GR Engineering Services’ share price has slumped to $1 after the company disclosed it was involved in a complex legal dispute with former client Allied Gold.
The company has been pursuing a debt recovery claim to the tune of $4.5 million against Gold Ridge Mining Limited – a wholly owned subsidiary of Allied Gold – which it initiated in June last year.
The claim relates to an engineering, procurement and construction contract between Gold Ridge and GR Engineering for the expansion and refurbishment of the Gold Ridge Mine in the Solomon Islands.
In a statement to the ASX this afternoon GR Engineering revealed Gold Ridge had served a counterclaim for losses arising from alleged defects and alleged representations regarding performance and damages for approximately $25 million.
GR Engineering said the allegations were inconsistent with previous public announcements made by Allied Gold in relation to the performance of the Gold Ridge plant.
Managing director Joe Ricciardo said the company would vigorously defend all counterclaims and considered them to be without basis.
“The company has forged strong relationships with its clients built on integrity with fair and honest commercial dealings,” Mr Ricciardo said.
“GR Engineering will aggressively protect its reputation and excellent industry track record through a vigorous defence of what we consider to be an ambit counterclaim.”
An arbitration between the two companies is scheduled to proceed to trial in November 2012.
The slump in GR's share price has brought it back to the issue price for its initial public offering in early 2011. The stock rose strongly after listing but has been sliding this year.