Legal process entangles many good prospectx

Perhaps the change can be attributed to the amount of money to be won — or lost — these days. But then, where gold is involved, the stakes have always been high.

Many of the court battles show no signs of letting up early. A case in point is the 8-year ownership fight over the hugely successful Page-Williams gold mine at Hemlo.

Settlement of the dispute between LAC Minerals (TSE) and Corona Corp. (TSE) over the mine may actually be near resolution. At least that is the opinion ventured by Corona Chairman Ned Goodman, who told shareholders at the 1989 annual meeting a decision could be rendered by the end of June.

One of the five Supreme Court of Canada judges who heard LAC’s appeal last October retired Feb 15. Accordingly, he is given six months (in this case, until Aug 15) to clean up his files. Goodman reckons that if the judge intends to participate in the decision, he will act before the summer holiday season begins.

(Should the judge not respond by the end of the 6-month period, LAC and Corona must decide whether they will accept a ruling by the other four judges. If one of the companies disagrees, a new hearing will be scheduled.)

At stake is a mine which produced about 380,000 oz gold in 1988 and is set to turn out 490,000 oz this year. Developed by LAC, the mine continues to be operated by LAC personnel under the direction of a 3-member committee.

The legal battle over the mine began in 1981, when Corona (then known as International Corona Resources) challenged LAC’s ownership in the Supreme Court of Ontario.

In 1986, the court awarded the mine to Corona, holding that LAC had breached a fiduciary duty and had used confidential information in acquiring the claims hosting the mine. The court ordered the mine be transferred to Corona upon payment to LAC of about $154 million plus interest. (The interest now totals about $52 million.)

LAC appealed, but the original ruling was unanimously upheld in 1987 by the Ontario Court of Appeal. LAC then took its case to the Supreme Court of Canada.

Should the final decision go in Corona’s favor, that company has an agreement with Teck Corp. (TSE) which would see the firms become equal partners in the mine. (Corona and Teck are 50/50 partners in the producing David Bell mine at Hemlo.)

Followers of the Hemlo camp goings-on will be familiar with another company, Scintilore Explorations (TSE), which has been active on the court scene.

Scintilore in 1987 sued prospectors John Larche and Donald McKinnon, along with Corona, Teck, Hemlo Gold Mines (TSE) and a Hemlo Gold subsidiary, claiming all benefits and proceeds owing to the two prospectors from the major claims staked by them or on behalf of them at Hemlo. (Hemlo Gold operates the Golden Giant mine at Hemlo, while Larche and McKinnon played significant roles in staking claims there.)

The 1987 suit has yet to go to trial. However, a second lawsuit by Scintilore, launched in 1988 and alleging the claims covering the David Bell mine and an adjacent quarter claim were forfeited under the Mining Act of Ontario, was dismissed in January of this year.

In northwestern Quebec, metals giant Noranda Inc. (TSE) decided in 1988 to take to court three related companies — Agnico-Eagle Mines (TSE), Mentor Exploration and Development (TSE) and Dumagami Mines (TSE) — over Dumagami’s now-producing LaRonde gold mine. Involved are 26 claims located between Rouyn-Noranda and Val d’Or, adjacent to LAC’s Bousquet property.

Noranda, a former shareholder of Dumagami, is seeking to reclaim those shares. Noranda alleges information was withheld from it prior to the sale of the shares to Agnico- Eagle.

In the Maritimes, Australian firm Western Mining is suing the former directors of Seabright Resources, a small Nova Scotian gold producer taken over by Western Mining in 1988.

Western Mining, through Canadian subsidiaries Westminer (Canada) Holdings and Westminer (Canada), alleges the former directors of Seabright failed to maintain the company’s public record as required by law. Western Mining believes it was not properly informed as to the true economic potential of one of Seabright’s two producing properties. The former chairman of Seabright, Terence Coughlan, has begun his own legal action against the two Canadian subsidiaries of Western Mining.

Ontex Resources (ASE) and Metalore Resources (TSE) have been before the courts for three years over the Brookbank gold property near Beardmore in northwestern Ontario. Ontex is seeking return of the property or $500 million in damages.

Ontex alleges Metalore did not report a significant gold find on the property before Metalore acquired a 100% interest in the property from the claimant in 1983. The lawsuit has curtailed any major exploration or development of the property.

Figuring prominently in two lawsuits is Minnova Inc., the gold and base-metal producer with interests across Canada.

In northwestern Ontario, Minnova was taken to court in 1987 by Zenmac Zinc (ASE) over the now- producing Winston Lake zinc- copper-silver-gold project. Zenmac, which optioned the property to Minnova (then known as Corp. Falconbridge Copper) in 1980, is seeking, among other considerations, a 20% joint-venture interest and an undivided 20% proprietary interest, recision of the agreement and return of the property, or damages. In a counterclaim, Minnova alleges Zenmac is entitled to royalty payments.

The other Minnova lawsuit centres around the producing Lac Shortt gold mine in northwestern Quebec. Opawica Explorations (TSE), the former owner of the property, is suing both Minnova and Falconbridge Ltd. (TSE); Opawica alleges the two companies are in breach of agreement and fiduciary duties. (The property was originally optioned to Falconbridge, which transferred its Lac Shortt interests to Minnova in 1984.)

Under the agreement, Opawica is entitled to receive a royalty payment equal to 7.5% of the net proceeds of production. Minnova, in its 1988 statement of defence, said there had been no royalty payable because there had yet to be any net proceeds of production.

Still in northwestern Quebec, Aur Resources (TSE) recently took Louvem Mines (TSE) and its major shareholder, St. Genevieve Resources (TSE), to court over a failed attempt by Aur to gain control of Louvem. Aur is alleging breach of contract; a proposed deal would have seen Aur become Louvem’s major shareholder.

In the Yukon, the troubled Ketza River gold mine at Ross River is at the centre of a legal dispute between Canamax Resources (TSE) and Belmoral Mines (TSE). Canamax is suing Belmoral for breach of contract.

Belmoral was proposing to purchase Canamax’s 50% interest in the mine and the 50% interest of Canamax’s Ketza partner, Pacific Trans-Ocean Resources (TSE), but withdrew its offer in April of this year. The mine went into production in 1988. Belmoral has filed a countersuit.

Recently settling out of court with Australia-based G & B Exploration Pty., over a financing deal related to the Spotted Horse gold mine in Montana, was Chelsea Resources (VSE).

Chelsea soon found itself facing a second lawsuit, however. Beardmore Resources (VSE) has taken Chelsea to court claiming breach of contract in an alleged joint venture on the Gold Hill project in Montana, adjacent to the Spotted Horse mine. Chelsea has denied the claim.

Still in the United States, large gold producer Echo Bay Mines (TSE) is defending a claim by Standard Metals related to the gold- silver Sunnyside mine in Montana, which Echo Bay acquired (through a subsidiary) from Standard. Among other considerations, Standard is seeking net profits interest payments for 1986 and 1987 totalling about $18 million(US).

Another large gold producer, American Barrick Resources (TSE), is involved in a lawsuit with Utah- based Gold Standard over the Mercur gold mine in Utah,
which has been in production since 1983.

Gold Standard, currently holding a 15% net profits interest in the mine, is seeking ownership of the mine and all of the gold so far produced (about 500,000 oz). Barrick acquired its interest in the mine from Texaco Inc., which acquired its interest from Getty Oil. Getty was Gold Standard’s mine development partner in the Mercur venture. The lawsuit was filed in 1986.

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