Bema execs asked for documents in Verde dispute

Vancouver — Bema Gold (BGO-T, BGO-N, BAU-L) CEO Clive Johnson and vice-president Dennis Stansbury have been asked to testify in a dispute between a U.S. insurance firm and the company that was contracted in 1996 to build the Verde gold processing facility in Chile.

An affidavit filed in the British Columbia Supreme Court says American International Specialty Lines Insurance Company (AISLIC) wants the Bema executives to appear voluntarily and produce certain documents that it says may be relevant to the case.

Neither Johnson nor Stansbury are accused of any wrongdoing.

Instead, they are being asked to reveal what they know about a case that stems from the decision in 1994 by Bema and its partner Kinross Gold (K-T, KGC-N) to hire California contractor Fluor (flr-n)to manage construction of the Verde mine in the Andes Mountains.

Over an 18-month period, contractor Fluor oversaw the project, handling engineering, procurement and construction.

However, in June 1996, the solids beneath a large bin began to subside and partially collapsed, causing significant damage to the bin and related mine facilities.

Court documents say Fluor and a Chilean firm, owned jointly by Bema and Kinross, disagreed as to the cause and immediate solution. In addition, the court documents allege Verde did not meet its performance expectations.

In May 2002, a Chilean arbitration panel ordered Fluor to pay US$20.9 million in damages. Fluor complied with that request and then filed a claim with AISLIC.

But the insurance company denied the request for coverage, arguing that it was not notified promptly enough about developments at Verde.

AISLIC says it wants more information about settlement negotiations between Fluor and the mining companies.

Fluor reacted by taking AISLIC to court, seeking US$20 million from the insurer in connection with the damage award by the Chilean arbitrator.

Now, according to documents filed in the B.C. Supreme Court on Dec. 11, the insurance company wants Johnson and Stansbury to voluntarily appear and produce documents “and witnesses.”

“The respondents have unique knowledge, concerning the claims, arguments, communications and settlement negotiations in the arbitrated design and construction dispute and would be the only entities in possession of the requested documentation and information,” says Joel Eads, a lawyer acting for the insurance firm.

The case has come to light just weeks after Kinross stepped up the pace of consolidation in the North American gold mining sector by launching a friendly bid for Bema, worth $3.5 billion.

Phone calls to Johnson’s Vancouver office were not immediately returned. Eads, in his affidavit, has indicated that Stansbury has agreed to submit a deposition in Vancouver before year-end.

However, Eads also said that neither the insurance company nor the California court has the authority to require Johnson, or anyone else from Bema, to provide the requested documentation and information.