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Court clash looms on BHP seabed ban

by: Andrew Burrell
From: The Australian
September 10, 2013 12:00AM

Source: TheAustralian

THE Northern Territory government has effectively revoked exploration tenements granted to BHP Billiton and two other companies, exposing it to huge compensation claims and threatening the NT's reputation as being "open for business".

The Australian understands that one of the companies, listed junior Perth miner Northern Manganese, has lodged a claim with the NT government for what some might consider an ambit claim of more than $1 billion in compensation over the shock decision in June to impose a ban on seabed mining off Groote Eylandt in the Gulf of Carpentaria.

The matter is yet to hit the courts and all three companies are in talks with the government.

BHP already has a manganese project on Groote Eylandt in a joint venture with Anglo American, although it is believed BHP had no immediate plans to expand into the waters off the island.

The 11 offshore licences held by BHP, Northern Manganese and an unlisted Brisbane-based company, Yukida Resources, were all rendered worthless by the government ban, which followed complaints from the local community about the environmental impacts of seabed mining. It is highly unusual for an Australian government to remove a company's right to explore for minerals once tenure has been granted.

Yukida Resources said it was seeking compensation from the government, claiming a prospective foreign investor had pulled out of a deal to back the project after Chief Minister Adam Giles imposed the ban.

NT Mines Minister Willem Westra Von Holthe declared the NT was "open for business" when he took on the job last year and said he wanted to fast-track new mining projects.

But Yukida director Nathan Cammerman said the NT government's decision to effectively annul its exploration licences sent a bad message to foreign investors about doing business in Australia.

He said the Country Liberal Party had signalled last year it would end a moratorium on seabed mining announced by the previous Labor government and he had been shocked when Mr Giles announced a permanent ban.

"The haphazard revoking of granted exploration and mining tenure presents an issue of sovereign risk for the resource sector and has broader ramifications for the mining industry and its ability to attract incoming investment," he said.

"The NT government states that it is open for business. From our first-hand experience this is questionable. "

Mr Cammerman said he was seeking a meeting with Mr Giles to discuss compensation and he would prefer to avoid litigation.

Northern Manganese chairman Doug Daws said he hoped the NT government would agree to pay compensation for the lost investment opportunity and he had a duty to his shareholders to pursue a claim.

He said the NT government had actively encouraged the company to explore in the area but its moratorium -- and subsequent ban -- had caused Northern Magnanese's market capitalisation to sink from $80 million in 2010 to just $3.5m now.

The chief executive of the NT's Department of Mines and Energy, Scott Perkins, confirmed the government was in negotiations with BHP, Northern Manganese and Yukida Resources over the issue.

However, he appeared to rule out paying compensation for lost opportunity.

Mr Perkins, a former senior executive with BHP, said compensation might be paid if there was agreement about the amounts spent on exploration.

BHP declined to comment.

Environmental groups have welcomed the ban on seabed mining off Groote Eylandt and have called for it to be extended to other parts of the NT.

They say seabed mining -- the extraction of minerals from the sea floor -- would devastate the feeding grounds for fish, turtles, dolphins and dugongs.

Mr Perkins said the NT government had consulted widely before imposing the mining ban, including speaking with traditional owners in the area.

However, seabed mining is seen by many as an economic saviour, particularly for small island economies in the Pacific. The Cook Islands, for one, hopes to become one of the world's richest countries on a per capita basis by unlocking the mineral potential on its territorial seafloors.

http://www.theaustralian.com.au/business/mining-energy/court-clash-looms-on-bhp-seabed-ban/story-e6frg9df-1226715505546