A break-up of troubled steel and mining group Arrium could be on the horizon after the company entered voluntary administration following failed discussions with lenders for a funding deal.
The move could put at risk the jobs of nearly 7,000 Arrium employees as the new administrators grapple with options to stem the cash drain from its iron ore mining business and steel plant at Whyalla in South Australia.
"The administrators could go for another round of cost cuts, or decide to close down the iron ore and steel businesses," Morningstar mining analyst Matthew Hodge said.
Top of any asset sale list would be the profitable MolyCop mining consumables business.
"It might also be easier to sell the MolyCop business, because banks will probably bring this to a head."
Arrium abandoned an unsuccessful attempt to sell Moly-Cop - the world's largest supplier of grinding media used in mining and construction - in January because it could not secure an agreeable price.
Arrium, which has struggled with a $2.1 billion debt, on Thursday appointed Grant Thornton as administrators.
The move followed a suspension of trading in its shares on the ASX on Wednesday after Arrium's lenders rejected a $US927 million ($A1.23 billion) lifeline from US private equity group GSO Capital Partners that would have involved lenders suffering steep losses on their debts.
The company struggled to come up with alternative proposals acceptable to its lenders - who include Australia's four major banks, several global banks and US bond holders.
"It has become clear to the board that it has, unfortunately, been left with no option other than to place the relevant companies into voluntary administration, in order to protect the interests of stakeholders," Arrium said in a statement.
Grant Thornton has promised to maintain `business-as-usual' across the group's operations while it undertakes a comprehensive review of Arrium's steel and mining businesses.
"Our focus will be to stabilise current trading, maintain business as usual across the group's affected operations, and identify ways to restore the performance of key business units," Grant Thornton managing partner Paul Billingham said.
The administrators will hold their first meeting with creditors within eight days.
The move into administration makes Arrium the most significant casualty among Australia's mid-sized resources companies that used debt to expand iron ore production during the mining boom.
Slowing Chinese demand and a glut of supply from larger rivals such as BHP Billiton and Rio Tinto has resulted in a collapse in iron ore and steel prices over the past two years.
"This company has been unsustainable for a while. They paid too much for expanding their iron ore business, and the downturn in prices has exposed that," Mr Hodge said.
Federal Industry Minister Christopher Pyne has talked down the prospects of a taxpayer-funded bailout, which he described as a "very blunt instrument" when the government had other levers to help the company.
Neither the company nor the administrator had asked the government for direct assistance, Mr Pyne added.
Australian Industry Group chief executive Innes Willox urged stakeholders to all they could to allow the company to restructure and continue operations for the long term.
"This is a situation with national implications and potential deep impacts for regional Australia involving an essential nation building industry," he said.
South Australian Treasurer Tom Koutsantonis said the state is working with the federal government to come up with a package that could ensure the Whyalla steelworks continue to run.