GR Engineering takes Eastern Goldfields to court over Davyhurst dispute

The Davyhurst plant

Mining services company GR Engineering has launched proceedings against Eastern Goldfields in the Supreme Court of Western Australia over a contractual dispute at the Davyhurst gold project.

GR has taken action to recover payments associated with the Davyhurst gold project refurbishment contract signed between the two companies in September 2016.

Perth-based GR was awarded the EPC contract for Eastern Goldfields’ 1.2 million tonnes per annum Davyhurst processing facility.

The agreement involved GR providing engineering, procurement and construction services for the processing facility’s refurbishment.

According to GR, the claim is $9.9 million, plus interest and costs. The contract value is around $18.5 million, including variations for additional works, GR added.

GR has completed the contract work, it said yesterday in an ASX announcement.

“These proceedings follow a breakdown in protracted commercial discussions where GR considers that Eastern Goldfields failed to meet commitments to pay the majority of the claimed amount over the course of the preceding months,” GR explained.

“Eastern Goldfields has alleged the existence of minor defects and omissions in respects of the works, which GR considers are immaterial and which pertinently were first raised following Eastern Goldfields’ most recent failure to pay $5 million towards the contract payment arrears on 28 June 2017.”

GR suspended the Davyhurst works in May because of Eastern Goldfields’ payment default. According to GR, Eastern Goldfields then “alleged the wrongful suspension of the works” and raised an offsetting claim for delay costs of $6.8 million.

“GR will vigorously defend any offsetting claim in the course of proceedings,” GR added.

Davyhurst, about 120km northwest of Kalgoorlie, has been on care and maintenance since 2008. Eastern Goldfields has been redeveloping the historic operation behind chairman Michael Fotios.

Eastern Goldfields today responded to the claims, saying GR “wrongfully suspended work” at the Davyhurst mill in May. The company added it had paid $10.4 million of the $12.5 million contract value.

The gold developer explained that GR “represented to Eastern Goldfields that it would immediately and unconditionally recommence work towards commissioning the Davyhurst mill, but has failed to do so.”

“As a consequence, Eastern Goldfields has taken steps itself to complete the refurbishment of the Davyhurst mill, during which it has discovered numerous defects and omissions by GR,” Eastern Goldfields stated.

“Rectifying those defects, GR’s wrongful suspension and GR’s failure to assist the company to complete the refurbishment has delayed the recommencement of production.

“Eastern Goldfields intends to vigorously defend the proceedings and will pursue by counterclaim its rights to damages and costs arising from GR’s breaches of contract, defective work and other conduct.”

Eastern Goldfields’ shares fell almost 38 per cent in trading on the ASX yesterday following the GR announcement.