Rio Tinto has started legal proceedings against Monadelphous for $493 million in damages related to the mining major’s iron ore processing facility at Cape Lambert, Western Australia.
Rio Tinto filed the complaint to the Supreme Court of Western Australia after a fire incident occurred during a maintenance shutdown by Monadelphous last year, which was claimed to destroy part of its iron ore operations.
Monadelphous had agreed to discuss the matter with Rio Tinto prior to the service of its court summons.
Rio Tinto alleges MEA breached its maintenance contract and therefore caused the fire.
“Although the writ does not specify any damages, Rio Tinto has separately informed MEA that its claim is for $493m in loss and damage,” Monadelphous stated in an Australian Securities Exchange media release.
According to Monadelphous, this includes $35 million in material damage costs to rebuild the Sinter Fines processing facility, along with $458 million for a temporary operation solution due to the company’s inability to produce iron ore during reconstruction.
“MEA denies Rio Tinto’s allegations and claimed losses (which MEA considers have not been substantiated),” Monadelphous said.
“Further, the contract between Rio Tinto and MEA, which governed the maintenance work performed by MEA, contains exclusions and limitations of liability which will be relied upon by MEA in defence of the claim.”
A total limit of $150 million in liability insurance is in place for MEA, and covers property damage claims, along with associated losses.
The engineering company “is unaware of any reason” why the insurance policies would not indemnify MEA for its liability toward Rio Tinto.
Monadelphous stated it was working with Rio Tinto to seek a “satisfactory outcome” and would be defending its position against the mining giant’s legal action.