Gwalia pursues Portman for royaltyThe West Australian15th May...

Gwalia pursues Portman for royalty
The West Australian
15th May 2008, 8:15 WST



Iron ore producer Portman Mining faces a Supreme Court probe of its Mount Jackson mining operation as the administrators of failed miner Sons of Gwalia fight to get a 2 per cent production royalty from the US-controlled group.

In what is likely to be a first-up victory in a prolonged legal war, the administrators yesterday gained the endorsement of Justice Rene Le Miere to question Portman chief operating officer Duncan Price under oath about Mount Jackson.

He also ruled that Portman should hand over documents about production from Mt Jackson, near the group’s flagship Koolyanobbing operation, as the administrators try to work out the size of the royalty they may be entitled to claim.

The administrators from Ferrier Hodgson have launched the probe under the Corporations Act public examination laws after failing to reach a settlement deal with Portman over the royalties they believe are payable under a 1999 deal.

Portman bought the Mt Jackson land from Sons of Gwalia subsidiary Burmine and agreed to pay a 2 per cent gross royalty on all gold, silver and metal produced from the project.

Stock exchange-listed Portman, which is now 80 per cent owned by US steel group Cleveland Cliff, claims that “metal” does not include iron ore.

They are pursuing Portman as part of attempts to extract extra value for creditors caught in the $1.1 billion-plus 2004 collapse of the high-profile Sons of Gwalia.

The administrators have sold the group’s gold and tantalum mining assets and launched a $560 million-plus legal claim against auditors Ernst & Young and certain former directors, including brothers Peter and Chris Lalor.

The size of the potential Mt Jackson claim is not known, but filings by Portman show that the deposit produced almost 7.4 million tonnes of iron ore from 2004 to 2007, a period in which the price for high-grade iron ore surged from below $US30 a tonne to about $US70 a tonne. Price can vary greatly depending on ore quality.

The administrators want mining and ore data from Portman to determine conclusively whether a royalty was payable on iron ore.

Portman had refused to hand over the information and vigorously opposed the public examination.

It told Justice Le Miere the examination was unconstitutional and claimed Mr Price should not be probed before a court determining whether a royalty was payable.

But Justice Le Miere rejected Portman’s constitutional claims and said the value of the claim on the iron ore royalty was relevant to the administrators deciding whether to launch litigation and to assessing any possible future settlement offer.

Immediately after Justice Le Miere handed down his ruling, lawyers for Portman foreshadowed an appeal against his decision and asked that an examination be delayed until after a decision by the miner.

Justice Le Miere stayed his examinations orders until May 29, when the matter is to return before the judge.

NEALE PRIOR