Boundary battle heads to arbitration

After a failed takeover attempt, Canadian Royalties (CZZ-V) is headed to arbitration with Ungava Minerals (UNGV-CUB).

On July 26, Ungava filed an amended statement of claim alleging that Canadian Royalties withheld information regarding the Expo-Ungava property in northern Quebec. Ungava says that if it had had the information it wouldn’t have granted CZZ an option to acquire up to 80% of the property by spending $1.75 million on exploration (for 70%) and producing a bankable feasibility study (80%).

Ungava also alleges that information received by Canadian Royalties during the option period was acquired improperly.

Ungava is seeking the return of all exploration data from the Ungava property, the annulment of certain property transfers, and the transfer of the Phoenix prospect to Ungava.

Canadian Royalties says the claims are, “wholly without merit” and that Ungava Minerals was aware of the presence of mineralization in the Ungava region prior to entering into the option joint venture agreement.

CZZ also notes that it has always exceeded the flow of information and documentation delivery requirements under the partner’s agreement.

The company says it is, “perplexed by the allegations made by Ungava Minerals and questions why Ungava’s allegations came up only after its successful field exploration season in 2001.

In mid-June, CZZ launched a 10-per-share cash bid for a controlling stake in Ungava’s outstanding shares. CZZ sought to replace Ungava’s current management team and board of directors because they have not acted in the best interest of its minority shareholders. The company claims that Ungava has twice jeopardized its interest in the Expo-Ungava property in northern Quebec by failing to pay renewal fees for its permits.

The company also cited Ungava’s failure to hold annual shareholder meetings for the past five years and management’s decision not to accept the Canadian Venture Exchange’s invitation in 1999 to list its shares for trading.

The failed bid expired on July 25.

The bad blood between the two companies stems from a dispute over the inclusion of a key piece of ground in the Phoenix nickel-copper-platinum-palladium property in northern Quebec. A 4-sq.-km piece of land borders Canadian Royalties’ wholly owned Phoenix property and Ungava Minerals’ Expo Ungava property.

In early April, Ungava Minerals notified Canadian Royalties that the junior was in default of its option and joint-venture agreement because the border area, which includes the Mesamax NW grid and TK copper-nickel platinum-palladium discovery, was subsequently included into the Phoenix property.

Canadian Royalties says the land was properly transferred by Ungava Minerals when the Expo-Ungava property was expanded and the boundary repositioned in June 2001. The company says the bounder shift received Ungava’s written approval.

The property is 15 km south of Falconbridge’s (FL-T) Raglan nickel-copper mine and hosts three mineralized structures — Expo, Cominga and Mesamax, all of which were discovered in the 1960s.

Resources at Expo-Ungava are pegged at 17 million tonnes grading 0.6% nickel and 0.8% copper. Included is a higher-grade core of some 3 million tonnes grading 1% nickel and 1% copper.

Canadian Royalties’ offer will remain open for at least 35 days. If the offer receives more than 51% of Ungava’s outstanding shares, the offer price will be diluted in proportion to the total number of shares tendered.

The offer is subject to at least 51% of Ungava’s outstanding shares being tendered and to Ungava’s not implementing its proposed shareholders’ rights protection plan.

Ungava has advised its shareholders to take no action in response to the offer for just less than 9.3 million of Ungava’s outstanding shares. The company says its board of directors will review the offer and determine the appropriate course for shareholders.

During the arbitration, Davies Ward Phillips and Vineberg will represent Ungava, and Langlois Gaudreau will represent Canadian Royalties.