AMMON -v- CONSOLIDATED MINERALS LTD [No 3] [2007] WASC 232 (4 October 2007)

AMMON -v- CONSOLIDATED MINERALS LTD [No 3] [2007] WASC 232 (4 October 2007) - WASC 2007 case summary — Zoe

[44]

28 Mr Ammon's evidence was that he chose the configuration of EL47/1140 and the 19 blocks which comprise it, after drawing all the potential graticular blocks on the published geological survey map of the Roy Hill area. A version of that map, with graticular blocks annotated upon it, was in evidence. That map shows a total of 25 graticular blocks which are shaded, six being double hatched, and 19 being single hatched. Mr Ammon's evidence was that he would have liked to have applied for all 25 blocks which he had marked, but after marking them, realised that he could only afford 19 blocks, and therefore restricted his application to those 19. However, because there is a minimum annual expenditure commitment of $20,000 for each EL, whatever its area, of which Mr Ammon was aware, the difference in cost between an EL covering the 19 blocks for which he applied and an EL covering the 25 blocks would have been in the vicinity of $5000 per year. That is a relatively small amount. Because of my general skepticism in respect of his evidence, I do not accept that he would have applied for an area covering 25 blocks but was discouraged from doing so because of expense. That conclusion is reinforced by the observation that some months after applying for EL47/1140, Mr Ammon moved to Hong Kong where he earned a substantial income. Notwithstanding that income, he took no step to apply for an EL covering the additional blocks which he says he marked on the map because he would have liked to claim them or, indeed, any area additional to the area of EL47/1140. Mr Ammon gave evidence to the effect that he was thinking of pegging additional ground. However, he never did so, and because of my reservations about Mr Ammon's evidence generally, I do not accept that evidence. I think it more likely, and I find, that Mr Ammon thought at all material times that he had identified and captured the only significant prospective ground within the 19 graticular blocks he applied for as EL47/1140.

[49]

The Mindy Mindy Creek iron-pisolite deposits are located in the eastern Hamersley Ranges of the Pilbara Region, Western Australia, about 70km north-west of the town of Newman on the Roy Hill (SF 50-12) 1:250 000 scale map sheet. Most of the resource is found within the beheaded portion of Mindy Mindy Creek about 20 km to the east of Hamersley Iron's Yandicoogina iron-pisolite mining operation and about 25km south-west of BHP's Newman to Port Hedland iron ore railway line.

In 1972 OREX identified a possible resource of 79,000,000t of iron pisolite (>55% Fe) on TR 4515H covering the downstream half of Mindy Mindy Creek. In 1993 Hamersley Iron identified an additional possible resource of 8,000,000t of iron-pisolite (>55% Fe) on E47/633 covering the upper half of the Creek. In 11-2001, E47/1140 covering the entire length of Mindy Mindy Creek, including both the OREX and Hamersley Iron pisolite resources was lodged by Mr. Derek Ammon.

The pisolites outcrop as [sic] a series of mesas, 15m to 25m thick, which dominate the valley of Mindy Mindy Creek. The mesas represent the eroded remnants of a large palaeo-drainage system which in tertiary geological time was part of the Yandicoogina-Marillana-Welli [sic] Wolli drainage system which now hosts the massive 4,700,000,000t 'Yandi' iron-pisolite currently being mined by BHP and Hamersley Iron.

All of the 87,000,000t resource identified to date is found in the above ground mesa portion of the resource. This point is of major significance because 90% of the total tonnage and all of the high grade ore (>58% Fe) found within the adjacent Yandicoogina-Marillana-Weeli Wolli Creek iron-pisolite orebody, of which Mindy Mindy Creek was once a part, is found below ground level i.e. immediately beneath the outcropping mesas and below the superficial gravel's of the surrounding creek bed. These resources can literally be likened to icebergs with 10% (= 87,000,000t ?) of the resource clearly visible above ground level in the form of mesas while the remaining 90% of the resource lies concealed below ground level.

While the subsurface potential of the Mindy Mindy Creek orebody has not yet been systematically drill tested limited reconnaissance exploration drilling by BHP in 1995 within part of the creek on the extreme northwest edge of the licence intersected 12m of high grade iron pisolite ore (57.5% Fe) from 10m depth clearly demonstrating the subsurface potential of this resource.

The key to this projects viability is presence of both BHP and Hamersley Iron's high quality, iron ore railway line infrastructure right on the projects doorstep. Under the terms of there [sic] lease agreements both BHP and Hamersley Iron are obliged to provide third party access to there [sic] iron ore rail and port facilities at commercial rates. The presence of this infrastructure will not only save years off start up time and reduce start up capital costs by hundreds of millions of dollars but will also ensure that even relatively small orebodies found within trucking distance of the railway lines can be mined very profitably. With a [sic] operating margin of around $A20-25/t FOB even a relatively modest 2,000,000t per year operation could be expected to generate a pretax profit in order of $A50,000,000 per year. In short we don't need to find a large orebody in order to make this project financially attractive.

Pisolitic iron ores of export quality (>55% iron) are highly sort [sic] after by steel makers as sinter feed for conventional blast furnaces because of there [sic] excellent sintering characteristics, high iron content after calcine and there [sic] low silica & aluminium content hence there will be few problems in either sourcing project funding or finding buyers for the product.

[426]

311 However, a claim alleging breach of confidence must nevertheless establish that the defendant misused the information, or, in the words of the Full Court in Smith, Kline and French Laboratories (Australia) Ltd at 304, took "unfair advantage" or made "unconscientious use" of the confidential information. As I have already suggested, that notion seems to me to import the permissible consideration of aspects of the conduct of the parties which sheds light upon their subjective views at the time, such as, Mr Ammon's conspicuous failure to make any complaint whatsoever when he became aware, in late May 2002, that PIO had applied for tenements EL47/1191 and EL47/1192, at a time when he had not even commenced negotiations in earnest with ConsMin. And, as I have observed, the terms of the negotiations between Mr Ammon and ConsMin appear to me to be only consistent with a tacit understanding that Mr Ammon's rights and interests were limited to EL47/1140, and that ConsMin enjoyed all the rights and interests deriving from the other tenement applications. That in turn is inconsistent with any perception by Mr Ammon to the effect that ConsMin had made unconscientious use of confidential information which he had supplied to it, as is his email to Ms Lovitt of 8 August 2002 in which he referred to ConsMin having negotiated in good faith. Plainly Mr Ammon did not consider that ConsMin had taken unfair advantage or made unconscientious use of his report until late 2003, when a dispute arose in relation to the hematite resource. His belated assertions of breach of confidence were only made after the dispute arose and Mr Ammon had received legal advice. They did not emerge from a common understanding or the implicit basis of his dealings with ConsMin. If, as I find, Mr Ammon himself did not at the time himself think that ConsMin had taken unfair advantage or made unconscientious use of confidential information which he had imparted, I can see no reason why a court should conclude otherwise.

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AMMON -v- CONSOLIDATED MINERALS LTD [No 3] [2007] WASC 232 (4 October 2007)

Legislation Cited (1)

Cases Cited (21)