TVX to appeal ruling giving Alpha stake in Kassandra

Alan Lenczner has done it again. The legal hero of the Lac vs. Corona decision has successfully argued breach of fiduciary duty in another mining case, wresting a 12% interest in the Kassandra gold project in Greece from TVX Gold (TVX-T).

The beneficiaries are three businessmen, Hendrik Visagie, David Lean and James Stephenson, who had first brought the Kassandra property to TVX’s attention in the fall of 1993. In a decision handed down on Oct. 14, Madam Justice Kathryn Feldman of the Ontario Court, General Division, ordered that TVX give up a 12% carried interest in the property and that the plaintiffs receive an option to acquire another 12% as a working interest.

The three men, collectively known as the Alpha Group, had obtained the right to negotiate with the National Bank of Greece to buy the Kassandra property, which the government-owned bank had seized from Kassandra’s bankrupt owner, Hellenic Chemical Products. The group approached TVX to finance further work on the project.

In November 1993, TVX and Alpha agreed on a joint venture under which TVX could fund investigations on the property to earn Alpha’s right. The group retained a 12% carried interest and the option to acquire an additional 12% working interest.

The Greek government determined that the mines should be sold through open tender rather than through an exclusive negotiation, and TVX — having no reason to earn a right that had been rescinded — terminated the agreement in the summer of 1994.

In a tender process held by the government in March 1995, TVX was the sucessful bidder, offering US$47 million for the property. TVX has since performed feasibility work, and plans a US$225-million expansion of the Olympias mine. A second project, the Skouries gold-copper porphyry deposit, is at the final feasibility stage.

In late 1995, the Alpha Group brought suit against TVX, alleging breach of confidence and breach of fiduciary duty. The trial was held over a 6-week period in late 1997.

In deciding in Alpha’s favor, Judge Feldman, who now sits on the Ontario Court of Appeal, found that TVX had legitimately terminated their funding obligations under the 1993 agreement but still had a fiduciary obligation not to enter a bid in the privatization process without Alpha. The judge also ruled that TVX had breached a formal confidentiality agreement with Alpha and had used information provided in confidence to further its own bid.

Lawyers acting for TVX argued that all its obligations to the group had been discharged when the agreement was terminated in the summer of 1994. They further argued that information on the deposits was made public during the tender process, and that there was no need to rely on work done by the Alpha Group.

The plaintiffs had sought full ownership of the property or, alternatively, restoration of their rights under the 1993 agreement. They also claimed actual damages of $500 million and punitive damages of $1 million, which the court declined to award.

TVX has 30 days to file notice of appeal and a further 30 days to make a final submission. The company says an appeal is under active consideration.