Watpac Civil & Mining and BC Iron have flagged legal action against each other, with Watpac seeking about $12.5 million from the iron ore miner.
Watpac Civil & Mining and BC Iron have flagged legal action against each other, with Watpac seeking about $12.5 million from the iron ore miner.
The dispute is in relation to the early termination of Watpac’s contract for work at BC Iron’s Nullagine iron ore project in April.
Watpac Civil & Mining is a subsidiary of Watpac Limited.
Watpac is arguing that the termination of the contract gave rise to a one-off $2 million payment to the company, while BC Iron was also required to purchase $6.4 million in plant and equipment by July 1.
Watpac valued its entitlements at $12.5 million as of June 30.
“In its June 30 annual report BC Iron contended that no further payments were due to Watpac,” the contractor said in a statement.
“Recently BC Iron also foreshadowed a potential counter-claim.
“Watpac has been pursuing its outstanding entitlements under the contract since August, however efforts to resolve the dispute have been unsuccessful and this matter will now be progressed through litigation.”
Despite a continued recovery expectation, Watpac said in light of BC Iron’s recent financial position announcements and the decision to suspend work at Nullagine earlier this month, it has determined that a “conservative accounting position” will be taken.
“Watpac will provide for all amounts previously accrued in relation to this dispute in the group’s December 31, 2015 financial result,” it said.
“Pleasingly, the group’s underlying financial result for the December 31 half-year will remain unaffected and despite this disappointing contractual dispute, Watpac has continued to improve its financial strength since June 30, holding over $200 million in gross cash reserves as at November 30.”
BC Iron replied to Watpac’s announcement today, arguing that it had paid the contractor all that was due under the terms of the contract, and said Watpac’s claims had no contractual basis or merit.
“As such, the joint venture will be vigorously defending each of the claims made by Watpac,” BC Iron said.
“Further, the Nullagine joint venture considers that during the term of the contract, Watpac breached its primary service obligations to BC Iron as manager.
“The joint venture believes that it has suffered losses as a consequence of those breaches, and will be taking action against Watpac in respect of those losses.”
Watpac was scheduled to wrap up work at Nullagine in October, however in April BC Iron announced the contract would be terminated three months early.
It also followed news in March that the miner had contracted Viento Group to provide similar work at Nullagine; a sign that turned out to mean that Watpac was being replaced for a cheaper deal.
Viento has since gone into administration and owns no assets.
Earlier this month, BC Iron announced that operations at Nullagine would be suspended as a result of the continued weak iron ore price.
Nullagine is 75 per cent owned by BC Iron and 25 per cent owned by Fortescue Metals Group.
Watpac shares were 0.9 per cent lower to $1.05 each, while BC Iron shares fell 4.7 per cent to 10 cents each at the close of trade.
