Two contractors on Gindalbie Resources' recently commissioned Karara iron ore project have been hit by contractual disputes, with one contractor initiating legal action this week.
Malaga-based contractor UON told Business News it had instructed its solicitors to commence legal proceedings against Karara Mining, a joint venture between Gindalbie Metals and Chinese steelmaker Ansteel.
Gindalbie has rejected both claims, saying the contractors had failed to perform.
UON was contracted by Karara Mining from November 2010 to June 2012 to provide the design, supply and installation of permanent generators at the Karara iron ore mine, located 200km east of Geraldton.
The company said it had made all reasonable attempts to resolve the disputed matters in accordance with the dispute resolution process of the contract, however alleges "Karara has refused to cooperate and has frustrated the contract".
"Karara's breaches of contract include refusing access to the site, failing to give directions required by the contract and failing to provide extra time for UON to perform as a result of delays Karara itself caused," it claimed in a statement.
Karara has purported to apply liquidated damages of $926,910, called up bank guarantees of $893,949 provided as security for retentions and has refused to pay the cost of variations it authorised, according to UON.
UON supplies power generation, air compressors and water pumping products, and last year won the 2012 Commonwealth Bank National Medium Business Award at the 20th Telstra Australian Business Awards.
Separately, AusGroup subsidiary AGC Industries has disclosed that Karara Mining was withholding $21.7 million in progress payments and was planning to call on $8.8 million in performance security in the form of bank guarantees.
AGC has also received notification from Karara Mining of a claim being prepared against AGC for an unfinalised value.
It said the notification of claim has not been given in accordance with the contract and Karara Mining has not provided any formal substantiation of either the breaches it relies upon or basis for calling on the performance guarantees or withholding the progress payments.
A spokeswoman from AGC said today that the company was currently considering its options.
The contractual disputes coincide with commissioning issues at the Karara plant, which has required Gindalbie to explore new funding options.
A Gindalbie spokesman said payments to both companies had been withheld because of non-performance under the terms of their contracts.
"We are surprised by their tactics, some nine months after the event, of now trying to conduct this dispute in the media and link it to an entirely separate contractual dispute. UON's claims are baseless and have no merit and we will defend vigorously any court proceedings, if and when they commence, through the court system and not through the media."