While coal prices are still in boom territory, a dispute over marketing arrangements for the Isaac Plains mine shared by both companies has cost three shipments so far.
The timing of the dispute seems particularly poor if making money is the primary goal.
However, this is not the first JV dispute between Vale and Aquila.
With the Eagle Downs longwall project, last year Vale unexpectedly pulled out of arrangements to secure 4 million tonnes per annum of port and associated rail capacity to export through Abbot Point.
Aquila is seeking damages for the expected income from longwall mining in 2013, and the company has indicated that first longwall production might be in October 2016.
Meanwhile, the result of the first legal spat between the two parties came in on Monday, with Queensland’s Supreme Court throwing out Vale’s claim that Aquila’s commissioned valuer incorrectly estimated how much a 24.5% stake of the Belvedere longwall project was worth.
Vale long ago triggered its option to buy this stake from Aquila but with the court case out of the way both parties are expected to jointly select a third determining valuer as set out in the Belvedere JV agreement.
Yet Aquila was not confident this would be smooth sailing, and yesterday announced it was “unaware of what further action Vale may take in relation to this matter”.
Overall, it is perhaps unsurprising that Aquila suspects Vale has an agenda.
“In this current strong coal environment, Vale’s agenda is not good for Queensland, it is not good for Vale’s reputation and it is not good for Aquila’s shareholders,” Aquila executive chairman Tony Poli said.
“We should get on with developing coal in Queensland for the benefit of all stakeholders.”
While Vale’s share price overseas is unlikely to be significantly impacted by the dispute at Isaac Plains, the Brazilian company indicated it wanted a resolution.
“We would like to assure you that the level of Vale’s engagement with Aquila in relation to resolving the difficult commercial issues which affect the Isaac Plains joint venture relationship has been continuous since 2010 and we are looking for a positive solution,” Vale global coal managing director Decio Amaral told ILN.
“We regret that we have not yet been able to conclude the necessary agreement with Aquila but we are, in respect of these matters, unfortunately not in control of the outcome or the position taken by the other party.
“Whilst Aquila has chosen to make public announcements that serve its own interests, our preference is to focus on the negotiations in hand and to seek an acceptable conclusion as soon as possible.
“It would be an error to attempt to draw conclusions about either parties' broader commercial aspirations from their approach to this particular joint venture.
“Vale is committed to developing its coal projects and delivering coal to the market. Vale is committed to its growth plan for Australia and is focused on delivering benefits to all stakeholders, including the economy of Queensland.”
However, Amaral told the Australian Financial Review before the newspaper’s conference today that Australia was becoming a more unpredictable investment destination than African countries like Mozambique.
He based this on the uncertainty generated from the Gillard government’s proposed mining and carbon taxes, along with the Queensland government’s strategic cropping land policy.
“In Africa, I know what the challenges are: finding skilled people and building infrastructure,” he told the newspaper.
During the conference this morning Vale Australia coal chief operating officer Steve Badenhorst reportedly said the company would not be in Australia “if it didn’t see a future here”
Mine Life senior resource analyst Gavin Wendt did not want to comment too much on the JV disputes between the two companies, but said there was an opportunity cost in terms of time and money.
“It’s the interest of both parties to sort the situation out in respect to each operation and move on,” he told ILN.