HudBay ordered to give 777 records to Callinan (April 07, 2008)

A Manitoba court has ruled that HudBay Minerals (HBM-T, HBMFF-O) must provide Callinan Mines (CAA-V, CCNMF-O) with financial records for the 777 copper- zinc mine in Flin Flon.

Last March, Callinan filed an action with the Manitoba Queen’s Bench for the right to conduct an audit of the books and records of the mine, HudBay’s flagship project.

HudBay maintained that it was not obliged to disclose books, records and accounts to Callinan.

The two companies signed a net profits interest (NPI) and royalty agreement in 1988 that granted Callinan a 6.66% profits interest in the mine and any other projects developed on the 777 property once all the development costs were paid.

Callinan became suspicious that HudBay wasn’t complying with the agreement after the company reported total earnings from all of its projects of $565 million for 2006.

At the time, HudBay said the company had made all appropriate payments to Callinan.

Callinan also has a 25-per-tonne royalty for ore milled from the site, which HudBay has paid.

HudBay made its first royalty payment to Callinan in November 2007 for $358,000 but the amount represented 75% of an undisclosed portion of third-quarter profits.

In February, Callinan received its second payment, this time for $2.4 million and again representing 75% of the amount HudBay estimated it owed Callinan, giving Callinan a better picture of what future NPI payments might look like.