Court awards Equatorial Mining $157 million

Equatorial Mining Ltd announced recently that a $157 million judgement in its favour was formally entered by the Fifth Judicial Court of Nevada as a result of successful litigation against Kvaerner US.

Equatorial Mining Ltd announced recently that a $157 million judgement in its favour was formally entered by the Fifth Judicial Court of Nevada as a result of successful litigation against Kvaerner US, Inc, the American subsidiary of Aker Kvaerner.

On July 16, 2003, a unanimous jury verdict for $136.9 million was awarded to Equatorial Mining Ltd and its US subsidiaries over claims arising out of a Kvaerner feasibility study which was relied upon for Equatorial’s purchase and construction of a copper mine near Tonopah, Nevada.

The judgement amount entered against Kvaerner US late on Friday August 15 by the court includes interest and costs awarded by the Court as well as damages awarded by the 10-person jury after the seven-week trial. Equatorial’s legal fees incurred in prosecuting the litigation will also be awarded, although Kvaerner is still contesting the exact amount.

Kvaerner has indicated that it expects to appeal within the required 10-days of the entry of judgement. Kvaerner has also announced that insurance should cover $75 million of the award.

Equatorial had prevailed in the trial on claims of breach of contract, professional negligence, breach of the implied covenant of good faith and fair dealing, fraud, fraudulent concealment, negligent misrepresentation and violations of the Nevada Deceptive Trade Practices Act by Kvaerner. The jury also found that Equatorial had no contributory negligence on the negligence claims.

Mr Gavin Thomas, Managing Director of Equatorial, stated: ‘Equatorial is gratified and humbled by the verdict and sees it as vindication of the efforts of all its employees who worked tirelessly to try to make the mine a success.’

The lawsuit was filed in March 2001 and involved a positive ‘bankable’ feasibility study prepared by Kvaerner for the mine in August 1997. The study was to determine the material characteristics of the ore.

According to a statement, Equatorial relied on the positive study and Kvaerner’s reputation and global experience when it purchased, financed, constructed the mine. Equatorial spent approximately $157 million on the mine including the cost of closing and reclaiming the mine. The jury award represented Equatorial’s total net investment related to the project excluding copper and asset sales.

The mine began operations in early 2000 but is said to have experienced persistent metallurgical recovery problems related to the basic characteristics of the ore, including high levels of clay and fluorine which were not identified as problems in Kvaerner’s feasibility study.

Despite the efforts of management and several international mineralogical and process experts to save the mine, operations were said to be losing about $2 million a month and were shutdown in June 2001.