Steel firm urges court to throw out claim

Li Ka-shing's company is worth $12 billion. Photo / Bloomberg

Bluescope and adviser Merrill Lynch lock horns with Hong Kong giant over mine

The legal battle over a failed $250 million bid to buy a New Zealand iron sands mining operation is back before Australia's Federal Court today.

BlueScope Steel is urging the court to throw out claims it misled Hong Kong firm Cheung Kong Infrastructure Holdings (CKI) over the purchase of its operation in 2008.

Australian-owned BlueScope and its adviser Merrill Lynch are accused of trying to sell the mine on the Waikato coast while knowing its top customer - a rival bidder - would stop buying the product if it was sold to a third party.

Cheung Kong is seeking damages from BlueScope and the investment bank that could include the mine's $250 million purchase price, according to court documents.

"During the bidding process for the mine and iron sands business, BlueScope provided false information, and failed to disclose information, which was crucial to the ongoing operations and value of the mine," a Cheung Kong statement lodged this year said. "The false and undisclosed information included customer, landowner and shipping matters. The statement of claim alleges that such conduct by BlueScope caused CKI to overvalue the mine."

Cheung Kong has lodged a related claim against Merrill Lynch International (Australia) alleging "misleading and deceptive conduct" while acting as an adviser to BlueScope.

The hearing in Australia followed arbitration in New Zealand, the results of which are confidential. "Part of our defence is an abuse of process claim given that it's already been through the arbitration process in New Zealand. This whole process is an attempt by CKI to relitigate it in Australia," a BlueScope spokesman said.

The mine deal fell through in December 2008 as the global crisis hit.

In its ruling in December that year the Overseas Investment Office said CKI had originally intended to carry out an expansion of the business.

"However, given the reduced demand for the product produced by the mine and the deteriorating global economic conditions, CKI has come to the decision that plans to expand the business are no longer viable," the office said in its decision.

Cheung Kong is a $12 billion publicly listed infrastructure company controlled by billionaire Li Ka-shing and has been active in New Zealand.

In 2008 it bought Vector's Wellington power network for $785 million.

SAND MINE

*The Taharoa iron sands business is owned and operated by NZ Steel and acquired by BlueScope Steel (BHP at the time of the acquisition) as part of the purchase of NZ Steel from the government in 1992.

*Exports totalled 850,000 tonnes of iron sands, mainly to Japan and China in 2008.

*Revenue that year was $53 million.

- additional reporting: NZPA