Lanco settles $3.5-bn legal spat with Perdaman, stock rises

Perdaman had sued for alleged non-compliance with coal supply pact for the company's upcoming urea plant in Western Australia

Gurgaon-based infrastructure major Lanco Infratech Ltd said its Australian subsidiary, Griffin Coal, have settled a $3.5-billion lawsuit filed by Perdaman Chemicals & Fertilisers over coal supply issues. According to an agreement signed between the two sides, Lanco would pay $7.5 million to Perdaman, along with legal costs for withdrawing the case. Lanco’s share price jumped 10.3 per cent before closing at Rs 11.6 on the BSE on Monday.

“If allowed to continue, this case would have taken up to 14 months for the judgement, resulting in significant legal costs and loss of management time. The purpose behind making this nominal offer was to put an end to this litigation and move forward with our mine expansion plans,” said Nagaprasad Kandimalla, CEO-Business Development at Lanco.

He, however, added that Lanco still maintains that Perdaman’s action was baseless and devoid of merit.

Lanco Infratech had acquired Griffin Coal for $730 million in 2011. Perdaman had filed the lawsuit against Lanco in Australia alleging the miner did not honour an existing coal supply commitment for Perdaman’s urea plant in Western Australia. “It was unfortunate that a Group of our size was pulled into this claim. We have 28 days to make this settled payment to Perdaman,” said Kandimalla.

In a separate statement, Perdaman said it maintains its concerns over Griffin and Lanco’s solvency and the commercial value of pursuing the legal case – listed for a 13-week hearing beginning August. “Last week’s announcement by Lanco that it was trimming its entire workforce by 20 per cent coupled with Lanco’s third quarter results showing losses for the nine month period of around $200 million heightened Perdaman’s concern as to the commercial utility of continuing with this case,” the statement read.

Settlement of the case was achieved by the two parties on April 26 and is scheduled to be completed by May 24. In addition to the settlement cost of $7.5 million, Lanco would pay up the legal costs of about $3.5 million to Perdaman over 9-12 months, said Kandimalla.

Lanco said it expects the development to have a positive impact on the entire group, including Griffin Coal. The company said it would increase focus on its business and mining operations in Western Australia, including the proposed expansion of the Collie mines and export facility at Bunbury port. Griffin Coal’s current production capacity is 4.2 million tonnes (mt), which it plans to increase to 16 mt.