Tennant to seek damages from BC Iron

Base metals trading house Tennant Metals says it will seek damages from BC Iron because the iron ore mining hopeful terminated a contract between the parties.

BC Iron this week defended its decision to terminate an offtake deal whereby Tennant would act as the agent and/or principal in the sale of 25 per cent of production from BC Iron's Nullagine project in Western Australia, an equal joint venture with Fortescue Metals Group.

BC Iron chairman Tony Kiernan told WA Business News on Tuesday that there was a clause in the agreement, entered into in February last year, that allowed it to end the deal.

Mr Kiernan said Tennant disagreed with that decision.

Tennant argues that the contract was invalidly terminated and has referred the matter for arbitration.

"As part of the arbitration, Tennant will seek damages for BCI's invalid termination of the contract for the profit it would have received under that agreement," Tennant managing director Dennis Karp said in a statement on Thursday.

BC Iron announced in February 2009 that it had struck an offtake agreement with Tennant, for 25 per cent of its future iron ore production from Nullagine.

At the time of the agreement, the planned output was 1.5 million tonnes per year but is now 3 million tonnes per year.

Five months later, BC Iron announced a joint venture agreement with FMG for the development of Nullagine.

It has subsequently announced a US$50 million funding and off-take agreement with Hong Kong based trading company Heng Hou Industries. The off-take agreement is for 20 million tonnes of iron ore to be supplied over 8.5 years.

BC Iron said it will strongly defend any action Tennant Metals may take in this regard.

BC announced last month that results from its trial mining test pit had exceeded expectations and that FMG had formally confirmed its commitment to move ahead with development activities.

The Nullagine project will share rail and port infrastructure with FMG's existing Pilbara operations.