Battle brewing between Big Red Diamond and Kel-Ex

Montreal-based Big Red Diamond (DIA-V) has requested an additional 30 days from the Autorit des marchs financiers to file its annual financial statements ended Oct. 31, 2005, blaming its partners in a joint venture for the holdup in its financial filings.

Approval of the request by the Quebec securities regulator is said to be a formality.

In a press release issued on Feb. 28, Big Red says the extra time is needed because the financial reporting of joint-venture partners Kel-Ex Development and Metalex Ventures (MTX-V, MLXVF-O) has “been inconsistent and difficult to reconcile.”

Kel-Ex and Metalex are the operators and managers of the Attawapiskat and Dumont joint ventures in northern Ontario, in which Big Red is a minority partner. Renowned geologist Charles Fipke runs Kel-Ex and is chairman of Metalex.

President of Big Red, Francois Desrosiers, says Kel-Ex has left his company in the dark with regard to operations.

“For the last year we’ve been demanding access to data and details of accounting of the joint venture and our requests have been met with silence or incomplete answers,” he says.

According to Desrosiers, Kel-Ex says the release of such information would give Big Red an unfair competitive advantage.

“That’s an intellectual statement that is a bit lopsided for the simple reason that we are partners, and as such, we should be on the same side,” he says.

Big Red has been allowed to view data, but only on-site.

Reached in Australia, Metalex president Peter Gregory says Metalex refutes the claims in Big Red’s press release and is considering its legal options.

According to Desrosiers, another bone of contention between the companies is the roughly $500,000 for which Big Red is in arrears.

The debt is connected with prior exploration work completed at the diamond project. Desrosiers says he doesn’t know how the money was spent, and therefore can’t say if the monetary demand is legitimate.

While Desrosiers says he’d still like to see the dispute settled in a friendly manner, he won’t rule out legal action.

In the meantime, he hopes the delay request to the Autorit des marchs finaciers will put regulatory pressure on Kel-Ex, and give it the time it may need to prepare its financial disclosures in a more “consistent” manner.

As for the status of joint-venture project, work has been halted since January 2005.

“We’re trying to determine if we should go ahead with the project,” Desrosiers says. “But without the data, we can’t make an educated decision because we don’t know where we are at.”

The Attawapiskat properties are located in the Porcupine district in northeastern Ontario. To date, more than 200 samples have been collected for analysis. Study of the abundant kimberlite indicator minerals found in the samples has lead to the identification of numerous mineral fans that were the focus of sampling efforts.