Lawsuit takes centre stage at Ontex meeting

The junior company is cash- strapped and entangled in a 4-year- long legal battle with Metalore Resources (TSE) over ownership of the Brookbank gold property near Beardmore, Ont.

At present, Ontex’s main asset is a 10% net profits royalty in the Brookbank property, where Placer Dome (TSE) recently completed more than 35,000 ft of diamond drilling under a joint venture agreement with Metalore.

But Ontex was unable to give its shareholders any up-to-date information on the recent exploration work since the results aren’t available, and communication with Metalore hasn’t been the best since a lawsuit over the property’s ownership was begun in 1986.

In 1986, the company commenced a Supreme Court of Ontario action in which it seeks, among other things, an order that its ownership rights in the Brookbank property be restored. Metalore is defending the action and is counterclaiming.

Questions concerning the status of that lawsuit took centre stage at the meeting.

“We will have our day in court, be certain of that,” Ontex President Salvatore Fuda told shareholders. “Our side is pushing hard for a trial,” he said. “We’re ready, willing and able.”

According to Ontex’s consolidated financial statements, its deferred legal expenses already total more than one million dollars from the litigation with Metalore.

With its legal costs mounting, and a lengthy trial period of at least three months anticipated, it is unclear where the company will get the funds necessary to continue the costly court battle.

For the 9-month period ended Sept 30, 1989, Ontex reported a cash balance of $10,134, while management compensation totalled $168,750 for the period.

At the meeting, Ontex lawyer John Eversley answered all questions from shareholders regarding the status of the lawsuit. He said a trial date has been set for Sept 4, 1990, and that pre-trial discovery examinations involving former Metalore geologist Barbara Kowalski are set for Dec 22.

Regarding a motion by Metalore for security of its legal costs, he said, “That motion has just withered and died on the vine.”

Meanwhile, Placer Dome has shut down its drills on the Brookbank property, and will prepare a summary report by February, according to Metalore President George Chilian. “The tonnage and grade at Brookbank have been significantly increased,” he told The Northern Miner in a telephone interview. No specific details or assay results from the recent work were given, however.

He said Placer Dome has completed its first phase of exploration work and will take the next couple of months to analyse all the results before deciding on the next stage of work.

“We’re doing a lot of check assaying,” said Placer Dome’s project geologist Chris Keech. “It’s a fairly complex geological situation with a lot of the gold occurring in very fine-grained form and associated with pyrite.”

Placer Dome has an option to earn a 50% interest in the Metalore- Ontex property by spending $7 million over a 33-month period. Back in 1988, Metalore said there were about 1.3 million tons grading 0.3 oz gold per ton inferred in the Brookbank deposit.

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