on Tuesday that GFG Alliance was "in arrears", describing it as "a serious issue for the state".
But the government has refused to disclose the amount owed, saying it is more focused on creditors getting paid.
The treasurer told parliament that any push to demand payment would "exacerbate the difficult financial position that GFG finds itself in", and said the government was working "constructively and collaboratively" with the company, which has struggled to pay contractors who supply services to the steelworks.
Energy and Mining Minister Tom Koutsantonis today confirmed his department had sought advice from a specialist financial and insolvency service, in relation to GFG's SA operations, as a precaution.
"We're ready for every possible contingency," he told ABC Radio Adelaide.
"We're obviously making sure that the South Australian government has all the best advice it possibly can to prepare for any eventuality, but it doesn't necessarily mean anything in particular is going to happen.
"The department have gone away, have gone out and procured the advice that we need that we don't have in-house — whether it's specialist financial advice, legal advice, any other advice that we might need to make decisions very, very quickly — because we're talking about real people here, families in Whyalla."
The Whyalla steelworks is the country's "last structural steelmaker", Mr Koutsantonis says. (ABC News: Matt Coleman)
Premier Peter Malinauskas said the government was preparing for every possible "eventuality", including "something going wrong".
"We don't want to see GFG go into administration, we're not barracking for that to occur, but we also have a responsibility to plan for all circumstances," he said.
"What the state government is procuring advice around is exactly what would happen and when, who would fund administration in that circumstance — but I am reluctant to speculate in a way that is unhealthy.
"Any time you start planning … you worry that it's only going to diminish confidence, or have other implications, but that's life — we have to plan for everything."
The Whyalla steelworks went through upheaval in 2016 and 2017, after Arrium entered administration. (Australian Story: Ben Cheshire)
On the subject of the GFG's unpaid royalties, Mr Koutsantonis expressed certainty that the money "ultimately will be recovered".
"Businesses from time to time do delay their royalty payments, and GFG aren't the only ones in history to have done that so I'm not that concerned," he said.
"I'm more interested in creditors being paid than our royalties being paid — the more important budgets right now are the budgets of the businesses in Whyalla.
"Obviously Whyalla is in desperate need of a transformation — the blast furnace is getting on in age, it's time that it was upgraded to a direct iron reduction facility and an electric arc furnace so we'd very much like to partner with [GFG executive chairman Sanjeev] Gupta to make sure that can happen."
On Friday, Mr Gupta met with employees in Whyalla, where he "listened to their concerns" and "reinforced the need to bring the steelworks back to profit", GFG said.
In a statement released this week, a spokesperson for GFG said the company valued "our strong working relationship with the South Australian Government as we navigate short-term challenges".
Sanjeev Gupta during a visit to the steelworks in 2017, when his company was revealed as the site's new owner. (ABC News)
State opposition leader Vincent Tarzia said the government should declare the extent of any financial risk to taxpayers, saying it was "outrageous" that the government had not divulged the amount of the outstanding royalty payments.
"I can't believe that a minister of the Crown cannot answer … basic questions about how much money is owed to the South Australian government and how much GFG are in arrears. I think this is absolutely in the public interest," he told ABC Radio Adelaide.
"We don't want to catastrophise these things — we understand the importance of Whyalla but we don't want this becoming another state bank disaster; we can't get basic information out of the government.
"[The minister] didn't provide any information about the extent of the payment or how much they're owed — we don't know if it's millions, we don't know if it's tens of millions."
But Mr Koutsantonis defended the decision not to release the figure, saying it was "not an amount that would concern me a great deal".
"I don't think it's prudent for me to release that number given the mining act requires a level of confidentiality," he said.
Asked whether GFG was "trading solvent", Mr Malinauskas said that was a matter for GFG, but said it was "reckless" to liken the situation to the 1991 collapse of the state bank, which caused an estimated $3 billion in public debt.
He said he had "raised concerns" about GFG's situation with the prime minister, and later told SA parliament that GFG's missed payments were "not unprecedented", and that previous cases had "subsequently been rectified".
Mr Malinauskas said while there were "similarities" between the current situation in Whyalla and the situation when Arrium was in administration eight years ago, the government also had to "account for the differences in how we prepare for this".
During question time, Mr Malinauskas also updated the lower house on the situation concerning the steelworks' blast furnace, which has been offline because of an "impurity" inside the equipment.
"The impurity is progressively being addressed, and we expect, and the advice that we have got from GFG is that they expect, that in the early days of October that will be resolved," he said.
"That will be a good thing for cash flow within the business. It's obligations to customers, though, are being met, out of inventory it currently has on hand."