Zamin Ferrous and ENRC heading for bitter High Court battle

The legal spat between Zamin Ferrous, the privately-owned miner run by Indian billionaire magnate, Pramod Agarwal, and Eurasian Resources Group – the former ENRC - over a $220m claim relating to a Brazilian mine, is heating up after its defence was recently lodged in the High Court.

Mr Agarwal’s Zamin group is suing ERG for $220m after alleging that it failed to pay the final installment to buy out its share in their joint venture in the Bahia iron-ore mine, based on an agreement that dates back to 2010. Zamin made its claim in the High Court earlier this year, alleging that ENRC is in default for the last payment.

ENRC agreed to buy the Bahia mine from Zamin for $1 billion, with the final tranche due when certain conditions were met such as a government license being granted to operate the port, deemed essential to transporting the iron-ore away from the mine.

But ENRC, which has the Kazahkstan government as a big shareholder, claims the grounds on which Zamin, and other parties, were granted a license to operate a port close to the mine was acquired in ‘suspicious’ circumstances on Friday, September 19th, with 15 minutes to go before the deadline of their deal was due to expire.

A Zamin spokesman confirmed that its reply is due shortly, possibly by the end of this week. Legal sources suggest that ENRC and the Mayfair-based Mr Agarwal, who controls big mining assets in Brazil and Uruguay, are heading for a bitter High Court battle unless they settle to avoid a costly battle.

Both miners have been hit by falling iron-ore prices. Since ENRC was taken private by its founders, net debt has risen to more than $6 billion.

Mr Agarwal has close links to the Mittal and Hinduja families and owns a £35m property in Cornwall Terrace, Regent’s Park, London. Although he keeps a low-public profile in his business activities, Mr Agarwal takes a high-profile with his daughters weddings: he spent E10m on a celebrity-style wedding for his daughter Rikita in Puglia, Italy in September, where the 800 or so guests - including around 20 of his bankers - were entertained by singer, Florence and the Machine and Bollywood star, Pritam.

More than 20 of his bankers from RBC, Banque Cantonale Vaudoise, Credit Suisse, ABN Amro, BNP Paribas, State Bank of India, Canara, Investec and Intesa were also present. An equally grand wedding was held for another daughter in Venice a few years ago.

Mr Agarwal’s Zamin group beat Glencore and Severstal to buy Brazil’s Amapa mine from Anglo American last year, which has since been hit by costly labour disputes and a falling iron-ore price.

On taking over Amapa, Mr Agarwal predicted that iron ore prices would rocket but they have fallen sharply since the $128 per tonne in January 2013 to less than $70 today.

Another big project, an open-pit iron ore investment in Uruguay, has been heavily criticized by the country’s politicians and environmentalists worried that the mine could devastate the local ecology.