GR Engineering Services Limited (ASX:GNG) (GRES) announces that it has commenced proceedings in the Supreme Court of Western Australia against Eastern Goldfields Limited (ASX:EGS) (EGS) and others to recover payments associated with outstanding progress and variation claims in relation to the Davyhurst Gold Project refurbishment contract entered into by GRES and EGS on 22 September 2016 (Contract).
The value of GRES' claim is $9.9 million, plus interest and costs. The Contract price is approximately $18.5 million, including variations for additional works. GRES has completed the work under the Contract.
These proceedings follow a breakdown in protracted commercial discussions where GRES considers that EGS failed to meet commitments to pay the majority of the claimed amount over the course of the preceding months.
EGS has alleged the existence of minor defects and omissions in respect of the Works, which GRES considers are immaterial and which pertinently were first raised following EGS' most recent failure to pay $5 million towards the Contract payment arrears on 28 June 2017.
GRES suspended the works in May 2017 as a result of EGS' payment default, when GRES had substantially completed its work under the Contract. The suspension was initiated by GRES concurrently with the issuance of a statutory demand in May 2017 for approximately $6.6 million EGS alleged the wrongful suspension of the works by GRES and raised an associated offsetting claim for delay costs of approximately $6.8 million in seeking to set aside the statutory demand. GRES will vigorously defend any Offsetting Claim in the course of proceedings.
GRES is assessing the impact that the claim may have on its FY17 financial results and will inform the market of any material developments.