14/08/2015 - 10:04

Judge slams Palmer’s “farcical” claims

14/08/2015 - 10:04

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Clive Palmer's private company has suffered a resounding loss in legal battle with China’s CITIC Pacific, with a court judgement describing Mineralogy’s claims as astonishing, farcical and without substance.

Clive Palmer.

Clive Palmer's private company has suffered a resounding loss in its legal battle with China’s CITIC Pacific, with a court judgement describing Mineralogy’s claims as astonishing, farcical and without substance.

The case revolved around control of Cape Preston port in the Pilbara, which was developed for and is used by Citic's $10 billion Sino Iron project.

Mineralogy sought to terminate Citic's right to use the port, saying it should not have exclusive control of the facility.

Mr Palmer's private company claimed there had been a breach of an agreement between the companies, arguing it had the ultimate right to operate the port as it owned the mining tenements on which the Sino Iron project was developed.

Mineralogy had also claimed Citic was blocking other companies from using the facility, saying it was unable to tell potential investors in other iron ore projects in the area that they could use the port.

This reflected Mr Palmer’s original desire to have multiple iron ore mines on his tenements, all exporting through the single port.

Federal Court Justice James Edelman ruled in favour of Citic today, criticising both Mineralogy’s case and the way it was managed.

“Even as late as the final day of trial, after millions of dollars had been spent on this litigation, Mineralogy sought to amend four of its five grounds of relief,” Justice Edelman wrote.

“My ultimate conclusion is that Mineralogy’s claims fail for a litany of reasons.

“Although there were many factual issues explored, at the heart of this dispute are a series of legal issues.

“The Citic parties have ultimately been successful on almost all of these issues.”

Justice Edelman said that, in March 2010, Mineralogy agreed that Citic Pacific Mining would be the terminal operator while the port continued to have a single user.

This was confirmed in September 2010, after Citic had spent $6 billion on the project.

“In 2012, after the Citic parties had spent billions more dollars on the Sino Iron project, Mineralogy changed its mind,” the judgement said.

Justice Edelman was scathing in his assessment of Mineralogy’s attempt to terminate the operator agreement.

“When the terms of the termination notices are considered, the issue of those notices by Mineralogy is not merely surprising,” Justice Edelman said.

“It is astonishing. Many aspects of the termination notices are farcical.”

For instance, he states that: “Citic parties were alleged to have breached a term that was neither express nor implied, yet which somehow required them to capitulate to proceedings involving potentially billions of dollars”.

Justice Edelman also dismissed arguments based on the supposed mining plans of ASX-listed company Australasian Resources, which is controlled by Mr Palmer.

Mineralogy had (unsurprisingly) not provided any estimate of the extent to which the facilities would need to be used for the imaginary processing and export from a non-existent mine funded by a company which was practically insolvent.”

Justice Edelman also dismissed claims that Citic had breached the ‘facilities deeds’.

“The termination notices did not allege any genuine breach. They did not involve any serious or persistent breach. They did not provide for any reasonable time to rectify any breach," he ruled.

“Although no obligation of good faith is implied into the facilities deeds, the termination notices were issued as a lever for future commercial negotiations and they were not issued in good faith.

“That was Mineralogy’s primary case.”

Mineralogy put forward alternative claims for injunctions and declarations, but these also failed “for a multitude of reasons”.

“Most fundamentally, not only does Mineralogy not have rights to possess, control, own, operate or manage the port terminal facilities, but the Citic parties were under a duty to operate and maintain them by the operation of provisions in later agreements.”

A Citic spokesman said the company was pleased with the court decision. 

"It's a positive outcome for the project, where we continue to export quality iron ore concentrate from our terminal facilities," he said.

"Having made such a significant investment in mining, processing and export infrastructure, we've always been focused on ensuring continuous operations and seeing the project reach its full potential."

In a statement, Mineralogy said it would appeal the decision.

Mineralogy is confident of a successful appeal,” the statement said.

Mineralogy is considering issuing further termination notices for continuing breaches by Citic Limited at Cape Preston.

“It is confident in the final analysis that justice will prevail.”

The legal dispute with Mineralogy added to multiple challenges facing Citic, which has needed to deal with large cost blow-outs and delays at the Sino Iron project – the largest magnetite iron ore development in Australia.

The project has been shipping magnetite concentrate since the end of 2013, with two production lines in operation.

Construction of additional production lines at Sino Iron is progressing, with three and four due to be operating by the end of this year and production lines five and six due by late 2016.

In its December 2014 financial statement, parent company Citic wrote down the value of the Sino Iron project by $US2.5 billion ($A3.3 billion).

 

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