Why the Heron Resources share price crashed today

Heron Resources (ASX: HRR) is facing a potential legal battle.

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The Heron Resources (ASX: HRR) share price has plunged 10 cents or 16% to 53 cents this morning after the zinc-copper exploration company revealed a Cimic Group Ltd (ASX: CIM) subsidiary named Sedgman had it hit with a development bill $49.9 million higher than expected.

According to Heron’s management the maximum Sedgman can charge under the terms of its contract to help build the Woodlawn copper-zinc mine in NSW is $109 million, however, Sedgman has now hit it with a bill demanding $49.9 million in extra costs.

Herron’s management stated its “extremely disappointed” by Sedgman’s demands and will seek to enforce its legal rights to avoid having to pay.

For investors it sounds like a court battle is brewing unless the two companies can agree on a settlement. As such the Heron share price could stay under pressure until any further update. It has a market value around $150 million as of today.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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