Aker Kvaerner loses case, must pay US$137m

Engineering firm Aker Kvaerner is expected to appeal a Nevada court ruling that says it must pay damages of US$136.9 million plus interest and legal costs to Australia’s Equatorial Mining.

If the appeal proceeds, Nevada law requires Kvaerner to lodge the US$136.9 million as a cash bond.

The Norway-based firm was found guilty of preparing a phony feasibility study that estimated copper production of 54 million lbs. per year over 10 years at the Tonopah copper mine, 320 km north of Las Vegas, Nev.

Equatorial Mining bought the mine from Cyprus Amax for US$70 million in 1997, based on a feasibility study provided by Kvaerner. The engineering firm subsequently won the contract to build the processing plant at Tonopah.

Once the plant was commissioned in 1999, it was discovered that copper recoveries were about 40% of initial estimates. The operation was shut down in spring 2001.

Equatorial told shareholders that “Kvaerner’s representations in the feasibility study had been, from the beginning, inaccurate, incomplete, unsubstantiated, and misleading.”

Equatorial took a writedown of US$100 million on Tonopah in 2000.

Kvaerner tried to settle the dispute via arbitration, but the case went ahead in June. The company says its insurance would likely cover about half the damages.

Out of the judgment monies, Equatorial would have to pay the original US$15 million purchase price for Tonopah, refund financiers, including London-based Barclays Bank, and repay Aussie financier AMP, which propped up the miner when the case came to court. Last year, AMP pumped an additional US$25 million into Equatorial.

The damages dwarf the US$28-million compensation awarded to Anaconda Nickel in its claim against engineering firm Fluor over the design of the troubled Murrin Murrin nickel laterite plant.