La Quinta Wins in Congo Court

La Quinta Resources (LAQ-V) made big market gains recently after a court ruling in the Democratic Republic of the Congo (DRC) that the company says paves 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.

But Banro (BAA-T, BAA-X), which also lays claim to the land, says it will appeal the decision and is continuing with a separate case against La Quinta back in British Columbia.

The dispute centres on exploration licences (known as Permis de Recherche or PRs in the DRC) for over 7,000 sq. km of land between Banro’s Lugushwa and Namoya properties in the southern part of the Twangiza-Namoya gold belt.

Banro initially applied for the licences in 2003 and, while it waited for a decision, the company 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. In 2005 Banro provided that guarantee, in effect laying the groundwork for a joint venture between the two companies and ensuring that if WBK was awarded the PRs, Banro would not be left out.

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

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

La Quinta chairman Malcolm Swallow says the company originally negotiated a deal with WBK not knowing 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 licences for all 32 of the disputed claims. Further, La Quinta says, WBK has received a written opinion from the government authority that issues mining licences) that the PRs are the property of WBK and the claims made by Banro over the grounds are invalid.

Banro, however, disputes that claim.

“We don’t know what they’re referring to,” Jones says. “We know the PRs have not been awarded.”

Swallow says La Quinta’s next step is to wait for a written transcript of the DRC court decision, have it translated and then present it to the B.C. court with the aim of having the case against it dismissed.

Banro brought La Quinta to court in B.C. in October 2006 arguing that La Quinta had interfered in its affairs. It’s 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 B.C.

“We’re confident that the situation will play itself out properly over the next couple of months,” he says.

On the telephone from the Congolese capital of Kinshasa, Swallow sounds a different note. He says he expects to have workers on the disputed ground by the end of April. While getting drills turning by the end of the year will be tough, he won’t rule it out entirely.

La Quinta signed a memorandum of understanding with WBK in August 2006 for the properties. If consummated, the deal will give La Quinta the option to earn an 80% stake in the properties by paying WBK roughly $1.5 million over the next three years and about 8 million shares. In addition, La Quinta will fund the first $10 million in exploration, after which both sides contribute.

“It’s more like the kind of deal you’d see in B.C. or 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.