The Australian mining company Kingsgate Consolidated, armed with a US$55-million insurance payout for the closure of its gold mine in Thailand, says it now has the financial means to pursue its arbitration case against the Thai government.
The Chatree mine in Phichit and Phetchabun provinces, operated by the Kingsgate subsidiary Akara Resources Plc, was ordered to suspend production in late 2016 on grounds that its activities were harmful to the environment and area residents’ health.
The order was made by Prime Minister Prayut Chan-o-cha under Section 44 of the interim constitution, which grants him unlimited executive powers. Kingsgate has consistently disputed the findings of reports that its activities resulted in toxic leaks that affected groundwater and local paddy fields.
Chatree was Thailand’s biggest gold mine, employing almost 1,000 workers. The open-cut mine began production in 2001. Its concession was due to run until 2028.
Kingsgate has since entered into an arbitration process with Thailand under the Thailand-Australia Free Trade Agreement (Tafta). The company said the government’s order was unlawful under the trade pact and caused substantial damages.
The first arbitration hearing is not scheduled until November of this year in Hong Kong. The parties have the option to continue efforts in the interim to negotiate a settlement, but no talks have taken place recently.
Kingsgate executive chairman Ross Smyth-Kirk said in 2017 that the arbitration could represent a major test of provisions related to investment protection in the free trade pact.
“There is a definition of expropriation in the Tafta agreement and this certainly fulfils that and so we want full compensation,” he said.
Kingsgate has not said how much compensation it is seeking, but an Akara executive once said the company could have earned another 30 billion baht if the mine had continued to operate throughout the remainder of its term.
The Australian company began legal action against its insurers in October 2017 over a $200-million political risk insurance policy payout that it was denied when Chatree was closed.
The New South Wales Supreme Court case against Zurich Insurance Australia and others was due to be heard in early June. But Kingsgate has settled proceedings by entering a legally binding agreement that includes a cash payment of $55 million to be made by mid-April, the Australian market news site Stockhead reported.
The insurers will also contribute up to $3.5 million to help Kingsgate fund its legal case against the Thai government and share future related costs.
Kingsgate said it now had sufficient cash to pay off its debt and no longer needs funding to pursue its claims against its insurers and the Thai government. It had earlier been in talks with prospective litigation financiers, who provide cash to cover the cost of legal action in exchange for a cut of the judgement or settlement proceeds.