Fortescue Metals is facing claims it traded during insolvency during the recent decline in iron ore, which may have resulted in a contract falling-through to the tune of more than $8 million.

Senior management of Andrew 'Twiggy' Forrest’s Fortescue Minerals Group will now face a liquidator over the claims. Some reports have stemmed from the Fuel-Sys Installations company, which is contracted to Fortescue’s Pilbara iron ore project. Fuel-Sys allege the miner’s actions backed the contractor into an awkward corner.

Reports in Australian media say a letter has been written to the mining company’s board yesterday by lawyers for the liquidator to FSI, Richard Albaran of accountants Hall Chadwick, saying witnesses (including the project manager at the time) claimed a senior manager at Fortescue said the company would fail on payments for construction of a fuel facility venture at the Solomon project, FSI alleges Fortescue could already have entered insolvency when comments were made last September.

But Fortescue claims it operated honestly, meeting all payment deadlines and not offering to pay $1 million for postponements and contract differences, as was also reported.

A Fortescue spokesman said that as FSI was not working on the Kings project, the contract was not impacted by the short project deferral in September: “We categorically deny the allegation that we unilaterally altered our credit terms to any of our contractors and suppliers in response to iron ore market volatility. We have acted with integrity in this matter and in fact believe that we have behaved as a white knight,” said the company.