Louvem-Aur dispute takes centre stage

The dispute between partners Aur Resources (TSE) and Societe Miniere Louvem (TSE) prevents Teck Corp. (TSE), Cominco Ltd. (TSE) and Noranda Inc. (TSE) from calculating, with any degree of certainty the value of their investment in the Louvicourt project where a five million ton massive sulphide deposit has been outlined.

In the hope that future drilling results will increase the size of the deposit, Vancouver companies Teck and Cominco recently agreed to spend $35 million in return for an 18% stake in Aur Resources. Two weeks later, Noranda, via subsidiary Noranda Minerals, announced that it was spending $8 million to increase its stake in Louvem to 11.3% from 6.6%.

But an alleged $40,000 default by Louvem during an earlier exploration phase puts the company’s ownership rights in doubt. According to Aur President Jim Gill, a clause in the original exploration agreement gives Aur the right to dilute Louvem to a 25% non-participating interest from 50%. If Gill is correct, Aur’s interest at Louvicourt would increase to 75% from 50%.

But if he is wrong, Louvem will eventually assume responsibility for managing the project (should underground exploration be warranted) in addition to a 50% joint venture interest.

Gill and Louvem Chairman Pierre Gauthier are so far apart on the dispute that a recent meeting between the two executives in Toronto was cut short in less than 15 minutes.

Matters are complicated even further by a lawsuit brought about prior to the Louvicourt discovery by Aur Resources against Louvem and the Quebec gold producer’s major shareholder St. Genevieve Resources (TSE). Aur is suing the two companies for breach of contract after an attempt by Aur to acquire control of Louvem fell through. Cambior Inc. (TSE) of Montreal is also named in the lawsuit because it bought Louvem’s Chimo gold mine around the time that Aur was attempting to take over Louvem.

Gauthier, who is also chairman of St. Genevieve, says the $40,000 default resulted from a cost overrun which had never been agreed to by the joint venture committee. As Aur has been returning all cheques sent by Louvem since the alleged default occurred, Gauthier has been putting the cheques in trust.

“Now that Teck and Noranda are involved, there should be a real willingness to solve this thing,” Gauthier told The Northern Miner before leaving for two weeks vacation at his cottage.

Top priority for Gauthier when he returns will be to settle the dispute which prevented Noranda from visiting the site or viewing the drill core while it was negotiating with Louvem.

“They reviewed the documents and formed their own opinion,” said Gauthier who believes that Louvem will eventually retain its 50% interest in the project. “What judge would allocate 25% of a property on the basis of a $40,000 cost overrun?” he said.

While John May, Teck’s vice- president of exploration declined to comment on the dispute, Noranda Minerals vice-president Lance Tigert told The Northern Miner that he is “comfortable with Louvem’s legal position,” adding: “we think they have a defendable case.”

However, Tigert had no comment to make on speculation that Noranda has already begun to sell off the approximately 1.6 million Aur shares it has accumulated over the past couple of months.

According to Yorkton Securities Inc. analyst Eric Zaunscherb, Noranda earned approximately $4 per share on the 500,000 Aur shares it sold recently. The remaining shares are expected to be sold by the end of this month.

]]>