Monday 20th August 2018
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Bathurst Resources has been ordered to pay a US$40 million performance payment on coal production from its Buller operations.
The company, New Zealand’s biggest coal miner, says it is “extremely disappointed” by the High Court ruling and plans to appeal.
Bathurst shares fell 17 per cent to 12 Australian cents on the ASX today. Trading was halted Friday pending the release of the court judgment.
The dispute stems from Bathurst’s 2010 purchase of L&M Coal’s Buller business. L&M went to court in December 2016 claiming the 25,000 tonnes produced from the licences by that time had triggered the performance payment. The claim was heard earlier this year.
Bathurst acquired the acreage as part of its plan to develop the Escarpment mine on the Denniston Plateau as part of Buller Coal export coking coal project. Some coal was produced from Escarpment as part of the mine’s construction but the development has not proceeded and Escarpment has been in care and maintenance since May 2016.
As part of the 2010 transaction, Bathurst was to make two US$40 million payments. The first was due when 25,000 tonnes had been shipped from Buller Coal, the second was due when 1 million tonnes had been shipped.
Bathurst argued that not only did the coal sales not constitute the export shipments envisaged in the deal, but that the company had exercised its option to instead pay a higher royalty payment until the performance payments are made.
But the High Court disagreed. Bathurst chair Toko Kapea said in a statement that the court believes the threshold has been met irrespective of the type of coal production and whether it was exported.
The court also ruled that the increased royalties Bathurst has been paying to L&M should have been based upon a reasonable level of coal production from Escarpment. Kapea noted that the court has not defined that level of production.
He said the company is likely to file its notice of appeal this week. As is usual, and also acting on advice, the firm may take other “interim steps” in relation to the judgment pending the hearing of any appeal, he said.
Bathurst completed the purchase of Solid Energy’s Stockton coking coal mine and the Rotowaro and Maramarua thermal coal mines in the Waikato in September 2017. It acquired the assets through its 65 percent interest in the BT Mining venture it formed with food processor Talley’s Group.
Last month it reported production of almost 2.07 million tonnes for the June year, including output from its wholly-owned Buller, Canterbury and Takitimu operations. Domestic sales accounted for almost 1.2 million tonnes.
Bathurst’s share was 1.47 million tonnes. It booked $217.7 million of the $309 million of sales and $94.6 million of the $106.3 million of operating earnings.
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