Government’s dodgy loan to a dodgy manganese smelter.
Administrators say Liberty Bell Bay was insolvent three months before Tasmania handed it $20 million. How did the government miss it — and does it matter?
The Tasmanian government handed $20 million of public money to a company that administrators now believe had already been insolvent for three months. Liberty Bell Bay, Australia's only manganese smelter, closed last week with around 200 workers out of a job and creditors owed somewhere between $70 million and $300 million. The loan, approved in August 2025, was meant to save the smelter. It did not.
The administrators' report reveals the government lent into a collapse already underway
The administrators' report, prepared by EY Parthenon, puts the timeline in damning sequence. Liberty Bell Bay's revenue had collapsed from $172 million in the 2024-25 financial year to $11 million in 2026. The company had been posting operating losses since 2022-23. By May last year, in the administrators' view, it could no longer pay its debts as they fell due. That is the legal definition of insolvency. Three months later, the Tasmanian government wired it $20 million, $14 million of which was spent on a single shipment of ore.
The Deputy Premier, Guy Barnett, said the government had taken security over that ore and completed due diligence. That is a defensible position in a narrow sense: the government did not simply hand over cash with no strings attached. But it speaks to a deeper problem with how governments approach these decisions. Securing collateral against an ore shipment is not the same as understanding whether the underlying business has any viable future. The ore is now sitting unused. The workers are still out of a job.
The Tasmanian government was effectively lending money into a bucket with a hole in the bottom, and the hole had been there for years.
GFG Alliance was draining the company while the government was deciding whether to save it
There is also the matter of what GFG Alliance, the parent company owned by Sanjeev Gupta, was doing with Liberty Bell Bay's cash while all this was happening. The administrators found that roughly $191 million in net inter-company loans had flowed out of the smelter to related parties within the GFG group. The report is blunt about the consequence: those outflows left the company with almost no financial buffer when commodity prices moved against it. The Tasmanian government was effectively lending money into a bucket with a hole in the bottom, and the hole had been there for years.
Governments are structurally bad at this decision, and the incentives explain why
This is not an isolated failure of judgment. It fits a pattern that keeps repeating itself at the state level in particular. The same Tasmanian government is currently weighing whether to buy the Boag's Brewery site in Launceston for somewhere between $20 and $25 million, a deal that follows the same logic: use public money to intervene in a commercial decision because the political cost of not acting feels higher than the financial cost of acting. The logic is understandable. It is also usually wrong.
Governments are structurally bad at this kind of decision, and not because public servants are incompetent. The problem is informational and structural. A private lender deciding whether to extend credit to Liberty Bell Bay in August 2025 would have had every incentive to scrutinise the company's cash flows, its inter-company loan arrangements, and the trend in its aged payables. That last number is telling: the proportion of bills more than 60 days overdue had blown out from 18 per cent of total payables in 2023-24 to 86 per cent by 2026. A creditor watching that number would have had serious questions. A government watching a regional community lose 200 jobs has different incentives entirely.
The same dynamic plays out at the federal level when governments back hydrogen projects, green steel proposals, or any number of industries deemed strategically important. The Grattan Institute's push for up to $2 billion a year in hydrogen subsidies rests on the assumption that governments can identify which bets are worth making before the market can. The Liberty Bell Bay case is a reminder of what happens when that assumption is tested against reality.
None of this means governments should never intervene in industry. There are genuine cases for it: strategic capabilities, market failures, industries where the private sector cannot capture the social return on investment. But those cases require a discipline that is very hard to maintain when a community is facing immediate job losses and a minister is fielding calls from the local member. The pressure to act overwhelms the analysis. The loan gets approved. The company closes anyway. And the taxpayers are left holding a shipment of ore nobody is using.
The Tasmanian government says it put "everything on the table" to protect taxpayers. What the administrators' report shows is that the table was set before the government arrived.
Sources
Frequently Asked Questions
When did Liberty Bell Bay become insolvent?
Administrators from EY Parthenon believe Liberty Bell Bay became insolvent in May 2025, meaning it could no longer pay its debts as they fell due. That is three months before the Tasmanian government approved a $20 million loan intended to keep the smelter operating.
Why did the Tasmanian government lend money to a company that was already insolvent?
The government says it conducted due diligence and took security over an ore shipment before approving the loan. The administrators' report suggests the warning signs — collapsing revenue, operating losses since 2022-23, and bills more than 60 days overdue blowing out to 86 per cent of total payables — were present in the company's financials at the time.
What happened to the $20 million the Tasmanian government lent Liberty Bell Bay?
Fourteen million dollars of the $20 million loan was spent on a single shipment of ore, which the government holds as security. That ore is now sitting unused following the smelter's closure, and the government's ability to recover its money depends on what the ore can be sold for in administration.
What did GFG Alliance do with Liberty Bell Bay's money?
Administrators found that approximately $191 million in net inter-company loans flowed out of Liberty Bell Bay to related parties within Sanjeev Gupta's GFG Alliance group. Those outflows left the smelter with almost no financial buffer when commodity prices moved against it.
Why do state governments keep lending money to failing businesses?
The incentive structure works against commercial discipline: the political cost of allowing a regional employer to collapse — 200 jobs lost, calls from the local member — is immediate and visible, while the financial cost of a failed loan is diffuse and deferred. Private lenders scrutinise cash flows and payables trends because they bear the loss; governments scrutinise the political consequences of inaction.