OKIMO dispute with Moto weighing down shares

While Moto Goldmines (MGL-T, MOE-A, MOE-L) is remaining tight lipped over its negotiations with its joint venture partner — the Congolese state run L’Office des Mines d’Or de Kilo-Moto (OKIMO) — the market has not taken an optimistic outlook on negotiations thus far.

Moto shares are off roughly 17% or $1.02 since Apr. 5. In Toronto on Apr. 11 Moto shares were trading at $6.03 on roughly 700,000 shares traded.

News of the extent of OKIMO’s dissatisfaction with Moto broke in South Africa on Apr. 4.

It was reported by a South African new agency that OKIMO has three main concerns with Moto. OKIMO wants a larger stake in Moto in exchange for asset level interests; it has questions about “inconsistencies” in the original lease agreement that Moto signed for the property; and it has doubts as to the legitimacy of the large resource at the Moto Gold Fields project.

In early march, Moto announced it was in discussions with OKIMO in an effort to acquire OKIMO’s direct interest in certain parts of the Moto Gold Fields project in exchange for a 10% stake in Moto.

The Moto Gold Fields project is one half of the Kilo-Moto greenstone gold belt in the northeastern corner of the Democratic Republic of Congo. It has been reported that OKIMO is asking for a 30% undilutable stake in Moto something that Moto’s chief executive, Klaus Eckhoff, told a news agency, he would not allow.

But OKIMO’s opposition to Moto extends beyond a 20% difference of opinion. The state-run company’s chief executive, Victor Kasango, told South African press that OKIMO also has concern with the original lease agreement Moto signed back 1998. Kasango said he has government approval to review the lease agreement.

Eckhoff has gone on record as saying the DRC’s interim government had verified the integrity of its lease contracts.

In addition, OKIMO has contracted the consulting firm SRK to do an independent review of Moto’s resource estimates. Kasango told the press that it was hard to believe that Moto could add gold resources at a rate of 500,000 oz. a month.

On Apr. 7 Moto announced a 34% boost to its indicated resource, upping it to 3.75 million oz. of gold. The company also reported a 51% increase in its inferred resources to 12.35 million oz.

Indicated resource comes from 43.44 million tonnes of ore at 2.7 grams per tonne and inferred resources come from 100.86 million tonnes grading 3.8 grams gold per tonne.

In a press release issued on Apr. 11, Moto said it isn’t aware of any legal proceedings or similar disputes challenging Moto’s interest in the Moto Gold Project.

The release goes on to say that the relevant ministries of the government of the DRC have instructed OKIMO, “not to unilaterally attempt to renegotiate or cancel any agreements with Moto.”

“These Ministries have also been consistently supportive of Moto’s involvement in the Moto Gold project,” the release says.