KENMARE Resources has to pay $5m (R69m) to Aveng following an arbitration tribunal decision which found the South African contracting firm was entitled to R206m for work conducted at Moma, Kenmare’s Mozambique-based mineral sands facility.
Whilst Aveng claimed R206m, Kenmare issued a counter-claim for losses resulting from Aveng’s alleged contractual breaches which it said were “substantially in excess of Aveng’s claims”.
However, the tribunal found that Aveng’s liability, under contractual limitations provisions with Kenmare, was capped at R150m. The net outcome was the R69m payment due to Aveng.
Said Kenmare MD, Michael Carvill: “Whilst we are naturally disappointed that the project companies [Kenmare’s operating subsidiaries] are required to make payment to Aveng, we welcome the tribunal’s endorsement of our position that Aveng caused significant losses to the project companies.
“We also note that the net amount payable on the merits of the case is significantly less than the amount claimed by Aveng and the $19.4m accrued in respect of these amounts on the group’s balance sheet”.
The dispute relates to the under-performance of the engineering, procurement and construction contract of the $200m Moma expansion which was awarded to Aveng.
Earlier that year, Kenmare had raised £179.6m to fund the project which aimed at a 50% expansion of production at Moma to 1.2 million tonnes a year of ilmenite. The mine had a then production capacity of about 800,000 tonnes a year of ilmenite and associated products.
Kenmare has recently recovered from a capital crunch that nearly sank the company owing to depressed prices for the minerals it produces and project delays.
In June, shareholders approved a massive $275m share placement which, at a stroke, reduced net debt to $100m and left the company with $75m in working capital. At around the same time, ilmenite prices, which had declined to $80/t end 2015 from $400/t in 2011, started to revive.
In addition, Carvill has new board members in the form of representatives of State General Reserve Fund of the Sultanate of Oman, one of its major shareholders that took up a cornerstone $100m in the share offer.
