Judgment entered in suit over Tonopah copper mine

RENO, Nev. (AP) -- A mining company has won a $157 million judgment from an international engineering firm it hired to study the potential value of a Tonopah copper mine.

District Judge Michael Gibbons signed the order against Kvaerner U.S. Inc. on Friday after presiding over a seven-week jury trial in Tonopah that ended last month.

Lawyers for Kvaerner did not immediately return phone calls seeking comment.

Equatorial Tonopah Inc., a division of Equatorial Mining Ltd. of Sydney, Australia, sued Kvaerner U.S. Inc. in March 2001 for breach of contract, negligence and fraud.

Equatorial claimed Kvaerner misrepresented the findings of a feasibility study it did to assess the value of the copper mine project, leading to the mine's "complete and catastrophic failure."

Among other things, Equatorial said the study prepared in August 1997 was to determine the material characteristics of the ore from which the copper is extracted, and that it relied on the study when it purchased, financed and constructed the mine.

According to the suit, Kvaerner U.S., a subsidiary of Norway-based Kvaerner ASA, said its analysis indicated a potential yield of 80 percent to 85 percent copper which would produce 47.1 million pounds of copper in the first year, 68 million pounds in the second and 59.6 million pounds in the third year.

Equatorial bought the mine from Cyprus Amax Metals Co. in September 1997 for about $15 million, then hired Kvaerner in November 1998 to build a $43.8 million processing plant.

Equatorial also entered into agreements that promised to deliver copper at 75 cents a pound for three years.

The mine opened in early 2000, but was plagued by problems related to characteristics of the ore, including high levels of clay and fluorine that were not identified in Kvaerner's report, the suit said.

"Plaintiffs now know that the Tonopah Project cannot achieve the necessary copper recovery required to profitably maintain the project and the copper recovery may be as low as 37 percent," the lawsuit said.

The company also said it was forced to buy copper on the open market at prices well above the 75 cents a pound to meet its commitments.

Equatorial said ore recovery problems cost the company about $2 million a month before the operation shut down in June 2001.

On July 16, a jury awarded Equatorial $137 million in damages. The judgment entered by Gibbons includes interest and costs.

Gavin Thomas, Equatorial's managing director, said the company is in negotiations to convert the site into a solar and wind energy farm.

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On the Net:

Equatorial Mining Ltd: http://www.equatorial.com.au

Kvaerner ASA: http://www.kvaerner.com