Clive Palmer has big court win

Chinese company CITIC Pacific Mining could be forced to pay hundreds of millions of dollars to Clive Palmer to gain access to additional land for its Sino Iron project after being strongly criticised in a Supreme Court ruling.

Chief Justice Kenneth Martin described CITIC’s efforts to acquire additional tenure as “unduly extravagant in scope” and not reasonable.

He was ruling on the latest in a “seemingly never-ending civil litigation war” between the two parties.

They stem from CITIC operating the Sino Iron project in the Pilbara on mining tenements owned by Mr Palmer’s company Mineralogy.

CITIC has spent in excess of $12 billion developing the project over the past decade while royalties from the mine underpin Mr Palmer’s multi-billion dollar fortune.

His fortune could grow larger after the court revealed Mr Palmer was seeking a payment of up to $750 million to accede to CITIC’s request.

That’s on top of more than $2.5 billion CITIC has already paid him (see more below).

Justice Martin said the dispute between the two parties could jeopardise both their interests.

“A 'fog of war' that has prevailed for too long between the Sino Iron project parties has seen them all behave towards each other in surprisingly uncommercial ways over time,” he said.

“By that mutually hostile conduct they now expose to some jeopardy the health of a precious project goose - that has laid golden eggs for many.”

CITIC was seeking orders to support its 2018 request for access to additional tenements.

It wanted more land for extra stockpiles of magnetite, extra tailings storage and extra waste dump areas.

Mr Martin said the scope of CITIC’s request was revised downwards in 2021 but still had a number of issues.

He explained that the ‘good faith’ obligations Mineralogy owed to CITIC only required Mr Palmer’s company to consider a request for additional tenure if it was “reasonably required”.

Justice Martin said the requests were desirable or optimal but “they did not meet the required higher threshold of being areas shown to be essential, necessary or critical to support, or to advance the continued operation of the Sino Iron project”.

“Even if the requested extra tenure areas were shown as then being 'reasonably required', that did not of itself then oblige Mineralogy to act against its own legitimate commercial interests,” he said.

Justice Martin said Mineralogy was entitled to seek a commercial level of payment in return for providing additional tenements.

“A request or demand for additional tenure areas from Mineralogy on a basis…..of there being no additional payment whatsoever……was not, for that reason alone, a 'reasonable request',” he concluded.

Justice Martin found other shortcomings in CITIC’s request, including failure to allow sufficient time or provide sufficient technical information.

CITIC argued before the court that it should not have to pay Mr Palmer for additional tenements because of the large sums it had already paid him.

The court was told that between 2006 and 2008, CITIC paid $US415 million ($A590 million) to secure full control of project companies Sino Iron and Korea Steel.

Since mining commenced about a decade ago, it has paid two royalties to Mr Palmer – royalty A has totalled $A117.8 million and royalty B has totalled “over $US1.285 billion” ($A1.83 billion) up to February 2022.

Justice Martin said ongoing payments to Mineralogy were “at a royalty rate said to exceed well over $A1 million every day”.

The court was told Mr Palmer had written to CITIC suggesting $750 million as an acquisition price for additional tenements it wanted.

That was described by CITIC’s counsel as a ransom demand.

Justice Martin suggested this figure was issued “with a high level of accompanying bravado” and “might well be seen as an opening gambit”.

He added that the claim should be judged in the context of CITIC’s estimated $12 billion investment to establish the Sino Iron project and “the scale of the ongoing revenues now produced” – estimated by Business News to be about $4.7 billion.

“Given all that, the amount of $750 million does not present to this court as being outlandishly out of place in a robust negotiation between commercial heavyweights,” he said.

CITIC Pacific Mining Management chairman Chen Zeng said the court ruling had some positives.

The court confirmed that Mineralogy was obliged to either consent to CITIC submitting a long-awaited program of works or submit the PoW itself.

“This paves the way for commencement of the investigative works necessary for the extension of the mine pit and a new tailings storage facility,” Mr Zeng said.

The court also held that Mineralogy was contractually obliged to provide assistance and cooperation towards the submission and approval of a State Agreement project proposal for the areas within the site lease currently held by CITIC.

Mr Zeng said this would enable CITIC to pursue, as an interim measure, a revised form of State Agreement proposal in respect of those areas.

CITIC said the ruling meant that there was now a pathway that should enable it to seek approval of a proposal for extension of the mine pit and expansion of waste rock and tailings storage within the existing site lease area.

“While not operationally and financially optimal, this should enable continued operation for a further interim period, allowing CITIC further time to take the necessary steps to seek to secure the additional tenure required for life of mine operations,” the company said.