Dispute has Louvem unsure about effect of Aur discovery

The discovery of high grade copper-zinc-gold mineralization on a group of Louvicourt Twp. claims held by Aur and Louvem ensured a full house at the meetings which were also attended by Aur President Jim Gill.

But until the dispute is resolved, Louvem will be unable to determine what impact the potentially large discovery will have on its share price or bottom line, said St. Genevieve Chairman Pierre Gauthier.

Aur is claiming that because Louvem defaulted on a $40,000 payment required to fund exploration at Louvicourt Twp., he has the right to dilute Louvem’s interest down to 25% from 50%.

But Gauthier said the $40,000 payment resulted from an $80,000 cost overrun which had not been approved by a joint venture committee. He insisted that Louvem acted in good faith at the time and that he will take the dispute to court rather than allow his company’s stake in the project to be diluted below its original 50%.

While the dispute has cast something of a dark cloud over an otherwise exciting base metals discovery, the share prices of Louvem and St. Genevieve have both risen substantially in the past three weeks. share prices and volumes to come.

However, Gauthier didn’t make any comment on a second dispute involving Aur Resources and Louvem which is now before the courts. Three months ago, Aur initiated legal proceedings against Louvem after Louvem sold a 50% stake in the Chimo gold mine to Cambior Inc. (TSE) after St. Genevieve rejected Aur’s offer to acquire St. Genevieve’s 56% stake in Louvem.

Gauthier also declined to comment on a rumor that he had discussions June 19 with representatives from Noranda Inc. (TSE) who are known to be interested in developing the Louvicourt Twp. project with either Aur or Louvem Mines. Another rumor that Noranda may seek to gain control of the Louvicourt deposit by purchasing a number of convertible debentures of St. Genevieve which are held in Switzerland, is not a concern, said Gauthier.

St. Genevieve has about $27 million in outstanding bonds convertible into 15.4 million St. Genevieve shares at $2.27, which would give the holder about 45% of the company if converted.

He claimed that the Swiss debenture holders wouldn’t sell their shares to a hostile bidder.

Meanwhile, the $4 million which Louvem received from the sale of its 50% stake in the Chimo mine to Cambior Inc. has put Louvem on a more sound financial footing. Located near Val d’Or, Chimo produced 145,382 tons of grade 0.143 oz gold per ton in 1988. While a shaft deepening program resulted in reduced output and contributed to a year-end loss of more than $14.4 million, the mine is scheduled to be back in production this September when shaft sinking and underground development work is completed.

Last year, Louvem took an $11.4 million write down on the value of the Chimo mine.

Louvem has high hopes for its 50% owned Beaufort project in Val d’Or where equal partner Aurizon Mines has outlined 300,000 tons of grade 0.2 oz gold. After spending $7 million so far, Aurizon is expected to gain more information on the mineability of the property from the results of a 12,000-ton bulk sample.

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