April 3, 2018 / 11:48 AM / 6 months ago

Prairie Mining starts legal action against Poland's environment ministry

WARSAW, April 3 (Reuters) - Australia’s Prairie Mining said it filed a lawsuit in a Warsaw civil court on Friday against the Polish environment ministry, seeking an extension to the company’s exclusive rights to a mining project in the country.

The news sent the miner’s shares plunging 30 percent in London and 20 percent in Warsaw.

Prairie Mining secured in 2015 the exclusive right to apply for a mining concession for the Jan Karski mine in southeast Poland and had until April 2, 2018 to file its application.

The company said in a statement on Tuesday that it had not been able to apply for the concession because it first needs to obtain an environmental permit from local authorities, which it said has been delayed.

As a result it said it asked the ministry in December to sign a mining usufruct agreement on the project, “which precludes any other parties being granted any licence over all or part of the Jan Karski concessions”.

The ministry was required by law to have responded to the request within three months but had failed to do so, Prairie said in a statement.

“Accordingly, the company has now commenced legal proceedings against the ministry of environment through the Polish courts in order to protect the company’s security of tenure over the Jan Karski concessions,” the company said.

Prairie’s share price had previously been buoyed by plans for the development. The company said in October that upfront capital costs for development of the mine totalled $630 million and that it was in advanced talks with Chinese lenders who could finance 85 percent of it.

Since winning the general election in 2015, the conservative Law and Justice party (PiS) has introduced many regulatory changes, prompting some investors to take legal action against the government.

Prairie, in its lawsuit, demanded that the mining usufruct agreement be signed so that it can still have the exclusive right to apply for the mining concession.

It said a Polish civil court could enforce the agreement in place of the ministry.

A spokesman for the environment ministry was not immediately available to comment.

Jan Karski, situated in an area neighbouring the state-run Bogdanka coal mine, would produce semi-soft coking coal.

Poland generates most of its electricity from coal, produced mostly by state-run mining companies, which survived a slump in coal prices thanks to state aid in 2016.

In October U.S. company Invenergy LLC, which says it has spent more than $600 million building windfarms in Poland, said it was formally in dispute with the Polish government over state companies failing to honour contracts.

Reporting by Agnieszka Barteczko; Editing by Susan Fenton

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