Mount Gibson Iron has agreed to settle a long-running US$114 million dispute with a Chinese steel mill, by signing two off-take agreements that will result in the partial recovery of the money it is owed.
The dispute arose during the global financial crisis, when Rizhao Steel Holding Group Co reneged on an iron ore sales agreement. Following arbitration, Rizhao was ordered in August 2010 to pay US$114 million in damages plus interest.
Since then, Mount Gibson has been seeking recognition and enforcement of the award in various jurisdictions, including China.
“These efforts have culminated in a settlement on terms favourable to Mount Gibson and its shareholders,” the company said.
It argued the result was a good outcome because enforcement proceedings in China “could potentially take many years”.
The settlement involves two off-take agreements.
Rizhao will buy 1.7 million tonnes of “mineralised waste” from the Koolan Island mine over a two to three year period.
“As a consequence, Mount Gibson will realize near term value for material that had been categorised as waste,” the company said.
“Total cash proceeds before crushing, shiploading and royalty costs will be approximately US$82 million.”
In addition, Rizhao has agreed to buy 25 per cent of the output from the Extension Hill mine “at a market clearing price plus an agreed premium, over a period of five years”.
The agreements include Rizhao paying a non-refundable deposit of US$15 million.
Separately, Mount Gibson said its largest shareholder Shougang Concord International has agreed to buy an additional one million tonnes of mineralised waste from Koolan Island, for total cash proceeds of US$47 million.
Mount Gibson’s share price fell 11 cents to $1.52 today, in a generally weak market. Its stock touched a one-year low of $1.20 last month.
That followed a boardroom coup in late August that resulted in Geoff Hill being elected chairman, with support from the company’s Chinese shareholders, despite former chairman Craig Readhead, managing director Luke Tonkin and independent director Ian Macliver dissenting.