Highlands Pacific Limited has announced that its wholly-owned subsidiary Highlands Frieda Limited and its Frieda River project joint venture partner Frieda River Limited (a wholly-owned subsidiary of PanAust Limited), have commenced arbitration proceedings to resolve a dispute regarding funding of project expenditures.
Highlands Frieda Limited and Frieda River Limited are in dispute regarding the parties’ obligations under the joint venture agreement, including whether Highlands is obliged to commence funding of project expenditures. Highlands previously has sought to resolve the dispute through mediation, however the parties have now agreed to seek a final and binding arbitration before a sole arbitrator, with a final hearing date yet to be fixed.
The dispute has put the immediate future of the proposed development of the world-class Frieda River copper-gold project in limbo.
It relates to an initial joint venture funding agreements for Frieda River, under which PanAust was required to fund all the costs of the project up to the time of the lodgement of an application for a Special Mining Lease (SML), supported by a Bankable Feasibility Study.
PanAust released an updated Feasibility Study in May 2016 and lodged an application for a Frieda River SML at the same, which was subsequently granted in June 2016.
However, Highlands Pacific has disputed the position that the lodgement of the application for the SML triggered the obligation for it to fund its share of joint venture expenditure relating to the period post the SML lodgement. The dispute is now the subject of mediation.
The situation became even more difficult when PanAust, which is a wholly-owned subsidiary of the Chinese government owned Guangdong Rising Assets Management Co Ltd (GRAM), called for the removal of five of Highlands’ independent non-executive directors and applied to replace them with three of its own nominees.
A Special Meeting of Highlands shareholders was held on May 18, 2017 and the move to remove the Highlands directors and the appointment of the PanAust nominees saw five of the resolutions voted down and the other three withdrawn.
Prior to that Special Meeting, Highlands had notified the ASX that it has instigated a process to investigate the sale of its 20% stake in Frieda River. The company has indicated that it would like to focus on its other PNG assets, particularly the Star Mountain Project in which it is partnering with Anglo American.