DENVER - International Royalty Corp. (TSX:IRC) and minority partner Altius (TSX:ALS) have launched a court challenge against mining giant Vale Inco over alleged underpayment of royalties on the sale of nickel concentrates from the Voisey's Bay mine in northern Labrador.
Denver-based International Royalty, which trades its shares on the Toronto Stock Exchange and on the NYSE, holds a 90 per cent interest in the Labrador Nickel Royalty LP, filed the claim Friday against Vale in the Supreme Court of Newfoundland & Labrador.
It alleges Vale Inco underreported royalties called net smelter returns when it bought nickel concentrates from its own subsidiary Vale Inco Newfoundland and Labrador Ltd. The net smelter returns or NSR are the basis for payment of a three per cent royalty due to International Royalty and Altius from the sale of the concentrates from the Voisey's Bay nickel-copper-cobalt mine.
Specifically, the International Royalty-Altius partnership said payments made by the parent Vale Inco to Vale Inco Newfoundland "do not represent fair market value and Vale Inco has incorrectly calculated the NSR paid." The partnership also alleges Vale Inco Newfoundland has deducted income taxes paid to the province "which is not allowable under the royalty agreement."
International Royalty and Altius estimated their share of royalty underpayments up to June 30 would come to more that US$26 million, before deduction of royalty taxes.
The allegations were not yet proven in court.
Vale has more than 100,000 employees around the world and is a global leader in the production of iron ore pellets, aluminum, coal, nickel, copper, steel and other resources. It was set up by the Brazilian government in 1942 but is now privately run and trades on the Brazilian and New York stock exchanges.
The company has faced serious labour difficulties recently across its Canadian operations, acquired when the Brazilian company bought the former Inco Ltd. for $19 billion in October 2006.
Vale's Canadian operations include six nickel mines, a mill, a smelter and a refinery in Sudbury; a refinery in Port Colborne; a nickel-cobalt-copper mine in Voisey's Bay; and three nickel mines, a mill, a smelter and a refinery in Thompson, Man.
About 3,000 unionized workers walked out in July at the Sudbury mines and employees at smaller operations in Port Colborne, Ont., and Voisey's Bay, N.L., are also on strike.
