No joint-venture with Zenmac; Minnova launches counterclaim

Denying a charge by Zenmac Zinc (ASE) that it acted in bad faith in developing the Winston Lake polymetallic deposit in northern Ontario, Minnova Inc. (TSE) has launched a counterclaim in the Supreme Court of Ontario.

Zenmac, which optioned the property to Minnova (formerly Corp. Falconbridge Copper) in 1980, took the latter to court late last year, seeking, among other considerations, a declaration that Zenmac is entitled to a 20% joint- venture interest in the property and an undivided 20% proprietary interest.

The zinc-copper-silver-gold Winston Lake deposit, located near Schreiber, along the northern shore of Lake Superior, was placed in production by Minnova earlier this year.

In its counterclaim, Minnova claims Zenmac is a royalty holder and, as such, is entitled to receive royalty payments. The company, in its statement of defence, denied the two companies had entered into a joint-venture agreement. “The parties have not agreed to the substantial terms necessary to create a joint venture,” writes Minnova.

As a joint-venture partner, Zenmac would be obligated to pay for 20% of the total production and capital expenditures; as a royalty holder, the company would be entitled to receive 10% of net proceeds of production.

In the counterclaim, Minnova is also seeking payment of $28,290.50 from Zenmac, the sum relating to a lien on two of the 36 patented mining claims which make up the Winston Lake project.

Minnova claims that for Zenmac to have become the registered owner of 100% of the property, the lien had to be discharged by way of a payment to the Ontario Ministry of Natural Resources. Minnova claims Zenmac refused to discharge the lien and subsequently Minnova, in 1982, made full payment to the provincial government ministry. Minnova is therefore seeking reimbursement from Zenmac of the above amount.

Allegations by Zenmac in its statement of claim regarding Minnova’s possible participation in an international zinc cartel are denied by Minnova. “Neither the defendant nor its parent, Kerr Addison Mines (TSE), are or ever have been members of an international zinc cartel,” writes Minnova.

In September, 1985, Minnova says it informed Zenmac of its decision to bring the property into production, but then Minnova decided against such a move later that year because of poor market conditions for zinc concentrates. The green light was again given to the project in mid-1986.

Minnova says it informed Zenmac on Dec 1, 1986, that pre- production and capital expenditures, higher than originally estimated, totalled $73.6 million.