Sedgman claims extra $50m on Heron project

ASX-listed Heron Resources has received a claim from CIMIC Group subsidiary, Sedgman, for $49.9 million in extra costs for works at its flagship Woodlawn zinc-copper project in New South Wales.

The claim would put costs 46 per cent over the $109 million guaranteed maximum price of Sedgman’s engineering, procurement and construction contract at the site.

In May 2017 Heron awarded Sedgman the 18-month EPC contract to develop a 1.5 million tonnes per year processing plant for production from underground mining and tailings.

Plant construction is now 95 per cent complete.

The contract followed a front end engineering and design study between the two companies that started in November 2016.

The $49.9 million is inclusive of an $11 million claim Heron received from Sedgman in October, which the contract superintendent rejected.

The contract superintendent will assess the new claim within 10 business days.

Both Heron and Sedgman are headquartered over east, but have offices in Perth. 

In a statement to the ASX, Heron said it was “extremely disappointed” to receive such a large claim when construction is effectively complete and would pursue legal action if necessary.

“Heron is holding bank guarantees valued at $10.8 million and will apply and enforce its legal rights under the terms of the EPC contract, which may include seeking liquidated damages from Sedgman,” it said.  

Shares in Heron were down 15.1 per cent to trade at 54 cents each at the close of trade.