South32 sues IGO over $122m royalty claim

South32 has launched legal action against IGO, claiming it was owed $122 million in royalties from the Tropicana goldmine operations since 2014.

IGO announced on the market today it had been served a writ lodged by South32 Royalty Investments Pty Ltd in the Supreme Court of Western Australia, after close of business yesterday.

In its ASX statement, IGO said it rejected South32’s allegations and considered the claim to be without merit.

IGO said it no longer had an interest in the Tropicana goldmine after selling its 30 per cent stake to Regis Resources on May 31 2021.

“South32 has estimated in the writ that the royalties payable by IGO are $122,100,825 (exclusive of interest and costs) for the period from December 2014 until September 30 2023,” its statement reads.

“IGO estimates that the relevant portion of the above claim amount in the period from May 31 2021 to September 2023 (covered by the Regis indemnity) is in the range of approximately $35 [million] to $40 million.

“IGO denies that it has any liability to South32. IGO has thoroughly reviewed its obligations under the relevant agreements and maintains that the pre-conditions to the entitlement to be paid the sample royalty have not been satisfied.

“IGO has instructed lawyers to act on its behalf, and intends to fully and vigorously defend the claim.”

The Tropicana gold project is located 330 kilometres from Kalgoorlie, and is a joint venture between Regis Resources and AngloGold Ashanti, which has a 70 per cent stake.

South32 claimed it granted a licence for IGO to access soil samples in the area under a 1997 agreement, IGO’s statement said.

According to IGO, South32 claimed the use of soil samples that led to gold discovery renders its liable to pay a 1.5 per cent sample royalty since December 2014.

In 2021, IGO sold its 30 per cent stake in the Tropicana goldmine to Regis Resources for $903 million in cash.

Regis Resources was in a trading halt since this morning, pending announcement of the royalty claim.

In its statement to the market, Regis said it was not a party to the royalty agreement or Supreme Court proceedings but remained interested in the outcome because of an overlap in the area South32 claims royalty over and its Tropicana gold project.

Regis said it assumed liability for the royalty and it agreed to indemnify IGO for liability under the asset sale agreement.

"Regis’ view at the time of the acquisition was, and remains, that no amount is due under the royalty agreement in respect of current operations at the Tropicana gold project, and Regis intends to take appropriate action to protect its position," the company said.