A Tanzanian mining contractor is trying to have a subsidiary of coal miner Intra Energy placed in administration for two years over a contractual dispute.

Tancoal, which is 70 per cent owned by Intra Energy (ASX:IEC), has been handed a “chamber summons and a petition for administration order” by local contractor Caspian, Intra Energy told investors.

A “petition for administration order” is an application to the court to have an administrator appointed to a company.

Caspian wants an administrator of its choice appointed to Tancoal, according to Intra Energy.

Tanzanian state-owned National Development Corporation owns the remaining 30 per cent of Tancoal.

Intra Energy said Tancoal was given four days by Tanzania’s Ministry of Industry, Trade and Investment to find and sign on a “credible” mining contractor to start work immediately and ramp up production capacity.

Intra Energy said Tancoal signed with Caspian “under considerable pressure to commence work immediately”.

Intra Energy (ASX:IEC) shares over the past 12 months.
Intra Energy (ASX:IEC) shares over the past 12 months.

Caspian’s equipment was two months late to arrive on site and it wasn’t fit for use, according to Intra Energy. The equipment was scheduled to be on site in April 2017.

“The equipment was not fit for purpose, it ranged in age from 13 to 25 years old and was only able to produce at approximately 50 per cent of capacity, making Caspian both twice as
expensive as Tancoal’s other comparable contractors and with inferior equipment,” Intra Energy said.

“Due to Caspian’s poor performance, Tancoal’s only option was to allow Caspian to only work ‘minimum hours’ as per the contract for 300 hours a month and then park Caspian’s fleet for the remainder of each month.

“Other contractors then carried on the work for the rest of every month.”

Intra Energy also claims that Caspian’s contract contained “onerous terms”, including a condition that Caspian “must be paid first after taxes and salaries of Tanzania employees”.

The company says Tancoal has been trying to renegotiate the three-year contract with Caspian since the beginning, but the contractor has “refused to engage in meaningful discussions”.

Intra Energy and Tancoal plan to fight Caspian’s attempt to have the subsidiary placed in administration.

The companies are seeking legal advice.