RE: DASUT8 Feb 2021 11:17
Hi Ken,
I am familiar with penalty clauses and contingency allowances on civil engineering contracts ,unfortunately virtually every time the big plc's bid for central government contracts (HS2, Highways, NHS hospitals, schools they bid low with the intention of using the contingency sum and then when this is exhausted and the client tries to invoke the penalty clauses the plc claims this would drive them into into bankruptcy or force them to pull out, knowing full well the politicians are desperate to get the job done before the next election, so the project goes into overspend and taxpayer picks up the bill, HS2 is a prime example of public money being chucked at an unneeded and wasteful project just so the present government doesn't have to admit a mistake!
Back to Centamin though, you may be aware that in 2018 there was a severe guidance downgrade due it was was claimed by Andrew Pardey to hitting unexpected transitional grade problems in the open pit ( there is some doubt as to just how unexpected these low grades were, but that is another story as LT holders are aware)
Other reasons for the 2018 guidance cut mentioned briefly problems with spare part availability for plant , in fact the plant was the sole underground LHDR which was operated and the responsibility of Barminco, but as the LHDR was awaiting critical parts it was impossible to make up for some of the lost open pit production and instead amplified the overall problem.
It seems though despite the failure of Barminco's deliver the services they were contacted to they weren't required to compensate Centamin for lost production.
I understand this is common practice amongst many mining specialist service contractors in order to reduce the overall contracts charges to the client.
So I wonder would Capital be subject to penalty clauses on this contract and if so how much protection would it offer the client?
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