Mining executive Shankar Madan is suing billionaire Clive Palmer and his company Mineralogy for about $10 million in royalties, after allegedly helping it acquire the Sino Iron tenements 35 years ago.
Mining executive Shankar Madan is suing billionaire Clive Palmer and his company Mineralogy for about $10 million in royalties, after allegedly helping it acquire the Sino Iron tenements 35 years ago.
According to a writ in the Supreme Court this week, filed under the name Hem Shanker Madan, Mr Madan has launched legal action against Mineralogy and Mr Palmer over a royalties agreement he alleges the three parties reached.
In 1985, Mr Madan, a geologist and consultant with extensive experience in the Pilbara and currently working for Strike Resources, entered into an oral agreement with Mineralogy in which Mr Madan alleges he offered to introduce Mr Palmer and his company to other mining companies that may be interested in allowing them to acquire their mining tenements.
Under the agreement, Mr Madan offered to provide advice about the companies concerned, assist with the acquisition of mining tenements, and acquire the records and data required for negotiations and due diligence in exchange for $225 a day.
But Mr Madan alleges that the most significant part of that agreement was a clause that entitled him to a royalty of 1 per cent on all net profits derived from any source during Mineralogy’s involvement with any tenements introduced by him; royalties that would be paid at the end of each financial year.
In the months that followed, Mr Madan claims he identified Australian Hanna, a company with tenements over the Balmoral Project in the Pilbara that had undertaken a preliminary drilling program, which indicated the resource was of high quality.
Mr Madan allegedly passed his findings on to Mr Palmer, who told him to arrange a meeting with the company’s general manager.
Australian Hanna’s general manager told Mr Palmer the company would be interested in reaching an agreement, but would require a $2 million payment.
Mr Palmer then allegedly told Mr Madan to conduct follow-up conversations with the company, with the pair travelling to Sydney to meet with officials from ANZ Bank and discuss the possible acquisition of the project.
In a letter dated June 14 1985, Mr Madan claims Mr Palmer offered to enter a pre-incorporation agreement with him to formalise their oral agreement.
Mr Madan claims to have signed and returned the letter within the week.
At the request of Mineralogy, Mr Madan claims he continued having discussions and meetings with Australian Hanna’s representatives; meetings that led to the two parties entering an option agreement to acquire the Balmoral Project.
On October 3 1985, Mineralogy lodged caveats over the exploration licences.
Mr Madan claims he completed due diligence on the company’s behalf over the following month, arranging access to data records and information that would aid in the company’s decision to acquire the tenements.
In December 1985, Australian Hanna relinquished the tenements to allow another company associated with Mr Palmer, GSS Homes, to apply for exploration licenscs over the Balmoral Project, entering a deed of mutual release three months later.
Mr Madan claims Mr Palmer then offered him the role of managing director of Mineralogy, an offer he declined.
Two years later, Mineralogy obtained an interest in the Balmoral Project and, in 2001, it subleased those mining leases to subsidiary companies Sino Iron and Korean Steel.
Sino and Korean Steel each signed agreements for the right to extract about 1 billion tonnes of magnetite ore from the Balmoral Project and, days later, Mineralogy sold its 100 per cent shareholding in Sino Iron to a subsidiary of Chinese company CITIC Limited for $US215 million.
The following year, Mineralogy sold its shares in Korean Steel to CITIC’s subsidiary Balmoral Holdings for $US200 million.
Under the agreement, which covered the same area Mr Madan allegedly introduced Mr Palmer to in 1985, a royalty was to be paid to Mineralogy of $0.30 per tonne of ore taken by the two companies.
In 2008, the companies entered into the China Project Option Agreement, which allowed CITIC to extract a further 1 billion tonnes of magnetite ore from the project for $US200 million.
Over the past decade, Mineralogy has been involved in multiple cases over royalty payments related to the project, which included a Supreme Court case against Sino and Korean Steel to retrieve $149 million in royalties from 2013 until 2017.
In November 2019 and January 2020, Mr Madan claims his solicitors wrote to Mineralogy seeking the money due under their agreement, but the company failed to pay.
According to the writ, Mr Madan is now seeking a declaration from Mineralogy that he is entitled to receive 1 per cent of all royalties the company has received in relation to deposits in the Balmoral Project, including the $US149 million the Supreme Court decided it was owed, as well as costs and interest.
Mr Madan is also claiming all ongoing royalties received from the project.
