Falconbridge, Minnova sued by Opawica over mine royalty

A lawsuit launched against Falconbridge Ltd. and Minnova Inc. dominated discussion at the annual meeting of Toronto-based Opawica Explorations.

Opawica, former owner of the Lac Shortt gold mine property in northwestern Quebec, claims the two companies are in breach of agreement and fiduciary duties and is seeking redress in a number of ways, including return of the property; an accounting of all revenues, expenses and profits and an order for payment of the profits; and $50 million in damages.

The Lac Shortt mine went into production during the fall of 1984. According to Opawica, Falconbridge in 1979 optioned a 100% interest in the property in return for a royalty payment to Opawica of 7.5% of the net proceeds of production.

Falconbridge, according to Opawica, sometime after making the deal “purported to convey an interest in the property or in the agreement” to Minnova, which at the time was called Corp. Falconbridge Copper and which today is controlled by Kerr Addison Mines. Minnova is operating the mine.

According to Opawica President Grant Harper, his company has yet to receive a royalty payment.

“During the past year, Opawica had numerous discussions with officials of Minnova in an attempt to bring about an arbitration of the differences between them respecting Opawica’s royalty from the Lac Shortt mine production,” Harper said in his report to shareholders.

“Opawica’s professional advisers have identified some 13 points of difference which were presented to Minnova. Minnova has never adequately addressed these points of difference and has not co-operated in setting up the arbitration procedure.” Falconbridge-Minnova deal

In its statement of claim, Opawica says its agreement was with Falconbridge only and that it is not bound by any deal worked out between Falconbridge and Minnova. It says that by assigning or transferring the property to Minnova, Falconbridge abandoned its rights to the property and should either return the property or compensate Opawica.

However, Opawica says that, should the Falconbridge-Minnova deal be permitted, then “Minnova stands in the same relationship to it as Falconbridge and owes to it the same fiduciary duties as Falconbridge.”

Opawica says Falconbridge did not deliver a statement of the net proceeds of production for 1984, and while such statements were delivered for 1985 and 1986, they arrived past the agreed delivery date. A statement for 1987 is due by March 31, according to the company.

In its 1986 annual report, Minnova says gold production that year at Lac Shortt totalled 64,031 oz, with the operating cost averaging $293(C) per oz. At the end of 1986, proven, probable and drill-indicated reserves stood at about 1.7 million tons grading 0.14 oz gold per ton.