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SYDNEY, Australia -- A trial date may be set soon to determine whether an Australian explosives contractor was an insured party under a construction all-risks policy for the Porgera gold mine in Papua New Guinea.

At a hearing set for late last week in New South Wales Supreme Court, Judge Bob Hunter was expected to set a date for a trial on the $28.1 million subrogation claim by the mine's insurers and owners against Sydney, Australia-based Dyno Nobel Asia Pacific Ltd., a Norwegian-owned company.

Dyno Nobel Asia Pacific Ltd. was the onsite explosives contractor at the mine when an Aug. 2, 1994, explosion killed 11 men and caused major damage at the mine, 373 miles northwest of Port Moresby.

The mine's owners at the time of the accident and their insurers are seeking compensation from Dyno, alleging Dyno was negligent and caused the explosion. Because the cause of the explosion has not been determined, the owners and insurers are relying on the principle that the explosion speaks for itself. Dyno disputes the claim, saying it was not negligent and regardless of fault should be covered under the Porgera joint venture's contract works policy. The policy has an extension for up to $20.0 million to allow for contractors' liability.

Porgera, which is the largest gold mine outside South Africa, was owned at the time of the 1994 accident by a joint venture of Sydney-based Placer Pacific Ltd.; Sydney-based Renison Goldfields Consolidated Ltd.; Highlands Gold Ltd., a subsidiary of Brisbane, Australia-based mining company MIM Holdings Ltd.; and the Papua New Guinea government.

The joint venture partners placed coverage with a Papua New Guinea-based insurer, Nuigini Insurance Corp., which fully reinsured the risk with Munich Reinsurance Co. The broker was Papua New Guinea-based Kila Marsh & McLennan Ltd., a unit of J&H Marsh & McLennan Inc.

Mark Sheller is an attorney with the Sydney law firm of Phillips Fox, which represents Dyno Nobel Asia Pacific Ltd.'s liability underwriter, Vesta Forsikring A/S, based in Bergen, Norway. He said Nuigini, after paying, took a subrogation action on the joint venture's behalf against Dyno seeking reimbursement of its $11 million material damage claim payment to the owners, while the Porgera joint venture partners also sought damages from Dyno for $17.1 million in uninsured losses.

Mr. Sheller said the insurer, reinsurer and the joint venture partners argued that Dyno Nobel Asia Pacific Ltd. was responsible for the loss.

Dyno's policy with Vesta covers it only for liabilities over and above any claims met by the underlying insurance, the Porgera joint venture's contract works policy, Mr. Sheller confirmed.

Court documents show the claim includes $13.6 million for repairs and reinstatement to buildings and equipment; $25,897 in workers compensation payments; $158,888 for payments to villagers for personal injury and property damage; and other payments, including repayment of sums paid by Nuigini to Dyno Nobel Asia Pacific Ltd. to replace its equipment.

There are also business interruption losses, including $4.6 million in lost profits, and interest on those losses, totaling $9.9 million.

Peter Robinson, an attorney with the Brisbane law firm of Carter Newell Lawyers, represents Nuigini. Mr. Robinson said the total claim is for the recovery of insured losses and payment for uninsured losses. Only $11.0 million of the $13.6 million material damage claim for repairs and reinstatement is covered under the joint venture's contract works policy, he said.

Mr. Robinson said policy deductibles are low, but he would not disclose them. Nor would he disclose policy limits, saying only that "the entire value of the site was covered."

Papua New Guinea law requires insurance to be placed with Papua New Guinea companies, but large risks are frequently 100% reinsured (BI, Aug. 15, 1994).

Mr. Robinson said Nuigini is a "front insurer" for the Porgera joint venture "to satisfy Papua New Guinea insurance requirements."

Mr. Sheller said Dyno has lodged public liability claims through Vesta's Stockholm, Sweden, office and also with its Papua New Guinea liability insurer, Port Moresby-based General Accident Insurance Asia Ltd.

The Vesta Forsikring A/S policy "operates on a global basis," and the General Accident Insurance Asia Ltd. policy "operates entirely within Papua New Guinea," but there is "a degree of overlap," he said. "The Vesta policy operates after all other policies have been exhausted."

Both Vesta's and General Accident's policy conditions require Dyno to first seek indemnity under the Porgera joint-venture's contract works policy, he said.

Mr. Sheller would not disclose more details of the policies.

Carter Newell Lawyers' Mr. Robinson said the case is being heard in New South Wales because Dyno Nobel Asia Pacific Ltd. and Placer Pacific Ltd., the mine operator, have headquarters in Sydney.

Mr. Sheller said a trial originally was set for June 9 after mediation in April failed. On May 27, the Porgera joint venture partners sought an extension; Judge Hunter was expected to set the trial date last week.

While attorneys involved in the case will not estimate the potential legal costs, other sources involved with the case suggest that if the litigation continues to a full trial, legal costs are likely to be about $6.3 million.

The Porgera mine is now owned 50% by Placer Pacific Ltd., a unit of Canadian mining company Placer Dome; 25% by Sydney-based Renison Goldfields Consolidated Ltd., 15% by Sydney-based mining company Orogen Minerals Ltd., and 10% by PNG landowners. Placer Pacific operates the mine for the joint venture partners.

The partners have just announced a discovery of more reserves at the mine. In the first three months of this year, the mine's output was 209,000 ounces of gold.