A clash of business cultures appears to be the main reason why Asia Minerals (AMP-A) has decided to terminate the Yingezhuang gold joint venture with the Zhaoyuan Gold Industrial Group of China.
After years of patient effort, Yingezhuang was the first foreign gold-mining joint venture to obtain full approval from the state planning commission and China’s Ministry of Foreign Trade and Economic Co-operation.
The partners were each to invest US$36 million over three years to earn a 50% interest in the joint venture. A business licence was issued to the partners in October of last year, and it was around that time that the honeymoon abruptly ended.
Asia Minerals says Zhaouyan breached numerous principles and provisions of the joint-venture contract. As a result of these breaches, the project is no longer considered by Asian Minerals to be technically or economically viable.
Asia Minerals alleges that Zhaoyuan rejected the authority of the joint-venture board to determine the gold grade of the mine, “insisting that both ore reserve and production grades are set and approved by the state planning commission.”
The company also says its Chinese partner “unilaterally entered into agreements” to expand the mine and that these agreements conflicted with the feasibility study, “such that significant additional capital costs will be incurred and the engineering design will not meet international industry standards.” Asia Minerals adds that Zhaoyuan “materially increased the existing debt” of Yingezhuang. To add insult to injury, the joint venture was unable to secure a mining licence or the preferential tax policies that were originally offered.
Asia Minerals called a meeting in early January in an attempt to resolve these and other issues. However, Zhaoyuan directors did not attend. The company then filed notice of its intention to terminate the partnership; it has not ruled out legal action if such a termination occurs.
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