Heron is cranking up Woodlawn copper-zinc but the builder is angsting for more cash
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Sedgman is claiming $53 million in costs to build Heron’s Woodlawn zinc-copper project in its next monthly progress claim, which Heron says is 49 per cent above their agreement maximum contract price.
That figure includes $49.9m in costs claimed the previous month that were rejected by the contract superintendent.
Heron is irate that the sums claimed are above the $109m guaranteed maximum price of the contract to build Woodlawn, which is based in NSW and was due to be completed in the December quarter last year.
Construction continues and it plans to start putting ore through the plant in the next couple of weeks, Heron CEO and managing director Wayne Taylor told Stockhead.
“We are obviously frustrated with what’s going on, we have kept our end of the contractual bargain, we have paid up to the guaranteed contractual price,” he said.
“Reading between the lines, it looks like Sedgman have overspent on the contract and want to recoup costs.
“We don’t believe Sedgman will do anything to compromise completion of the project.”
Sedgman has been contacted for comment.
On February 4, Sedgman made a progress claim for extra costs of $49.9m.
It included a claim for $11m in October which Heron said the contract superintendent has rejected.
According to Heron, the two companies signed an engineering, procurement and construction (EPC) contract in May 2017 that included a guaranteed maximum price and a cost sharing component “as it provided an incentive for Sedgman to share in any cost savings that might be generated by efficient work practices, effective project management and timely execution of the works”.
The $49.9m claim, half for actual extra costs and half for forecast cost, was rejected by the contract superintendent bar $223,057 for some works, Heron said in a statement to the ASX in February.
“Sedgman is attempting to circumvent the guaranteed maximum price through the submission of a list of 22 alleged variations claiming for unsubstantiated costs. The contract superintendent has determined that the majority of the variations either have no merit, or are time barred under the EPC contract, and in some cases refer to events that predate the parties entering into the EPC contract,” Heron said.
Heron is also claiming delay liquidated damages for the later than planned completion of the processing facility.
Mr Taylor said it’s up to Sedgman as to how to proceed from here, as there are provisions in the contract to deal with disputes and NSW legislation looks after security of payments.
Heron also holds $10.8m in bank guarantees from Sedgman that they could claim if necessary.
Heron shares were flat at 57c.