A lawsuit is alleging the owner of the Voisey's Bay mine is selling ore at low prices to non-arm's-length companies to reduce the amount of royalties it must pay.

Labrador Nickel Royalty Limited Partnership (LNRLP) filed a statement of claim Friday at Newfoundland and Labrador Supreme Court in St. John's.

Colorado-based International Royalty Corp. owns 90 per cent of LNRLP. Altius Minerals Corp. of St. John's is a limited partner, with the remaining 10 per cent.

The partnership, in total, holds three per cent of net smelter royalties for the Voisey's Bay deposit.

The claims have yet to be proven in court. And nobody is talking right now.

Bob Carter of Vale Inco's Newfoundland subsidiary declined comment, noting the matter is before the courts.

Brian Dalton, president of Altius, indicated that the statement of claim speaks for itself.

LNRLP is seeking US$29 million in damages to recover the alleged non-payments or underpayments to date.

The plaintiff also wants the court to declare the non-arm's-length agreements do not reflect the fair market value associated with the sale of Voisey's Bay concentrates going forward.

According to the LNRLP's statement of claim, Vale Inco "entered into a series of non-arm's-length contracts" in late 2005 concerning the purchase and sale of concentrates, including nickel mined from Voisey's Bay.

Those agreements were amended around April 1, 2006, the lawsuit claims.

According to court filings, the agreements see Vale Inco Atlantic Sales Limited (VIASL) purchase Voisey's Bay concentrates from Vale Inco Newfoundland and Labrador Limited (VINL).

Vale Inco Limited then purchases the concentrates from VIASL.

The lawsuit claims that the price received on the first sale "is significantly below the fair market value." The agreements run until the end of 2013.

"The effect of the non-arm's-length agreements is that Inco has arranged to sell the concentrates derived from the Voisey's Bay deposit to itself at below fair market value in all of the circumstances," the court filings note.

"Inco is retaining for itself all, or substantially all, of the profits associated with the concentrates and is improperly failing to share those profits with VINL, and, ultimately, the plaintiff."

The court filings also allege that VINL is incorrectly deducting income taxes when calculating royalty payments.

Originally, Archean Resources Ltd. received three per cent of the smelter royalties for discovering Voisey's Bay.

In 2003, Archean sold off a chunk of those royalties to Altius for $10-million.

Archean - and its remaining majority royalty stake - was gobbled up in 2005 by International Royalty Corp. of Denver. That's the same year Voisey's Bay went into production.

Meanwhile, it is unclear what comparison there is, if any, to how the province collects Voisey's Bay revenues.

The provincial Department of Finance indicated Friday it can't speak to this specific case, as it is currently before the courts.

Finance spokeswoman Ronalda Walsh said "taxpayer-specific information is protected under confidentiality provisions of the Revenue Administration Act."

She noted that the province does impose a mining tax of 15 per cent and a mineral rights tax of 20 per cent on mineral royalties received for the right to engage in mining operations.

"The department will monitor the situation to determine if it is relevant to the province," Walsh noted.

rantle@thetelegram.com