Gauthier moves to end Aur-Louvem dispute

To the surprise of almost no one in mining investment circles, St. Genevieve Resources (TSE) has tabled a proposal designed to end the legal deadlock over the base metal discovery of Aur Resources (TSE) and Societe Miniere Louvem (TSE). Having talked Aur President James Gill into settling all of the litigation relating to the 36-million- ton massive sulphide discovery, St. Genevieve Chairman Pierre Gauthier has asked Noranda Minerals to make a major commitment to the Val d’Or, Que., project or face losing control to Aur and its affiliates Teck (TSE) and Cominco (TSE).

Rather than continue with expensive litigation that could tie the project up in a lengthy court battle, Louvem’s parent company St. Genevieve Resources has offered to sell to Noranda 4.1 million of its 8.7 million Louvem shares for $8 each.

Noranda, which has acquired 3.7 million Louvem shares since last August for an average of $6.60 a share, has been given until Aug. 10 to consider the proposal. An agreement signed last August gives Noranda the right of first refusal on any Louvem shares held by St. Genevieve and its management.

According to Quebec and Ontario Securities guidelines, Noranda would be required to make a follow-up offer to all Louvem shareholders as it now holds 21.6% of the Val d’Or, Que., company’s 17.7 million shares.

To protect itself in case Aur announces any new discoveries on the Louvicourt property, St. Genevieve would retain the option to repurchase 70% of the offered Louvem shares at $8.25 each for six months after the shares are sold.

In the event that Noranda refuses, the proposal is structured to allow Louvem to sell to Aur an additional 10% undivided interest in the Louvicourt property in return for $5 million plus a 2.5% plus a net profits royalty.

As well as settling a lawsuit before it goes to court in September, Aur has also agreed to pay out $7 million in two equal instalments to Louvem if and when the property is brought into production at a rate of 10,000 tons per day.

Pending Noranda’s approval of the agreement, Aur’s interest in the Louvicourt project would increase to 60% from 50% while Louvem’s would drop proportionately to 40% from 50%. As a result, Aur would be guaranteed the right to be operator of any future underground exploration program and mining operation.

Under the original 50/50 joint venture between Aur and Louvem, project operatorship was scheduled to be transferred to Louvem from Aur once a decision to go underground had been reached.

But in a lawsuit launched last year, Aur claimed that an alleged joint venture payment default gave it the right to remain as operator while dropping Louvem’s stake in the project to a 25% net profits interest. Having outlined 36 million tons of grade 3.11% copper and 1.34% zinc per ton, Aur is still drilling from surface on the Louvicourt property.

Under the new proposal, Aur would also drop its claim on the 8.7 million Louvem shares held by St. Genevieve, which it attempted to buy last year along with a 50% interest in the Chimo gold mine near Val d’Or.

Before the trading of St. Genevieve, Louvem and Aur was halted Aug. 1, shares of all three companies had risen on speculation that Gauthier and Gill had reached an agreement.

A former stock broker, Gauthier has made no secret of his desire to free himself of the time-consuming and expensive litigation over the Louvicourt Twp. project. “From our perspective, the litigation puts major limits on our financing capabilities,” Gauthier told The Northern Miner.

If Noranda elects not to purchase the share block, St. Genevieve can trigger the settlement by selling its interest in Louvem and dropping the amount of Louvem shares held by it and Noranda to below 50%. If it goes ahead, the purchase would put $33 million into the St. Genevieve treasury and pit Noranda into a legal battle against Teck and Cominco which together own 21% of Aur.

However, in a carefully worded statement, St. Genevieve said the settlement with Aur would only come into effect if the required approvals are obtained from both Noranda and regulatory authorities.