Brookbank lawsuit one of three facing Metalore

Shareholders of Metalore Resources (TSE) presented some difficult questions to President George Chilian at the company’s recent annual meeting in Toronto. They were looking for some straight answers about the impact of three lawsuits the company is fighting. One shareholder asked why assets, subject to a lawsuit with Goldhurst Resources (VSE), were not clearly noted on the balance sheet. He also asked why another investment in Augdome (COATS), also subject to litigation, was not properly identified either.

In responding, Chilian acknowledged the scant information in the annual report. He said the various lawsuits brought against company in recent years have created difficulties and headaches for management which has led to confusion.

A trial began in Toronto this week over the manner in which Metalore acquired control of the Brookbank gold property from Ontex Resources (ASE) in the mid-1980s.

“These lawsuits have resulted in exploration being halted by Placer Dome (TSE) on Metalore’s properties, and cost the company nearly $800,000 in legal fees,” complained one shareholder.

Toronto-based Ontex originally held a 100% interest in the 18- claim gold property which in 1981 became part of a 60/40 joint venture with Metalore. Following a 1983 agreement, Ontex was diluted down to its current 10% carried interest.

In its suit, Ontex is seeking to have its original ownership rights restored, and alleges breach of fiduciary duty by Metalore as well as breach of obligation to disclose information from drilling on the property. Metalore has defended the action and is counterclaiming for the amount of $106 million.

Dwarfed by other high-profile lawsuits under way across the country, the Ontex vs. Metalore case has gone largely unnoticed by industry observers. Some have dismissed it as merely a frivolous lawsuit.

At the Metalore meeting, shareholders were shown a 40-minute home video describing a $1-million work program completed by Placer Dome on the Brookbank gold property in 1989. The video was hosted by Metalore geologist Barbara Kowalski who is planning a VSE-launch for her private company, Founder Resources, in the near future.

During the first phase of Placer Dome’s exploration agreement with Metalore, the company completed an extensive program of surface trenching as well as 35,000 ft. of drilling in 31 holes.

“The main Brookbank discovery continues to yield unprecedented results,” Chilian told shareholders.

While Metalore’s earlier work yielded drill results as high as 2 oz. gold per ton, and Hudson Bay Mining & Smelting obtained results as high as 4.5 oz. in the past, Placer Dome has recorded assays as high as 6.3 oz., said Chilian.

The company also reported significant intersections from the Fox Ear showing, one mile east of Brookbank. It yielded drill intersections of 0.18 oz. over 8.7 ft. with holes testing depths of 800 ft. below surface.

Meanwhile, the Golden Highway showing, one mile west of Brookbank, returned assays of 0.36 oz. across 18.7 ft.

Other recent work by Metalore on its 100% owned claims north of Ida Lake, about 4 miles west of Brookbank, has uncovered a new gold showing near an old shaft. That showing lies along a 400-ft.- long electromagnetic anomaly associated with sulphides in carbonate altered volcanic rocks.

Placer Dome is not expected to resume work on the main Brookbank property until Metalore’s legal dispute with Ontex is resolved. Its option agreement, still in effect, calls for the senior company to spend $7 million over a 33-month period to earn a 50% interest in 200 claims held by Metalore.

The Beardmore-Geraldton greenstone belt is one of the largest in Ontario and has historically yielded more than four million ounces of gold from several underground mines.

A spokesman for Placer Dome declined to comment on the results obtained at Brookbank until the lawsuit is resolved. “The litigation is something we just have to live with right now,” he said. “There are quite a number of hot properties in Canada tied up in lawsuits right now.”

Shares of Ontex, of which there are about 8.7 million outstanding, (fully diluted) have traded recently at $1.95 within a 52-week range of 70 cents-$2.00. There are about 1.65 million issued shares of Metalore with President George Chilian owning nearly 33%.