Aur, Louvem fight will stall project Noranda officer says

Noranda Minerals treasurer Lance Tigert denied that Louvem is in default of its obligations under the original joint venture deal. He says Louvem is, therefore, entitled to become project operator once the decision is taken to go underground.

As Noranda has the right to take control of Louvem, the Toronto- based Noranda Inc. affiliate is attempting to clear up doubts about who will eventually own and operate the Val d’Or, Que., project once the underground phase gets under way.

Unless the two companies can reach an out-of-court settlement, Noranda may seek a court injunction to prevent Aur from going underground at the deposit, Tigert told The Northern Miner.

Hired to represent Noranda and Louvem are Alan Lenczner and Ronald Slaght, the Toronto lawyers who successfully argued Corona Corp.’s case in its bid to win the Williams gold mine from LAC Minerals (TSE).

A shadow of doubt has been cast on the project by an alleged default by Louvem. Aur says the alleged default gives it a 75% project interest and the right to dilute Louvem’s interest down from 50% to a 25% non-participating interest. The alleged default, Aur says, also allows it to remain as operator.

While an Aur spokesman said Tigert is getting ahead of himself and that the underground exploration phase may not begin for at least a year, the potential size of the deposit means that the implications of a future court judgment are growing.

Having delineated potential reserves of 36 million tons grading 3.11% copper and 1.34% zinc, Aur is being backed by Cominco Ltd. (TSE) and Teck Corp. (TSE) who together hold 19% of the Toronto company. Some industry observers say sufficient surface drilling has been completed to warrant a decision to begin underground exploration.

“Under the agreement, we have a 100% working interest, they are carried for 25% and we can carry on as we see fit,” said Aur secretary Peter McCarter.

But Noranda and Louvem disagree. “Aur will be operator of underground exploration at Louvicourt Twp. only if it can prove that Louvem is in default of a $40,000 joint venture payment,” said Tigert.

Tigert’s view is based on the original 50-50 joint venture agreement which required operator status at Louvicourt to be transferred from Aur to Louvem once surface exploration was complete and the two companies had elected to go underground.

Louvem says the so-called default occurred because of cost overruns which were never discussed or agreed to by the joint venture committee and it is attempting, via a lawsuit, to have the agreement torn up.

If Louvem wins the case, a recent agreement involving the Val d’Or company and Noranda Minerals allows Noranda to become operator of underground exploration on its behalf. Noranda, which holds a 17% stake in Louvem, has first refusal on all of the Louvem shares held by parent St. Genevieve Resources (TSE).

“Our view is that Louvem is not in dilution,” said Tigert, who has attempted to gain a resolution with Aur President Jim Gill before the dispute is heard in a Quebec court. “We are still talking and our hope is that this can be resolved.”

Lenczner and Slaght were unavailable for comment. But Tigert said Noranda’s objective is to get the trial date set as soon as possible and to begin the process of discovery. “It’s an interesting orebody and we would hate to see it tied up in the courts for years,” he said.

Believing that the dispute is causing his company’s shares to trade at a discount to Aur’s, Louvem Chairman Pierre Gauthier visited Toronto recently to give his side of the story to some influential brokers and analysts. “Based on the number of Louvem shares outstanding (16 million) and the deal with Noranda,” Gauthier said Louvem should be trading at the same price as Aur.

At presstime, Aur was trading at $13.13 on The Toronto Stock Exchange while Louvem closed at $9.88.

However, Richardson Greenshields of Toronto analyst Ray Goldie has written a report stating that shares of Aur and Louvem are fairly priced with respect to one another. The report is scheduled to be released this week.

According to McNeil, Mantha Inc. analyst Alex Doulis there should be a price differential of $4.40 between the two share prices because of the $40-50 million cash and hard assets owned by Aur. “It’s difficult to find any hard assets in Louvem,” he said.

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