Citic Pacific in legal dispute with tycoon over iron-ore payments
Citic Pacific's shares slumped yesterday after it revealed it is in a legal dispute with Australian mining tycoon Clive Palmer over the payment of royalties, adding more uncertainties to its much-delayed and over-budgeted iron-ore project in Australia.
Citic Pacific said it filed a court injunction on Monday against Palmer-owned Mineralogy to stop it from terminating agreements to let Citic Pacific mine iron ore on its land, in exchange for payments including royalties. Citic Pacific's shares dropped 4.3 per cent to HK$9.5.
The agreements dated between 2006 and 2008 gave Citic Pacific the right to mine two billion tonnes of iron ore from the land. In April this year, it exercised an option for the right to mine a further one billion tonnes.
Citic Pacific said it received notices from Mineralogy alleging that certain terms of the agreements have been breached, which Citic Pacific refuted.
Reuters yesterday quoted a Mineralogy spokesman as saying the dispute is about when the royalty payments are due. "We believe 'taken' means when it's taken from the mine site; Citic believes it means when it is exported," the spokesman said.
But another person familiar with the situation who declined to be named, citing the court case, said Mineralogy claimed the royalties should have been paid when the iron ore mine's construction began in 2008, while Citic believes it was when production starts.
The first production line was planned to start trial production three years ago, but it only began this month due to contractor China Metallurgical Corp's failure to engage Australia-qualified engineers to manage the project and obtain necessary approvals. The rising Australian dollar and labour costs also pushed the construction cost to almost double the original estimated A$5.2 billion (HK$41.85 billion).
Separately, Citic Pacific yesterday said it would pay 1.24 billion yuan (HK$1.53 billion) to buy two pieces of land located at the Shanghai World Expo site from units of its parent Citic Group. The site is expected to become a new central business district of Shanghai.
