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HALF-YEAR REPORT 2016
Notes to the Consolidated Financial Statements
For the six months ended 30 June 2016
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3 Critical accounting estimates and judgment
(continued)
(b) Mineralogy Pty Ltd (“Mineralogy”) Disputes
(continued)
Royalties Disputes
(continued)
Earlier this year, Mineralogy sought and was granted leave to amend its statement of claim in
the Royalty B proceeding. Among other things, those amendments raise certain claims made in
other proceedings Mineralogy commenced in the Supreme Court of Western Australia that were
permanently stayed in late 2015, withdraw certain claims contained in its previous statement of claim
and raise new claims. Mineralogy then sought leave to bring an application for summary judgment
in respect of its claim in this proceeding that Sino Iron and Korean Steel (via their agent or contractor,
MCC) breached the ‘standard of work’ clause (clause 16.1) of the MRSLAs. Mineralogy asserts that the
breach amounts to repudiation of the MRSLAs and that Mineralogy is therefore entitled to, and has,
terminated the MRSLAs. The application for leave to bring the summary judgment application and the
summary judgment application itself were heard together on 26 May 2016. Judgment was delivered
on 4 August 2016 by Justice Chaney. Leave to bring the summary judgment application was refused
and the application itself was dismissed. In early May 2016, Mineralogy filed an application to strike
out certain paragraphs of the defence, however Mineralogy withdrew that application and it was
dismissed at a directions hearing on 8 August 2016. Counsel for Mineralogy at the 8 August 2016
directions hearing also stated that Mineralogy would not be filing a fresh strike out application and
indicated that Mineralogy considered the pleadings to be closed. A strategic conference has been
convened by Justice Chaney, who is case managing the proceeding, to consider the future progress
of the matter.
On 20 November 2015, Mineralogy filed an application for an urgent interlocutory mandatory
injunction requiring Sino Iron, Korean Steel and the Company (together, for the purpose of this
application, the “CITIC Parties”) to pay to Mineralogy royalties under the MRSLAs. The application
was heard in December 2015 by Justice Tottle, who dismissed the application. Mineralogy appealed
Justice Tottle’s decision. The appeal was heard on 24 March 2016 by the Court of Appeal of the
Supreme Court of Western Australia. Judgment was delivered on 27 June 2016. The appeal was
unanimously allowed and orders were made for the interlocutory injunction application to be
remitted for hearing before Justice Chaney.
In August 2015, Queensland Nickel Pty Ltd (“Queensland Nickel”) commenced a proceeding in the
Supreme Court of Queensland alleging that the non-payment of the Minimum Production Royalty
to Mineralogy amounted to unconscionable conduct by the Company, Sino Iron and Korean Steel,
and that the Company, Sino Iron Holdings Pty Ltd and individual officers of the Company and its
subsidiaries (together, for the purpose of this proceeding, the “CITIC Parties”) were knowingly
concerned in the alleged contraventions. Queensland Nickel sought damages for losses suffered
as a consequence of Mineralogy being unable to advance funds to it due to such non-payment. In
September 2015, the CITIC Parties filed a strike out application in the proceeding. At a hearing on 16
March 2016, the Court ordered that Queensland Nickel be removed as plaintiff and QNI Resources Pty
Ltd and QNI Metals Pty Ltd be substituted as plaintiffs in the proceeding. On 23 March 2016, the Court
upheld the strike out application brought by the CITIC Parties and dismissed the proceeding. QNI
Resources Pty Ltd and QNI Metals Pty Ltd appealed the decision and the appeal was listed to be heard
on 30 September 2016. However, on 22 August 2016, consent orders were made for the appeal to be
dismissed and for the appellants to pay the CITIC Parties’ costs of the appeal.