A ferrotungsten plant in Vietnam remains idle and funds are quickly running low as ATC Alloys fights a long-running legal battle with its joint venture partner.

ATC (ASX:ATA) has been unable to undertake production at the plant since September 2016, when a dispute arose between the company and partner Guangyu Chen.

Tungsten — the hardest pure metal with the highest melting point– is used in tool steels and is often added to steel melts as ferrotungsten, which can contain up to 80 per cent tungsten. China is the biuggest global ferrotungsten producer.

At the end of the September quarter, the company had just $1000 cash in the bank and a fully drawn $2.5 million loan. ATC estimates a cash burn of $1.6 million in the current quarter, including a $1.5 million repayment to lender Siderian Resource Capital.

The Vietnam operations are owned by Hong Kong-based Asia Tungsten Products, a joint venture 60 per cent owned by ATC and 40 per cent owned by Mr Chen.

Ownership dispute

In January, ATC agreed to sell Mr Chen a 35 per cent interest in Asia Tungsten Products for $US2 million ($2.7 million) to settle a dispute over ownership of the joint venture company.

However, the sale was delayed and ATC terminated the deal. The company has since served Mr Chen with a disenfranchisement notice.

ATC alleges that Mr Chen failed to maintain proper and complete accounting and financial records of Asia Tungsten Products and its wholly owned subsidiary Asia Tungsten Products Vietnam.

The company also alleges that its joint venture partners failed to “procure that the subsidiary’s profits were available for distribution”.

In response to the ATC disenfranchisement notice, Mr Chen has now sought to serve ATC with a disenfranchisement notice, in addition to a statement of claim against the company.

Mr Chen is seeking an order from the High Court of the Hong Kong Special Administrative Region Court of First Instance that the ATC disenfranchisement notice is void and invalid and that his notice is valid and effective.

ATC is seeking legal advice in Hong Kong and is continuing talks with Siderian Resource Capital over the repayment of its debt.

The company has been contacted for comment.