Mineralogy Pty Ltd v Sino Iron Pty Ltd & Ors

Mineralogy Pty Ltd (Mineralogy) brought proceedings against Sino Iron Pty Ltd and others (Sino Iron) in the High Court of Australia concerning a dispute over the interpretation and application of a joint venture agreement and a related royalty agreement. The core of the dispute revolved around the calculation of royalties payable by Sino Iron to Mineralogy for iron ore extracted from the Cape Preston project in Western Australia.

The High Court was required to determine whether Sino Iron had breached the royalty agreement by failing to pay royalties calculated on the basis of the "free on board" (FOB) value of the iron ore, as contended by Mineralogy, or whether its calculation based on a different metric was permissible under the agreement. Specifically, the court had to interpret the meaning of "FOB value" within the context of the agreements and consider whether Sino Iron's method of accounting for certain costs in its royalty calculations was consistent with its contractual obligations.

Gageler J found that the royalty agreement stipulated that royalties were to be calculated on the FOB value of the iron ore, which encompassed the value of the ore at the point of loading onto a vessel, free from costs incurred after that point. His Honour reasoned that Sino Iron's interpretation, which sought to deduct certain costs incurred after loading, was inconsistent with the plain meaning of "FOB value" as understood in commercial and contractual contexts. The court applied principles of contractual interpretation, emphasizing the importance of giving effect to the ordinary meaning of the words used in the agreement, read in their commercial context.

The court ordered that Sino Iron had breached the royalty agreement and was liable to pay royalties calculated on the FOB value of the iron ore as interpreted by Mineralogy.