Loan of $20m to troubled smelter deemed high risk, govt went ahead anyway

The Tasmanian government was advised to approve a $20 million loan to the country's only manganese smelter last year despite knowing the risk of not getting all the money back was high, as inaction was deemed too risky, an internal document shows.

The Liberty Bell Bay manganese smelter, in Tasmania's north, closed in July this year and was subsequently liquidated, resulting in the loss of more than 200 jobs.

More than two years earlier, a tropical cyclone damaged South32's GEMCO manganese ore operation in the Northern Territory, hobbling Liberty Bell Bay's access to its main source of ore and sparking a chain of events that would lead to its liquidation.

In May 2025, the smelter had entered limited operations due to what its then-owner — UK billionaire Sanjeev Gupta's GFG Alliance — said were ore supply issues, international price volatility and US tariffs.

A document obtained by the ABC under right-to-information shows in July 2025, the Tasmanian government was told Liberty Bell Bay "may run out of available capital by the end of July" and was given four options.

The paper, from Tasmania's coordinator-general John Perry, recommended the government provide an urgent loan of up to $20 million to Liberty Bell Bay — stating there was a "very high risk" the smelter would not be able to restart without an immediate capital injection.

"LBB's owners GFG Group appear unable and/or unwilling to provide any capital into the business,"

the paper stated.

Every risk category for loan was rated high

The Tasmanian government ultimately decided to proceed with the $20 million loan to allow Liberty Bell Bay to purchase ore and restart operations at the smelter.

But the document from the coordinator-general shows his office rated every risk category for the loan as "high".

The document stated manganese producers carried "industry and sector risks" including fluctuations in steel demand and pricing — as manganese is used to make steel — exchange rate volatility, supply chain disruptions, geopolitical instability, and environmental regulations.

It also stated there was a "high risk that the value of security provided would not be sufficient to cover the outstanding loan amount" — meaning the government may not see the full value of the loan returned.

But ultimately, the document stated the risks of Liberty Bell Bay's closure were greater.

"While there is clearly an elevated risk in relation to this transaction the broader economic and strategic implications of inaction could prove to significantly more severe,"

it said.

Doing nothing considered riskier than loan

The paper from the coordinator general canvassed three other options, in addition to the $20 million loan.

The options were:

• Option 1: do nothing.
• Option 2: provide a staged financial support package with an immediate $20 million loan.
• Option 3: support a "solvent" sale of Liberty Bell Bay through US-based private equity firm White Oak.
• Option 4: provide a smaller loan, conditional on security strong enough to force administration of the smelter.

"Do nothing" was deemed a "significant risk" to the smelter, with the paper estimating its closure could impact the state economy by $500 million a year if it failed to reopen.

Option 3, the sale of the smelter through White Oak, was considered "more than what is required" and "does not represent good value for money for the Tasmanian government".

The paper said option 4 would have enabled the Tasmanian government "to take control of the business" but was "fully expected this is likely to be unpalatable to GFG".

Liberty Bell Bay said it was solvent at time of loan

Minister for Business, Industry and Resources Felix Ellis said the government stood by its decision to loan Liberty Bell Bay $20 million to give "its workers the best possible chance of a future".

"We understood the risks were present, but the released documents show the advice was that the consequences of doing nothing were greater," he said in a statement.

The smelter's administrator EY Parthenon said it believed the company had been insolvent from as early as May 1, 2025.

But Liberty Bell Bay's directors signed a declaration to the Tasmanian government in August that year stating it was solvent.

"The loan followed independent financial and legal advice, and Liberty Bell Bay company directors provided a signed declaration of solvency before the loan was executed,"

Mr Ellis said.

"The loan was secured, and funds were paid directly to the ore supplier.

"State-appointed receivers are pursuing recovery through the secured ore, with the final amount recoverable dependent on the sale outcome."