CITIC Limited Half-Year Report 2019

51 CITIC Limited Half-Year Report 2019 For the six months ended 30 June 2019 3 Critical accounting estimates and judgements (continued) (b) Mineralogy Pty Ltd (“Mineralogy”) disputes (continued) Minimum Production Royalty Disputes (continued) On 11 December 2018, Mineralogy and Mr. Palmer commenced a new proceeding against the CITIC Parties and Sino Iron Holdings Pty Ltd (“SIH”) in the Supreme Court of Western Australia (“Proceeding CIV 3129/2018”), in which the claim for the Minimum Production Royalty was again revived. In their statement of claim in Proceeding CIV 3129/2018, Mineralogy and Mr. Palmer plead that each of Sino Iron and Korean Steel failed to produce at least six million tonnes of product by 21 March 2013 (and were not prevented from doing so for any of the reasons set out in clause 6.3(a) of the MRSLAs), and accordingly became liable to pay the Minimum Production Royalty by 21 April 2013. Mineralogy seeks relief, including: (a) orders that each of Sino Iron and Korean Steel pay Mineralogy AUD6,865,985 plus US$87,104,633, plus default interest; (b) an order that CITIC Limited pay Mineralogy AUD13,731,970 plus US$174,209,266, plus interest (pursuant to the guarantee under the FCD); (c) orders for specific performance of the MRSLAs and the FCD; and (d) a declaration that Sino Iron and Korean Steel have acted in breach of their obligation of good faith. In the event that Mineralogy is estopped or precluded from seeking the above relief in Proceeding CIV 3129/2018, Mr. Palmer seeks payment by the Company of US$187,941,236 pursuant to the guarantee and indemnity in the FCD. On 23 January 2019, the CITIC Parties and SIH filed and served an application to stay or permanently dismiss Proceeding CIV 3129/2018, or strike out the statement of claim, on grounds including that it is an abuse of process. That application has been listed for hearing on 25 September 2019. Site Remediation Fund Dispute Under clause 20.5 of the MRSLAs, Mineralogy may require Sino Iron and Korean Steel to provide reasonable security for the performance of their obligations under clause 20 of the MRSLAs, relating to the protection of the environment and rehabilitation following Mine Closure. Such security is to be provided by way of contributions by Sino Iron and Korean Steel into a Site Remediation Fund. Clause 20.6 of the MRSLAs provides for the operation of the Site Remediation Fund, and requires that: (a) Mineralogy will establish the Site Remediation Fund, which will be maintained in a separate interest-bearing trust account, designated as a trust account, and Sino Iron and Korean Steel will make contributions into the Site Remediation Fund; and (b) for each Operating Year, Mineralogy will “determine an annual charge on account of future Site Remediation Costs … having regard to Mineralogy’s best prevailing estimate of the amount of future Site Remediation Costs … and the number of years remaining until Mine Closure”. Notes to the Consolidated Financial Statements