Courtroom battles in the Congo

La Quinta Resources (LAQ-V) made big market gains on Wednesday after a court ruling in the Democratic Republic of Congo (DRC) has, the company says, paved the way for it to begin exploring on disputed grounds in the highly prospective eastern region of the DRC.

The news sent La Quinta shares up 28% or 12 to 52 on roughly 150,000 shares traded in Toronto on March 14.

But Banro (BAA-T), with whom the dispute is with, says it will appeal the decision and is continuing with its separate case against La Quinta back in the courtrooms of British Colombia.

The dispute centers on exploration licenses (known as Permis de Recherche or PRs in the DRC) for over 7,000 sq. km of land between Banros Lugushwa and Namoya properties in the south of the Twangiza – Namoya gold belt.

Banro initially applied for the PRs in 2003, and while it awaited word on whether it would be awareded to them, was approached by Wa Balengela Kasai-Investments Congo (WBK) — a Congolese miner that was also pursuing the permits.

WBK needed financing, and was looking to secure a guarantee for $6 million. Banro provided that guarantee, in effect laying the groundwork for a joint venture between the two companies so that if WBK was awarded the PRs, Banro would not be left out.

But Martin Jones, a spokesman for Banro, says things went sour with WBK last year when the company asked for more money from Banro. When Banro balked, WBK went and made a deal with La Quinta.

The Congolese court ruled the protocol between Banro and WBK was null and void, also found for costs and damages totalling US$200,000.

La Quintas chairman Malcolm Swallow says La Quinta negotiated a deal with WBK while knowing nothing about its former dealings with Banro.

Subsequently we received the claim from Banro and we said we were hands off until WBK could show it had clean title to the land, Swallow says. It has taken them from November of last year until now, but they have done it.

Swallow says WBK proved its title by gaining the PRs for all 32 of the disputed claims. Further, La Quinta says, WBK have received a written opinion from the “College des Juristes of the Cabinet of the Cadastre Miniere” (the Government authority that issues mining licenses) that the PRs are the property of WBK and the claims made by Banro over the grounds are invalid.

But Banro disputes the claim.

We dont know what theyre referring to, says Jones. We know the PRs have not been awarded.

Swallow says La Quintas next step is to wait for a written transcript of the court decision in the DRC, have it translated and then present it to BC courts with the aim of having the case against it dismissed.

Banro brought La Quinta to BC courts in October 2006 arguing that La Quinta interfered in its affairs. Its a charge that Swallow says has prevented La Quinta from finishing due diligence on the property.

Jones says Banro will continue with its case in BC.

Were confidant that the situation will play itself out properly over the next couple of months, he says.

On telephone from the Congolese capital of Kinshasa, Swallow was sounding a different note. He says he expects to have bodies on the disputed ground by the end of next month, and while getting drills turning by the end of the year will be tough, he says, he wouldnt rule it out entirely.

La Quinta signed a memorandum of understanding with WBK in August of last year for the properties. If consummated, the deal will give La Quinta an 80% stake in the properties with WBK taking the remaining 20%. La Quinta gave the right to roughly 8 million of its shares, and agreed to pay the company roughly $2.5 million over the next six years. In addition La Quinta will fund the first $10 million in exploration after which both sides contribute.

Its more like the kind of deal youd see in BC or in Mexico, and less like the kind you see in the Congo, Swallow says. We made an attempt to deal fairly with our partners.

WBK is based in Kinshasa and holds extensive mineral leases in the DRC.