Former CEO sues gold firm for $1m

ED ESHUYS may have set some ambitious performance goals over the four years that he was chief executive of the gold producer St Barbara Ltd, but in the tumultuous year of 2008 he may have been too ambitious.

St Barbara's production and budgetary targets were not met, cash was tight, and with a global crisis of confidence paralysing the banking sector there were grim prospects of refinancing the company's facilities. As the Victorian Supreme Court heard yesterday, disappointment followed disappointment at St Barbara in 2008.

A five-year management budget did not meet Mr Eshuys' standards, so was deferred; a multimillion-dollar accounting error emerged in October; and there were difficulties mining ore at the company's West Australia operations.

By November 2008, the court heard, Mr Eshuys' fellow directors had become ''alarmed'' by a further deterioration in the cash position. By mid-December, St Barbara's board found a replacement for Mr Eshuys.

When he left in March 2009, the company paid its outgoing chief executive various entitlements plus a sum of $150,000, ostensibly for hitting some performance targets.

But Mr Eshuys is suing St Barbara for up to $1 million, which was the most he could receive for reaching performance-based goals.

He argues that while St Barbara under his management fell short of stated operating cost targets and gold production targets, the board did not fairly and reasonably take into account other factors.

Mr Eshuys yesterday told Justice Stephen Kaye that by December 2008, despite the setbacks and cash-flow figures being below budget, he believed the company's position was improving and that by February 2009 it would have gone ''close to, if not exceed'' the budgeted cashflow forecast.

A letter from Mr Eshuys' lawyers to St Barbara's lawyers in December 2008, which was tendered in court, contended Mr Eshuys ''is meeting the milestones'' set out in his performance contract, namely gold production targets and the company's cash position.

Asked by counsel for St Barbara, Philip Solomon, SC, what he meant by ''is'' meeting the targets, Mr Eshuys told the court that at the time he ''fully believed that we would achieve them [the targets] by the end of February''.

Later he told Justice Kaye that in January 2009, ''we were short of budget but we were improving''.

The court heard St Barbara in mid-2008 raised $120 million through a rights issue, but some St Barbara directors and some of its shareholders were concerned about the suddenness of the raising. In February 2009 St Barbara again tapped the market to raise $75 million.

The court also heard that St Barbara's woes in late 2008 and early 2009 coincided with rapidly rising Australian dollar prices for gold. Under cross-examination, Mr Eshuys conceded it was a ''poor'' outcome that gold production fell 16 per cent short of budgeted figures between September 2008 and February 2009.

St Barbara, which is expected to begin calling witnesses today, argues it was not obliged to pay Mr Eshuys more than $150,000.