On Monday, the company’s shares plummeted to a low of 45.5c after it announced it could pursue legal action against its Indonesian partner after Bayan requested it purchase its share of their JV company, PT Kaltim Supacoal, for $US45 million.
White Energy owns 51% of Kaltim Supacoal (KSC), while joint venture partner Bayan owns 49% and is required to pioneer the briquetting technology at the Tabang coal plant.
The JV partners have been on rocky terms since early November after White Energy revealed Bayan said expenditure on a Tabang project upgrade was higher than expected and would not deliver sufficient returns.
This prompted discussions between senior representatives of the two companies regarding the future of the project and the joint venture agreement.
Following the discussions, White Energy said no resolution on the project had been identified and the companies were unable to reach an agreement on commercial terms relating to the ongoing supply of coal by Bayan to KSC.
White Energy requested that Bayan continue to supply run of mine coal from the Tabang mine to KSC up until June 2012, which was then rejected by Bayan.
White Energy managing director Brian Flannery said it would pursue “legal and other commercial options” regarding Bayan’s demands because they had been in breach of the JV contract.
“White Energy feels that it would not be in the best interests of shareholders to succumb to Bayan’s demand to purchase Bayan’s 49% of KSC for $US45 million as a condition of continues supply to KSC,” managing director Brian Flannery said.
White Energy is not the only Australian-based company that has run into problems following a decision to invest in the country.
Churchill Mining, based in Perth has a 75% ownership of its East Kutai project on the island of Borneo, which is believed to contain billions of tonnes of JORC-code compliant resource.
However Churchill hit a roadblock with the tenement when in 2008 Indonesian company Nusantara laid a claim against them relating to the project.
In 2011, the government official in charge of licensing proceeded to issue two licences on the same ground and said they could run concurrently.
Recently, Churchill has taken the EKCP discovery through to feasibility in readiness for funding and the commencement of construction.
“Unfortunately the project has been delayed whilst the company defends its rights in the licenses that make up the EKCP following a negative decision in the administrative tribunal in Samarinda,” the company said on its website.