The Bathurst Resources Ltd (ASX: BRL) share price has been an exceptionally strong performer on Wednesday.
In morning trade, the coal producer’s shares are up 63% to a 52-week high of 70 cents.
This gain means the Bathurst Resources share price is now up 84% since the start of the year.
Why is the Bathurst Resources share price rocketing higher?
The catalyst for the incredible rise in the Bathurst Resources share price on Wednesday has been a favourable outcome in the Supreme Court of New Zealand.
According to the release, the Supreme Court has upheld Bathurst Resources’ appeal against the case brought by L&M Coal.
What was the case?
Back in 2018, legal proceedings were brought against the company by L&M Coal in relation to a US$40 million performance payment. This stems from an agreement that Bathurst Resources signed when it bought the Escarpment mine on the Denniston Plateau.
That agreement was for an upfront payment of US$35 million and then US$40 million due when Bathurst had shipped 25,000 tonnes of coal and another US$40 million when one million tonnes of coal had been shipped.
However, although Bathurst Resources had produced 50,000 tonnes of coal from the mine, it claimed that this didn’t trigger the performance payment because it technically was not shipped overseas. Instead, the company had sold the coal to Westport’s Holcim cement plant.
According to today’s release, the Supreme Court did find that the US$40 million performance payment had been triggered.
However, the court also ruled, contrary to the prior court judgments, that Bathurst Resources can rely on the Royalty Deed which forms part of the original agreement. This means that for as long as the relevant royalty continues to be paid (even if that sum is zero), payment of the performance payment can be indefinitely deferred.
Furthermore, the Supreme Court also ruled that Bathurst’s Supreme Court legal costs must be reimbursed by the appellants, together with previous costs re-determined in the High Court and Court of Appeal in light of the judgement.