million $ ?'s , page-7

resolution months away + the mystery buyer reveale No clash on iron ore grab: Cazaly

JOHN PHACEAS

Cazaly Resources chief Nathan McMahon yesterday denied any potential conflict of interest over his tenement pegging activities, as fresh evidence emerged undermining claims by Andrew Forrest's Fortescue Metals Group to the contested Shovelanna iron ore deposit in the Pilbara.

Mr McMahon said Cazaly's interests were always his top priority and that he never provided external services where there was a potential conflict of interest.

"Cazaly is my number one priority," he said. "On an ad-hoc basis, I will help mates out if it doesn't have any detriment to Cazaly."

Mr McMahon also denied receiving payment from FMG for services provided by unlisted company Maincoast. "I am neither a director nor shareholder (of Maincoast), and received no direct remuneration," he said.

On Wednesday, the Federal Court dismissed a bid by FMG to block Cazaly from negotiating to sell any ore from Shovelanna to BHP Billiton under a memorandum of understanding announced earlier in the day. Fortescue had alleged it had struck an agreement giving it first rights to any Pilbara ground pegged by Mr McMahon through Maincoast and claimed it had paid him up to $50,000 a year for his services.

But Maincoast's sole director and shareholder Peter Symonds yesterday backed Mr McMahon, telling WestBusiness the Cazaly chief had provided Maincoast with advice and assistance only on an "informal" basis.

The prospector and furnace technology expert said FMG's claims over Shovelanna were a mystery.

"I wouldn't have a clue what's going on," Mr Symonds said. "I know nothing about all this stuff going on with Fortescue and Cazaly."

FMG operations director Graeme Rowley said the company accepted the court's ruling, but was still considering a potential damages claim.

The fall-out from the legal bid came as one of FMG's biggest shareholders - Alabama-based investment fund Harbert Management Corp - revealed itself as the buyer of almost 6.4 per cent of Cazaly as the stock was soaring on Tuesday. Harbert also owns 8.6 per cent of Fortescue.

Mr Rowley expressed surprise Harbert had bought into Cazaly, named after 1930s Australian Rules legend Roy Cazaly. "That's definitely not something we've orchestrated in any sense," he said.

Regardless, Cazaly's own claim to the lease adjoining BHP Billiton's Orebody 18 mine is likely to remain uncertain until well into next year.

Cazaly pegged Shovelanna when holders Rio Tinto, Hancock Prospecting and Wright Prospecting failed to renew the licences before they expired in late August.

Both Rio and Cazaly have another two weeks to submit formal rebuttals of the other's claim to the ground, at which point State Development Minister Alan Carpenter will decide on the matter.

But Government sources said any ruling could be "months" away because of the complexity of the case. The Minister is also expected to wait on the outcome of Hancock Prospecting's objections to Cazaly's application in the Marble Bar Warden's Court. A short procedural hearing has been listed for December 8 when a main hearing is likely to be scheduled.

In response to queries from WestBusiness, Gina Rinehart's iron ore group disputed Cazaly's claim that little work had been completed at Shovelanna, arguing a big drilling program in the early 1980s had outlined more than 130 million tonnes of high-grade iron ore.

Cazaly shares remained suspended yesterday ahead of the expected finalisation of the ore supply deal with BHP Billiton.