Clive Palmer’s $197m win revives nickel hopes

Clive Palmer says he will look to use the proceeds from his $197.4m legal victory over Citic to reopen his shuttered nickel refinery.

Clive Palmer. Picture: AAP

Clive Palmer says he will look to use the proceeds from his $US150 million ($197.4m) legal victory over Chinese corporate giant Citic to reopen his shuttered Townsville nickel refinery in north Queensland.

In a major win for the former federal MP, the West Australian Supreme Court ruled yesterday that Mr Palmer and his private company Mineralogy were owed substantial amounts of unpaid royalties from the $15 billion Sino Iron project in the Pilbara region.

Mr Palmer told The Weekend Australian he could now investigate reopening the refinery, arguing that the business would not have gone under if Citic had been meeting its obligations.

“We will have to look at doing what we can in the future for the people of Townsville and getting the refinery going again,” he said. “We expected to get that money when it should’ve been paid, that would’ve meant that Queensland Nickel would never have closed.”

Responding to the news that the refinery might be reopened, Townsville Mayor Jenny Hill said: “The way the refinery was managed previously has left people with little confidence in his ability or genuineness to really open the refinery, but if he wants to prove us wrong, we’d be happy to be proven wrong.”

While yesterday’s ruling also sets the scene for ongoing future royalty payments potentially worth about $200m a year to Mr Palmer over the remaining life of Sino Iron — an amount that would see him regain his billionaire status — an appeal of the decision looks to be a certainty.

Citic was considering its ­options yesterday but was likely to fight the decision all the way to the High Court. “We’ll carefully review the judgment and its implication for Sino Iron,” a Citic spokesman said.

The Chinese company has repeatedly warned that an adverse ruling in the royalty dispute could force it to shut Sino Iron.

The dispute at the heart of yesterday’s decision centred on the so-called Royalty B component of the original agreement under which Citic picked up its interests in Sino Iron from Mr Palmer in 2006. The royalty was originally linked to the benchmark iron ore price that was negotiated annually at the time by steelmakers and iron ore miners, but that system was abandoned soon after in favour of a spot market.

The judgment by judge Kenneth Martin was scathing of some of the key arguments put forward by Citic, namely that the royalty provision should be severed altogether or converted into a 20 per cent stake in the project that would expose Mr Palmer to a share of future profits or losses.

“There has not been and remains no legitimate or principled basis to sever the (royalty B) component of the Mineralogy royalty,” Justice Martin wrote.

Severing royalty B from the contract “would deliver a resultant disruption of seismic proportions” to the essence of the original deal, he said, while Citic’s idea of converting the royalty into a 20 per cent equity stake was also emphatically rejected.

“Transforming Mineralogy from an above-the-line long-term royalty income recipient, to be a 20 per cent co-venture risk participant … is ultimately untenable,” he said. “On my assessment, such a transformation would be wholly alien to the essential character of holding a royalty entitlement.”

The ruling is the latest in a ­series of misfortunes to befall Citic since it struck its original deal with Mr Palmer. The project’s construction took years longer and cost billions of dollars more than originally forecast, while Citic and Mr Palmer have been embroiled in a series of costly legal disputes for the past several years.

Mr Palmer said the decision showed that the rule of law still ­applied in Australia.

“We hadn’t been paid for years but resources were being sent to China and not paid for, that would have been a very bad precedent for Australia,” he said.