SNC dealt another blow with copper mine project cancellation

  • Business
  • Wednesday, 27 Mar 2019

MONTREAL: SNC-Lavalin Group Inc, the embattled engineering firm at the heart of Canada’s biggest political crisis in years, has been dealt another blow in Chile.

Copper producer Codelco said that it cancelled a contract worth US$260mil to build two new acid plants in the Chuquicamata mine.

Montreal-based SNC has “seriously” and “repeatedly” breached aspects of its contracts, according to Codelco, which cited delays in construction and in payments to subcontractors, as well as quality issues.

“Codelco made several attempts to resolve the problems facing the project, with the last attempt in February,” according to the statement from the Santiago-based company.

Difficulties around the contract were initially flagged by SNC on Jan 28, when it disclosed trouble at an unidentified mine in Latin America and took a writedown on its energy unit amid a diplomatic spat between Canada and Saudi Arabia.

About two weeks later, it said it had failed to reach an agreement with the miner and that the parties would try to settle the dispute with an accelerated arbitration process.

SNC cut its profit outlook for a second time and said the impasse would contribute up to a C$350mil (US$260mil) negative drag on the mining and metallurgy unit’s fourth-quarter earnings before interest and taxes.

SNC has been at the centre of a controversy that has engulfed Justin Trudeau after his former attorney-general said the Canadian prime minister and some of his aides pressured her to intervene to help the construction firm avoid a trial.

SNC has been charged with paying bribes related to work in Libya more than a decade ago. Trudeau has said he supported a so-called deferred prosecution agreement for SNC because the company employs 9,000 people in Canada.

The company has since indicated it was giving up on settling the fraud and corruption charges and was focusing on preparing for trial. SNC’s stock has declined 29% since Jan 25, the last trading day before the company disclosed a “serious problem” with a mining contract.

The shares fell 0.6% to C$34.35 in Toronto on Monday. — Bloomberg

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