TVX, Kinross face legal disputes

About a week before shareholders are scheduled to vote on a proposed three-way merger deal, TVX Gold (TVX-T) and Kinross Gold (K-T) are facing some legal disputes.

TVX announced that a group of investors known as the Alpha Group is seeking a temporary injunction requiring TVX to disclose the allocation of its assets after the proposed merger. The group has also asked the Court for permission to amend its claim to seek a temporary injunction prohibiting TVX from completing the merger until Alpha has had a chance to exercise its right of first refusal on TVX’s Greek assets.

TVX said in a prepared statement, “The Alpha Group has alleged that it has a right of first refusal over TVX’s Greek assets and that the right is triggered by the proposed business combination. TVX disputes that there is any right of first refusal and that any such purported right is triggered by the business combination.”

The latest move is part of a long-time dispute between the two companies. In June 2000, the Court of Appeal for Ontario upheld a lower court decision that granted Alpha a 12% carried interest and the right to a 12% participating interest in the Kasandra property in Greece. The Court ruled that TVX had used confidential information owned by Alpha in winning a tender process for the property in 1995.

TVX says that the group’s claims are without merit and it intends to vigorously defend any action that seeks to restrain its merger plan.

TVX has recently called into question its future in Greece, and in the latest in a long line of setbacks was recently forced to declare a force majeure on deliveries from its Stratoni base metal mine after the Greek government ordered a temporary halt to mining while various agencies examine permitting studies for an expansion at the mine.

Omolon delay

Meanwhile in Russia, Kinross is facing a delay in its plan to buy out the Russian shareholders of its 54.7%-owned subsidiary Omolon Gold Mining.

Late last year, Omolon arranged to buy back the outstanding shares for US$45.4 million. The deal came amid lawsuits launched by three of Omolon’s Russian shareholders claiming their shares were flawed due to “registration deficiencies.” The shareholders were looking for a return of their original investment plus interest.

Earlier this year, the suits were dismissed with prejudice. An order freezing certain of Omolon’s assets was also quashed.

Kinross says that for the share-purchase deal to go through it still needs certain written assurances from the Magadan Administration. The company warns that the acting Governor is apparently unwilling to sign any documentation clearing the deal until after an upcoming election slated for Feb. 2. Kinross still expects the deal to be wrapped up by the end of the first quarter of 2003. Kinross originally planned to close the deal by mid-November of 2002.

Shareholder votes

Kinross will put the proposed three-way deal before its shareholders on Jan. 28. TVX and Echo Bay Mines (ECO-T) each have votes slated for Jan. 31. The triad’s proposed deal would see Echo Bay shareholders get 0.52 of a Kinross share for every Echo Bay share, and TVX shareholders get 6.5 shares of Kinross for each share of TVX.

If approved by shareholders, and then the Ontario Superior Court, the merger would create the world’s seventh largest gold producer.

Despite the disputes, all three companies managed to see their shares trading higher in late afternoon trade in Toronto on Jan 22.. Kinross was the busiest, up 6 at $3.78 with about 5 million shares traded; TVX was 41 higher at $24.35, and Echo Bay was a penny richer at $1.93.