JV’s phantom board haunts St. Augustine in the Philippines

Sometimes working with minority shareholders in joint-venture partnerships in Southeast Asia can present unusual challenges—a lesson St. Augustine Gold and Copper (TSX: SAU) is learning all too well at its enormous King-king copper-gold joint-venture project in the Philippines.

In an article published earlier this month in The Business Mirror, a newspaper in the Philippines, a journalist reported that St. Augustine’s joint-venture partner, Nationwide Development Coropration (Nadecor), had rescinded its joint-venture agreement with the U.S.-based company for its “failure to fulfill its contractual commitments in connection with the development of its mine site in Pantukan town, Compostela Valley province.”

But St. Augustine says the media report is completely false and that the man who claims he is still the president of the Nadecor board is an impostor who has created a phantom board with its own website. The twist is that the individual, Jose “Ping” de Jesus—an influential businessman in the country and a former secretary of transportation—was ousted from Nadecor’s real board of directors by a shareholder vote in 2011, and yet continues to masquerade as its president.

De Jesus could not be reached for comment by press time.

In an Aug. 14 press release, St. Augustine said it has an excellent working relationship with the real board of directors at joint-venture partner Nadecor, in which it owns a 25% stake, and that its agreements are all in good standing. What is happening, St. Augustine claims, is that individuals who were ousted as board members of the company by a shareholder vote in 2011 are now masquerading as the real board of NADECOR and that they have made numerous false claims to be board members of NADECOR via bogus websites and media exposure in the Philippines.

St. Augustine also noted that the Philippine Court of Appeals in June last year ruled that the board elected in August 2011 and led by president Conrado T. Calalang and chairman Roberto Romulo is in fact the valid board of the company, and confirmed that the agreements between St. Augustine and Nadecor had not been rescinded. The writ was made permanent in February 2013.

“Subsequent to these rulings St. Augustine received a letter confirming it was in good standing from Nadecor,” St. Augustine stated. “Any claims made in the media that are contrary to this are fraudulent.” 

The gold-rich porphyry copper deposit St. Augustine describes as one of the largest undeveloped copper-gold deposits in the world, 35 km east of the city of Davao and about 13 km from the coast, is listed as one of the top priority projects by the country’s Mines and Geosciences Bureau.

Nadecor has the exclusive rights to explore and develop the project under a mineral production sharing agreement (MPSA).

“We find it all a bit annoying,” St. Augustine’s chief operating officer, Tom Henderson, said in a telephone interview from Manila. “There is a legitimate Nadecor organization that we work with under the guidance of Conrado Calalang and Roberto Romulo. They were elected to the board several years ago.”

“From my perspective, maybe there is just a little remorse from the de Jesus side, having worked with our company for so long and not being part of the management team. It could be that they wanted to find their way back in and restructure their relationship.”

Henderson added that because it’s a good project, “anybody who becomes aware of its quality is going to want a piece of the action, I suppose, but Ping has no authority to cancel an agreement, that can only be done by Nadecor.”

“We work daily with Nadecor on the project and share an office with them and both of us will consider our options and weigh the actions we choose to take…these are individuals who are, for whatever reason, disenfranchised. If they continue to take actions we will produce a measured response.”

The feasibility stage project on the island of Mindanao, is estimated to contain 5.4 billion lbs. of copper and about 10.3 millon ounces of gold. It has a National Instrument 43-101 compliant measured and indicated resource of 962.3 million tonnes grading 0.254% copper and 0.334 gram gold per tonne. Inferred resources add 188.8 million tonnes at 0.215% copper and 0.265 gram gold.

The deposit is on the western flank of the Eastern Mindanao Cordillera, between two majors plays of the Philippine Fault System. Gold and copper mineralization is at or near the apex of a composite diorite intrusive complex. Mineralization occurs within the intrusive rocks in addition to extending well into the surrounding wall rocks.