HomeMining Industry News Palmer vs Citic over $10b in royalties

Palmer vs Citic over $10b in royalties

Tuesday 1st of September 2015 08:24:08 AM



Clive Palmer and his estranged business partner Citic Limited have reached another level in their legal war, with Mr Palmer's company Mineralogy seeking $10 billion in damages from the Chinese giant.

Mineralogy is suing Citic over what it claims to be a lack of royalty payments from Citic's Sino Iron project in WA, which was built on Mr Palmer's leases.

The two companies have previously argued over royalties, which has been complicated by the agreement signed between the two companies in May 2006 which relies on the annual benchmark iron ore prices struck by BHP Billiton and Brazilian miner Vale to calculate one of the royalties owing to Mineralogy, known as "Royalty B".

With iron ore now traded on daily market terms rather than on annual contracts, there is no way to calculate Royalty B.

The two companies have battled it out over numerous things, including access to the port used by the loss-making Sino Iron project and the shifting of millions of dollars out of certain accounts, but it seems the battle has returned to the original issue of royalties.

"The simple fact is that Citic Limited continues to export iron ore concentrate from Western Australia and refuses to pay Mineralogy the royalty," said Mr Palmer.

A spokesman for CITIC Pacific Mining said the matter was already before the Supreme Court of Western Australia.

"This is yet another claim lodged by his companies since the Federal Court dismissed Mineralogy's attempt to terminate key port agreements at the Sino Iron project," the spokesman said.

"Like the other claims, it overlaps matters being addressed in other proceedings … We look forward to having the validity of these latest claims scrutinised by the courts and will continue to protect the interests of the project, our company and shareholders."

Sino Iron has two magnetite processing lines operating near Cape Preston in Western Australia and expects to commence production from two more this year.

"In the meantime, export operations are unaffected and we're focused on ensuring the project reaches its full potential," said the spokesman for Citic.

Mr Palmer has vowed to step back from his business interests since entering federal parliament, but at a press conference in Brisbane on Monday, he made a point of announcing he was speaking as the former director of Mineralogy.

"The Chinese practice is to try and bankrupt Australian companies and squash them," Mr Palmer said.

"To ensure there is a proper respect for our country and our companies and commercial litigation, we think it is about time to bring these people to account, through the courts, for the amount of money which is properly owing to us."

Mr Palmer said the $10 billion figure was "the net present value of the royalties" which Sino Iron and Korean Steel were "obliged to pay under their agreements with Mineralogy, over the life of those agreements".

"This actually relates to the fact that they are operating on our mining leases in Western Australia now, loading up Australian resources into Chinese ships, shipping them back to China without paying for them," he said.

"This is purely in respect to money that they owe us, for minerals that they have taken from Australia back to China, and not paid even one cent for."

Mr Palmer accused Citic of issuing "worthless" guarantees.

"The fact that Citic is one of the largest banking groups in China raises serious questions over the operation of the banking system in China and how Australian companies can rely upon it," he said.



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