Court puts Aur, Louvem to square one

Having won more time to consider all of their options relating to the Louvicourt Twp. base metal discovery, officials from Noranda (TSE), Aur Resources (TSE) and St. Genevieve Resources (TSE) have resumed discussions. The companies were essentially sent back to the drawing board after a Quebec Superior Court granted Noranda a 10-day provisional injunction to prevent Aur, Societe Miniere Louvem (TSE) and St. Genevieve from settling the legal dispute over the Louvicourt project, east of Val d’Or, Que.

The Quebec court also ordered St. Genevieve to withdraw its offer to sell to Noranda 4.1 million Louvem shares (representing a 23.1% interest) for $8 per share. St. Genevieve owns 50.1% of Louvem’s 17.7 million shares while Noranda has so far acquired a 21.6% stake in the Val d’Or-based exploration company.

Aur and Louvem are joint venture partners on the Louvicourt Twp. property where a major massive sulphide discovery has been under dispute since it was discovered last year.

As Aur and St. Genevieve elected to shelve a proposed settlement of the legal dispute rather than fight the injunction, there is technically no limit to the amount of time that each company can take to find a solution that all can live with.

However, during a telephone interview with The Northern Miner, St. Genevieve Chairman Pierre Gauthier made it clear that if no progress is made, he will attempt to force Noranda into making a decision.

The board of St. Genevieve has authorized management to offer Noranda, at the appropriate time, four million Louvem common shares at $8 each. Under an agreement signed last August, Noranda has the right of first offer on Louvem shares held by St. Genevieve, and management of Louvem and St. Genevieve.

Once the offer is made, Noranda would have 10 days to decide whether to buy the shares. Then St. Genevieve would have a further 30 days to sell them to a rival bidder.

As Noranda Minerals Treasurer Lance Tigert has called the $8 offer “unrealistic,” it isn’t clear yet how the current impasse will be resolved. Tigert said the request for an injunction had been granted because Louvem is prevented, under an agreement with Noranda, from entering into negotiations that would affect the Louvicourt orebody without Noranda’s approval.

However, if Noranda doesn’t accept a follow-up offer, St. Genevieve could sell part of its stake in Louvem to another company and reduce Noranda and St. Genevieve’s combined stake in Louvem to below 50%. At that point, Noranda would lose its right of veto over any future settlement between Aur and Louvem.

Under that scenario, there would be nothing to prevent Louvem from re-establishing a proposal to sell to Aur an additional 10% stake in the Louvicourt property in return for payments totalling $12 million.

The proposal, cancelled following the injunction, would guarantee Aur’s right to remain operator of any future mine, while settling all the legal issues relating to the 36-million-ton discovery.

Aur has claimed all along that an alleged payment default by Louvem gives it the right to operate the project after surface exploration is completed, and Aur President Jim Gill says he isn’t prepared to enter any agreement that doesn’t recognize Aur as operator.

“If the lawsuit isn’t resolved, you can count on us to put more pressure on (Noranda),” said Gauthier, who claims that at least one company is waiting to buy the shares if Noranda rejects the offer. Among potential buyers, according to street rumors, are Cominco (TSE) and Teck (TSE), which together hold 21% of Aur.

“There is nothing like a hanging to focus the mind,” said Gauthier.