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UPDATE 2-Contractor asks Australia to review asset sale by China's Tianqi Lithium

(Adds Treasury comment, changes headline)

MELBOURNE March 11 (Reuters) - An Australian mining services contractor locked in a legal dispute with China’s Tianqi Lithium Corp over failed payments has asked the Foreign Investment Review Board (FIRB) to examine a related sale, a company director said on Thursday.

Perth-based MSP Engineering has asked FIRB to review a part sale of Tianqi’s Australian lithium business to nickel miner IGO after Tianqi refused to pay it for constructing a battery-grade lithium processing plant in Western Australia.

This week, Western Australia’s Supreme Court ruled that Tianqi, one of the world’s biggest producers of lithium chemicals used in electric vehicle batteries, must pay A$38.9 million ($30 million) in arrears. Tianqi said it will appeal.

The FIRB submission comes at a time of heightened trade tension between China and Australia.

“If we are not resolved as part of that sale, then we think that doesn’t represent appropriate conduct by a foreign investor,” director Craig Burton told Reuters.

MSP has had to wind down other business lines to pay its contractors and subcontractors for months of work and has shrunk its staff to four from 400 employees as it awaits payment, he said.

“It’s had a devastating affect on our business. We just want Tianqi to do the right thing and pay the money that was spent doing the project.”

Tianqi said in a filing on Wednesday it would contest the ruling which had given it until March 15 to pay the money, including principal and interest. Its counter claims include that the project ran over budget.

“Treasury does not comment on the application of the foreign investment screening arrangements as they apply or could apply to particular cases,” Australia’s Department of the Treasury said.

IGO declined to comment.

Tianqi’s assets include a 51% stake in the Greenbushes lithium mine and 100% of the Kwinana lithium plant.

The facility was heralded as the largest of its kind before commissioning of its 24,000 tonnes per year first phase was halted a year ago as Tianqi flagged liquidity problems due to plunging lithium prices.

The debt-laden company in December secured a strategic investor in the shape of Australian nickel miner IGO Ltd for 49% of its businesses, paving the way for a lifeline extension on $3 billion of loans.

Tianqi warned in the filing the ruling could have an adverse affect on liquidity and the Kwinana plant.

The facility will likely commence operations by the fourth quarter of 2021, Daiwa Capital Markets said in a January note, citing Tianqi management remarks at a conference.

Tianqi did not immediately respond to a request for comment on the intended launch date.

$1 = 1.2932 Australian dollars Reporting by Tom Daly and Melanie Burton in MELBOURNE; Editing by Mark Potter and Stephen Coates

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