A legal stoush over a royalty disagreement between Palmer and CITIC came to an end in the Supreme Court of WA yesterday, with Justice James Edelman ruling in favour of Mineralogy’s claim that the royalty should be payed by Sino Iron when magnetite ore came into Sino Iron or Korean Steel's possession or control and was stockpiled.

The defendant’s lawyers had argued the royalty should be payable when magnetite was delivered to Sino Iron and Korean Steel, “and taken by them, at their delivery point, being the primary crusher.”

Edelman said that while the word ‘taken’ was ambiguous, the best interpretation of that word, and the clause, was more in line with Mineralogy’s.

“The royalty becomes payable by either Sino Iron or Korean Steel, or by both jointly, when the relevant person takes possession or control of magnetite ore,” Edelman said.

He said the natural meaning of ‘taken’ did not support CITIC’s interpretation.

CITIC acquired the right to mine 2 billion tonnes of magnetite ore from Mineralogy between 2006 and 2008 and exercised an option to acquire the right to an additional 1Bt in April last year.

Based on a good faith dispute about an ambiguous cause, CITIC will have to cough up about $400,000 in unpaid royalties.

While the royalty sum is a far cry from the money already spent on Sino Iron, CITIC welcomed Mineralogy’s decision to withdraw its threats to terminate CITIC’s mining rights over the operation, which could have had dire consequences for the project.

A spokesman for CITIC said the decision would have no impact on the development or operation of the Sino Iron project.

“CITIC Pacific mining acknowledges the court decision and will study the judgement,” the spokesman said.

Sino’s lawyers have up to a fortnight to provide submissions on the royalty outcome if they wish.

Palmer, chairman of Mineralogy, said he was grateful the decision had ruled in his favour.

“It is a significant victory for Mineralogy and an important vindication of the rule of Australian law,” Palmer said.

“It sends a clear message to foreign companies operating in Australia that contracts made under Australian law will be enforced by the courts.”

Palmer said he now looked forward to putting the parties’ turbulent past behind them.

“The court has handed down its decision and it is time to move on,” he said.

A dispute kicked off in November when first production started.

As well as the heated dispute, the magnetite project, about 100km southwest of Karratha, has been marred by continued cost blowouts and production delays.

Initial capital costs for the project were less than $3 billion, with first production targeted for 2009.

The operation, which is tipped to involve the extraction of around 3 billion tonnes of magnetite ore for processing, is anticipated to run until 2045.