Mount Gibson Iron is working out if it can seize iron ore cargo from other miners’ ports, as it scrambles to recover the $US114 million in damages awarded from China’s Rizhao Steel following reneged contracts.
The ports the Western Australian miner is attempting to source from include some owned by Rio Tinto.
Rizhao reneged on the contracts during the Global Financial Crisis (GFC) and the damages were awarded to Mount Gibson in August.
The company is also pursing the money through the Chinese courts under the UN’s New York convention and hopes that by publicising the court process, they will bring attention China’s handling obligations under the treaty, which allows enforcement in participating countries of an arbitration award made here.
Rizhao’s owner, one of China’s richest men, Du Shuanghua admitted to giving Rio Tinto executive Wang Yong $9 million, as well as a house.
Wang was jailed for 14 years, while the billionaire Du was did not receive jail time.
Enforcing the payments will be difficult for Mount Gibson, as Rizhao’s only potential Australian assets are iron ore purchases once they are loaded on a ship.
But documents uncovered from major iron ore miners during the court process show shipments Rizhao had been taking ownership of at the port are now being done through traders, meaning it does not officially take ownership of the ore in Australia and therefore making recovery unlikely.
"Rizhao and Rio know if we can grab one of their ships, while it might only be worth $15m or $20m, it could cause some grief, and they are acutely aware that’s one of the angles we are working on," Mount Gibson chief financial officer Alan Rule said.
He also said he did not know whether Australian suppliers were helping Rizhao out.
"We’re just surprised that these Australian suppliers wouldn’t be standing firm with Rizhao and saying you owe Mount Gibson a large amount of money — sort it out."
Rio and Fortescue have not commented.
Rizhao has disputed $US42.98 million of the award in the WA Supreme Court, where it was told in November it must pay the remaining $71.43 million.
Mount Gibson filed enforcement applications under the New York convention with the Rizhao People’s Court on 10 December, as there has been no indication of payment from the Chinese company.
The accepted application should be processed within seven days, but there is still no news on its approval.
"The process is set out and they are not abiding by those processes — we see it as a real test of the UN convention," Rule said.
"The procedural result will not only directly go to the image of the PRC courts and the Chinese legal system but also to how other people view China’s acceptance or reluctance to perform under the New York convention."
Contracts were rejected almost entirely during the GFC, because they were not producing steel or because it was cheaper to buy spot iron ore.
Mount Gibson was the only miner who pursued the company after Rio Tinto flagged legal action and Rule said the company no longer deals with customers with assets it cannot access.
“The lesson we’ve learned is that our offtake partners now are all companies and entities that either have assets in Australia or assets in Hong Kong, Japan or UK, where we can go after them and they can’t hide behind the Great Wall of China," he said.