Contractor says Detour Gold owes them money – by Ian Ross (Northern Ontario Business – August 2012)

Established in 1980, Northern Ontario Business provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North. Ian Ross is the editor of Northern Ontario Business ianross@nob.on.ca.

A southern Ontario contractor claims Detour Gold Corp. (DGC) owes them more than $66.4 million for excavation and construction work performed at the company’s flagship Detour Lake gold mine project in northeastern Ontario.
 
North America Construction (NAC) has filed two statements of claim in the Ontario Superior Court of Justice in Cochrane against the Toronto miner and its affiliated Trade Winds Ventures of Vancouver.
 
NAC claims it’s owed $58 million for concrete work and $8.4 million for excavation work performed at the massive and remote open pit mine and mill project now under construction, 180 km northeast of Cochrane. The Morristown, Ont.-headquartered general contractor has slapped three construction liens for work performed by the company between November 2010 and April, 2012.
 
The project marked the 75 per cent construction completion mark in late June. North America Construction provides master building services to civil, municipal, biofuels, energy, mining and industrial sectors across Canada.
 
NAC states during the course of construction, there were numerous unforeseen challenges soon after signing the two contracts in late 2010.
 
The contractor claims Detour was negligent and breeched its contracts on a host of issues including the late arrival of the final construction drawings and on the handling of the project, which drove up NAC costs, expanded the scope of its work, and forced it to bring in extra labour.
 
A subcontractor with familiarity of the project said NAC’s original workforce was to peak at 300, but the company ended up bringing 745 workers on site.
 
The original contract for the concrete work, signed in December 2010, was for $61.9 million, but NAC said costs soared to $129,640,000. The contractor has been paid $71.3 million, but $58 million is still outstanding.
 
On the excavation side, NAC said the original $18.1 million contract ballooned to more than $29.5 million by last December. Detour has paid more than $20 million,
 
NAC carried out the concrete for the foundations of the mill processing facilities, crushing operation, mine maintenance and office buildings at site, along with handling the earthworks and excavation side, including stripping 25 hectares of overburden, blasting rock and crushing aggregate.
 
NAC claims the job was plagued with problems early on with incomplete construction drawings at the time of tender that pushed back the original completion date from Dec. 31, 2011 to April 1, 2012.
 
Some inaccurate geotechnical information resulted in a 514 per cent increase in excavation work, the contractor said in its claim.
 
NAC said in its claim that there were numerous change orders in the project’s designs which affected productivity.
 
The contractor singles out AMEC, Detour’s project manager, as having a hand in poor planning and co-ordination.

NAC claims AMEC failed to provide project guidance, was inadequatedly staffed, had “poor document control,” lacked the authority to approve change orders, and regularly left the site without leaving someone with authority to approve daily work records.

The lack of coordination resulted in multiple construction trades working in the same areas simultaneously.
 
NAC charges that AMEC was often late by months in delivering supplies, such as anchor bolts for the ball and SAG (grinding) mills.
 
Working under an accelerated time schedule, NAC said it completed a majority of its work last December with a remaining scope of work finished this past April.
 
“We have no further comment to make,” said Jim Prytula, NAC’s vice-president of corporate finance.
 
“Our allegations are set forth in our statements of claim and clearly we stand by them. Detour has not yet filed its statement of defence and I’m sure they will in due course.”
 
He declined to elaborate any specifics outlined in the company’s court documents.
 
Derek Teevan, Detour’s vice-president of government and Aboriginal affairs, wouldn’t comment if there have been any delays in advancing the project.
 
“The matter is before the courts. DGC is currently examining the claims, none of which has been proven one way or the other, and a statement of defence will be filed in due course.”
 
Detour Gold is considered one of the Canadian mining industry’s up-and-coming staple of projects with a deposit of 11.4-million ounces of gold, enough for a 16-year mine life.
 
In a recent release, Detour said the project remains “on budget and on schedule” to start gold production by the first quarter of 2013.
 
As of late June, the construction workforce peaked at 1,550 workers.
 
The deposit contains a 15.6-million gold reserve.
 
In a July 23 release, company president Gerald Pannelton was “pleased with the performance of our contractors in achieving the 75 per cent completion mark at the end of June.
 
In a statement, he said Detour is cashed up with $576 million to “fully finance” the remaining project spending.
 
The pre-production capital cost estimates for the Detour Lake project remain unchanged at $1.45 billion, of which $969 million had been spent by late June.
 
Detour recently celebrated a major milestone by being hooked up to a 230-kilovolt transmission line connection to the Ontario power grid.

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