SNC-Lavalin Group Inc. chief executive officer Neil Bruce flew to Chile in late January and came back thinking he had a deal with state miner Codelco to salvage what was left of a US$260-million contract that was behind schedule and going badly. The aim, one insider said, was to make things right. Then Codelco tore up the pact.
“Codelco informed this morning its decision to terminate the contract with SNC-Lavalin early on, due to the serious breach of contractual milestones,” the miner said in a statement on March 25 that outlined its intention to take over the work on two new sulphuric acid plants at its giant Chuquicamata copper mine site.
The problems included construction delays, slow payments to subcontractors and “problems in the quality of the works, among others,” it said. The mining blowup marks a rare operational blunder under Mr. Bruce, who has reshaped SNC-Lavalin over a four-year tenure by widening its geographic footprint and lowering its exposure to riskier fixed-price contracts.
But how a multiyear relationship between Canada’s biggest engineering and construction firm and the world’s biggest copper producer came undone so quickly remains baffling to many analysts and observers alike.
A falling out between SNC and its main construction subcontractors was certainly central to the drama. The Canadian company alleges that its local Chilean partners did “poor” work that contributed to delays in the project.
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