Palmer victorious in CITIC royalties stoush

Palmer victorious in CITIC royalties stoush

Fri, 24/11/2017 - 17:30
Mine truck

CITIC Pacific has been producing magnetite at Sino Iron since 2013. Photo: CITIC Pacific

CITIC Pacific Mining has been ordered by the Supreme Court of Western Australia to pay $US149 million ($196 million) in royalties to Queensland businessman Clive Palmer’s Mineralogy, as a long-running court battle over the Sino Iron mine in the Pilbara comes to a head. 

The two companies were at loggerheads over part of an original mining agreement signed in 2006, when CITIC agreed to pay $US415 million $(547 million) and two ongoing royalty streams to Mineralogy in return for the rights to mine 2 billion tonnes of magnetite ore from the Cape Preston deposit.

One of those royalty streams was based off annual benchmark iron ore prices negotiated between Australian and Brazilian iron ore producers and their Asian customers, a system which ceased in 2010.

CITIC and Mineralogy were not able to reach agreement on what royalty system should replace it, resulting in the Supreme Court action.

A CITIC spokesperson said the company would the judgement and its implications for the mine in coming weeks.

The $US149 million CITIC has been ordered to pay covers a period from when the mine began producing in December 2013, until March 2017, suggesting that CITIC could be liable to pay further royalties on future production.

Justice Kenneth Martin said the royalties payable was determined by spot iron ore prices.

The unfavourable result places a cloud of uncertainty over the future of the Sino Iron mine.

Earlier this year, CITIC chairman Chang Zhengming said there was a real risk that the mine could be shut down if it was not successful in court.

CITIC and Mineralogy are also embroiled in a dispute over the need to expand the mine’s waste and tailings storage facilities, a matter which the Supreme Court is expected to rule on next week.