Australian mining firm wins $55m insurance payout

Kingsgate Consolidated, an Australian mining firm, has been awarded a $55m payout from a political risk policy it has with Zurich Insurance Australia, over the closure of its goldmine in Thailand. The goldmine, based in Chatree in the Thai provinces of Phichit and Phetchabun, is the largest in Thailand, with more than 1,000 employees. It was shut down in December 2016 after the government cancelled Kingsgate’s metallurgical licence, despite the fact its lease was scheduled to run until 2028. Lobbying from local landowners over claims of environmental and health issues led to the decision, which subsequently sparked an ongoing legal fight between Kingsgate and the Thai Government and its insurers. The closure of the mine was ordered by Thailand’s Prime Minister Prayut Chan-o-cha under section 44 of the interim constitution, which grants him unlimited executive powers. Kingsland not only disputes the findings of the environmental report, which stated that its activities had caused toxic leaks, it also claimed that the closure amounted to an illegal expropriation, which has caused a substantial loss to the company’s assets. In October 2017, it launched legal action against its insurers over a political risk policy worth $200m. The case was due to be heard in a New South Wales court in June but Kingsgate announced that the claim had been settled by signing a binding heads of agreement with Zurich Insurance Australia. Under the terms of the agreement, Kingsgate will receive a cash payment of $55m to be received in mid-April and an initial payment of $3.5m, which will be used to fund Kingsgate’s legal claim against the Thai Government. Kingsgate chairman Ross Smyth-Kirk told Australian news site Stockhead that although he had hoped for more, the settlement does end the company’s financial challenges “for a considerable period”. “I’m a hard marker so I wanted more, I expected more, but everybody involved in the negotiations thinks we did a very good job,” said Mr Smyth-Kirk. “They’re insurance companies, they really played hard ball. We had our backs to the wall and we were relying on funding from Investec, which has been very generous with us. “We fought hard and we got a result that means we live to fight another day. We don’t have any problems with money now for a considerable period,” he added. It remains to be seen how successful Kingsgate will be in its action against the Thai Government – the first arbitration hearing is set to begin in November. The company claims that the premature closure of the goldmine is in violation of the Thailand Australia Free Trade Agreement (Tafta). Mr Smyth-Kirk claimed that the closure was expropriation under the definition set out in Tafta and is therefore seeking “full compensation”, which is believed to be in the region of $940m. Although Mr Smyth-Kirk conceded that the case will be a major test of Tafta’s provisions for investment protection, his confidence in a successful outcome has increased since the insurance settlement and he added that the insurer has now joined Kingsgate in its pursuit of compensation from the Thai Government.

Australian mining firm wins $55m insurance payout

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