Lytton moves to gain interest in Eskay claims

His problems with securities regulators and former wives aside, Murray Pezim will likely be facing a lengthy legal battle to keep control of his most recent discovery, the Eskay Creek deposit, north of Stewart, B.C. In a surprise announcement, Toronto-based Lytton Minerals (TSE) dropped a bombshell on Pezim and associates. Lytton stated that it intended to “aggressively support” efforts by Tagish Resources to secure title to much of the Eskay Creek deposit, along with considerable ground in the surrounding district.

At the same time, Lytton announced it had agreed to acquire 45.25% of Tagish by issuing six million of its shares. The transaction also includes warrants allowing Tagish to buy an additional two million Lytton shares at 25 cents, which would increase Lytton’s position to 50% of Tagish.

“I’m taking this seriously,” Pezim told The Northern Miner.

Overstaking is not illegal and almost every major Canadian discovery has had its share of claim disputes, even though a few in the industry still frown on “nuisance staking” where the key intent is to extract a financial settlement. But as one mining executive aptly observed: “Since Hemlo, anything goes.”

No other public company has come forward with plans to acquire all or part of the remaining interest in Tagish. Waterford Resources (VSE) is considered a possibility (T.N.M. July 9, 1990) because of the involvement of some of its directors in the overstaking.

Tagish, a private company listing Ken McKenzie as sole director, is now reported to have overstaked 18 mineral claims totalling about 20,500 acres in the Eskay Creek area.

By far the most serious challenge is to four claims — Tok 3, 4, 5 and 6 — holding the bulk of reserves at Eskay Creek. Although both Corona (TSE) and Placer Dome (TSE) are vying for control of the project, title is currently held by Stikine Resources (TSE) and Prime Resources Group (VSE).

In a telephone interview with The Northern Miner, Lytton President William Christensen said his company was not involved in the original overstaking, but only became involved when the deal was being discreetly “shopped around” to find financial backers.

“We did not originate this activity,” he said. “The situation simply came to our attention and after reviewing it we decided to get involved. If we hadn’t come along, someone else would have.”

Christensen insists “the real story” began when the group behind Tagish became aware of “land speculators” staking in the Eskay Creek area, “but not complying with the rules of the province’s Mineral Tenure Act.” As an example, he cites cases where 604 of 620 necessary identification and corner posts were not placed on one particular claim group.

“There has been a great deterioration in the quality of staking in the province since the change was made to a modified grid system,” he said. “We’ve checked this out thoroughly and were amazed to find things were done so poorly.”

Christensen is also president of Dolly Varden Minerals (VSE), a company that has been active in the Kitsault district of northwestern British Columbia for decades. At one time, Dolly Varden held a sizable stake in Lytton, but Christensen said this is no longer the case.

Currently Lytton and Dolly Varden share common management, and the list of Lytton directors include some high-profile names in the mining industry. They include Charles Michener (of Derry, Michener, Booth & Wahl), and Ken Blakey, a former chief gold commissioner and former deputy minister of mines for British Columbia.

Christensen also told The Northern Miner the company has access to “whatever funding we need to see this through.” He refused to comment on who was calling the shots in mapping out strategy, except to say that it is “a team effort.”

Tagish’s challenge to the Eskay Creek deposit began on May 17 of this year when it initiated a Section 35 complaint against the TOK 3-6 claims hosting the main part of the deposit. On June 28, Tagish was informed that the Chief Gold Commissioner would investigate the complaint and make a ruling.

Tagish will be arguing that because of a staking gap between the TOK 3-6 claims and the remaining claims on the property, assessment work filed against TOK 3-6 (on the basis of grouping with the remaining claims) is not valid and, therefore, title should be cancelled.

“Grouping is only permitted with respect to adjoining mineral titles and the claims to the south are not adjoining,” Lytton noted in a recent press release.

These claims are partially surrounded by the IKS-1 claim held by Adrian Resources (VSE), and the GAMMA claim held by Eurus Resources (VSE). These claims are strategic as IKS-1, and to a lesser extent GAMMA, hosts any northward extension of the Eskay Creek deposit. The IKS-1 claim also covers a staking gap in the TOK claims where Adrian has title to a portion (65,000 tons) of the deposit.

Tagish overstaked these claims as AFTOM 11-13 and filed a section 35 complaint. And it won the first round when a mineral titles inspector ruled the IKS-1 should be cancelled, although this was overruled by the Chief Gold Commissioner on the grounds that “prevailing topographic conditions prevented the locator from placing the missing posts and line markings along the southern boundary.” In this case, according to Christensen, 16 of 18 necessary posts were placed on the claim.

Tagish is appealing this ruling to the British Columbia Supreme Court. A ruling has not yet been made on the GAMMA claim, but Tagish is alleging that many “accessible posts” were not placed.

Prime has recently stated, however, that even should Tagish be successful in its challenge to TOK 3-6, Adrian and Eurus would share title by virtue of having overstaked the ground before Tagish.

For this reason, Tagish will have to first win a legal battle to regain title to IKS-1, and to be awarded and retain title to the GAMMA claim before it stands a chance to get title to claims hosting the deposit. For this reason, many industry observers call Tagish’s efforts “a long shot at best.”

It is now expected, however, that no matter what ruling the Gold Commissioner makes on the TOK 3-6 claims, it will be appealed by the losing party “all the way to the Supreme Court.”

So far, Tagish has been awarded title to its AFTOM-9 claim which was staked over ground previously called IKS-3 and held by Adrian Resources. Appeals are still pending on that ruling.