Heron disputes $49.9m Woodlawn costs claim from Sedgman

Underground mine services area preparation last June. Image: Heron Resources

Heron Resources has received a claim from CIMIC Group subsidiary Sedgman for $49.9 million in additional costs for works at the Woodlawn zinc-copper project in New South Wales.

Heron has debated the claim, which puts costs over the guaranteed maximum price of Sedgman’s $109 million engineering, procurement and construction (EPC) contract at the site.

Heron awarded Sedgman the 18-month EPC contract to develop a 1.5 million tonnes per year processing plant (now 95 per cent complete) for zinc, copper and lead production from underground mining and tailings in May 2017. 

The contract followed a front end engineering and design (FEED) study between the two companies that started in November 2016.

Heron Resources expressed its frustration surrounding Sedgman’s claim for additional costs in an ASX release this morning, stating that the company was “extremely disappointed to receive a claim of this magnitude when the construction timeline is effectively complete”.

The company also stated that Sedgman’s $49.9 million claim appeared to be contrary to the principles of the guaranteed maximum price set out in the EPC contract, and that it planned to enforce its legal rights to challenge the claim.

If applied, the claim would push the maximum price of the project 46 per cent above the $109 million figure set out in the EPC contract.

The contract superintendent plans to assess Sedgman’s claim within 10 business days.

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