TORONTO (miningweekly.com) – Brazilian-owned Vale Inco has been hit by a claim  by International Royalty Corporation and partner Altius over alleged underreporting of sales and underpayments of royalties for Vale's Voisey's Bay operation, in Newfoundland and Labrador.

International Royalty owns 90%, and Altius holds the balance, of the Labrador Nickel Royalty Limited Partnership, which holds a net smelter return (NSR) royalty on the sale of nickel concentrates from the Voisey's Bay mine subsidiary to Vale Inco.

The NSR forms the basis for the payment of a 3% royalty due to the International Royalty-Altius partnership, which the partners say Vale is underreporting.

The two companies filed a claim on Friday in the Supreme Court of Newfoundland & Labrador, requesting damages for “underpayment of past royalties and an order in respect of the correct calculation of future payments”.

They say that payments made to Vale Inco Newfoundland for the sale of nickel concentrates from Voisey's Bay, under an arms length contract between Vale Inco and its subsidiary, “do not represent fair market value and Vale Inco has incorrectly calculated the NSR paid to Vale Inco Newfoundland through these contracts”.

International Royalty and Altius also assert that Vale Inco Newfoundland has “deducted certain income taxes that it pays to the province of Newfoundland and Labrador in determining the NSR, which is not allowable under the royalty agreement.”

If the claim is successful, International Royalty said that its share of the royalty “underpayments” up to June 30 this year would exceed $26-million before royalty taxes are deducted.

Brazil's Vale, the world's biggest iron-ore producer, bought Canadian nickel-miner Inco in 2007.

The firm's Canadian operations include the Voisey's Bay mine in Newfoundland and Labrador, six mines, a mill, a smelter and a refinery in Sudbury, Ontario, a refinery in Port Colborne and three mines, a mill, a smelter and a refinery in Thompson, Manitoba.

Unionised employees at the Sudbury, Port Colborne and Voisey's Bay operations are currently on strike after negotiations failed to produce new collective agreements.

Vale Inco has restarted some operations in Sudbury using nonstriking employees but Voisey's Bay remains halted.

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