legal action over $3b pilbara

Legal action over $3b Pilbara project September 8, 2010 - 11:52AM
.Iron ore explorer Cape Lambert Resources has begun legal action it says could stall a multi-billion dollar magnetite operation in Western Australias Pilbara region.

Cape Lambert executive chairman Tony Sage said his company commenced legal action on Tuesday night in the WA Supreme Court to recover money it says it is owed by China Metallurgical Group Corporation (MCC).

The explorer sold MCC its flagship project near Karratha in June 2008 for $400 million.So far it has been paid $320 million, with the final $80 million due at the end of this month, Mr Sage said today.

He said MCC had told him its Australian operations had cashflow problems, and could not immediately pay the outstanding amount.

But Mr Sage said he believed the Chinese state-owned company was playing games in negotiations, because on Monday it lodged plans to start construction on the site in mid-2012.

He said that internally the Chinese company had told him the project, which is planned to ultimately produce 25 million tonnes per annum (mtpa) of concentrate, would cost $3 billion.

Compared with the cost of the overall project, the $80 million his company was owed was a drop in the ocean, Mr Sage said.

I think it is just treating the Australian entities with a bit of contempt, he said.

Mr Sage said his company still had all rights to the Cape Lambert project until final settlement.

The only way to hurt them is to put brakes on their project, Mr Sage said. We can injunct the thing so no work is done on the ground, because they havent paid for it.

He said because he originally thought the Chinese group was strapped for cash his company was willing to accept a payment plan whereby they would be paid half of the outstanding money at the end of this year, with the balance within another six months.

But Mr Sage said he saw red after he called up the MCC negotiator on Monday, when news the project planned to go-ahead was unveiled, only to find out he was out on holidays and could not be contacted.

I think they are going to be in for a rude shock when they wake up this morning, he said.

In midday trade, shares in Cape Lambert Resources were down 1 cent at 37 cents.