Court battle looms over strategic Ellison claims

Discussions aimed at settling a legal dispute over three strategically situated gold claims located between LAC Minerals’ (TSE) Bousquet No. 1 and Doyon gold mines in northwestern Quebec got under way recently. Known to host a deposit containing almost one million tons of grade 0.2 oz. gold per ton, the claims were optioned to Yorbeau Resources (TSE) by Montreal lawyer-cum-promoter Max Ellison before the two sides fell into dispute. Now, Republic Goldfields (VSE), previously known as Malartic Hygrade Gold Mines, is preparing to pay Ellison’s legal fees and offer the family 600,000 shares in return for 100% of the property. While officials at Yorbeau and Republic Goldfields were unable to say whether they can resolve the dispute before court proceedings begin in Montreal, Oct. 11, there appears to be a lot of incentive for them to do so. The Ellison claims are adjacent to the west of Bousquet No. 1, which is expected to produce 65,000 oz. gold this year. The Doyon mine, operated by LAC and partly owned by Cambior (TSE), is two miles west of the Ellison ground which covers the same volcanic sedimentary package of rocks that host Agnico-Eagle’s (TSE) Dumagami gold mine about a mile to the east. In an interview with The Northern Miner, Gerry Gauthier, LAC’s senior vice-president of operations for North America, said his company is interested in the property if the two sides can settle their differences. “When they get the thing resolved and we know who we are dealing with, we can sit down and discuss some sort of program,” he said. Cambior and Agnico-Eagle are also expected to be offered a piece of the property if and when the dispute is settled. Like the neighboring Bousquet properties now being mined by LAC, Cambior and Agnico, the Ellison claims were held by Max Ellison and his wife Paula before they were optioned to Lynx-Canada Explorations in 1979. Ellison, now 90 and living in a senior citizens’ home in Montreal, granted Lynx an option to acquire full ownership, subject to a 41% net profits royalty to the Ellison claims, by spending $250,000 on exploration over three years. Regarded by many as a tough negotiator, Ellison later transferred his family’s interest to an Ontario numbered company (114660) and extended the length of time Lynx had to exercise the option to Oct. 12, 1984. The agreement was amended once again on Aug. 31, 1984, after Lynx undertook to construct an exploration shaft on the claims. In return Lynx was given until Oct. 12, 1985, to exercise the option and become owner of the property. The exercise period was extended a third time to Aug. 1, 1987, after Yorbeau had acquired the interest of Lynx’s partner Dejour Mines (TSE) and got control of Lynx via a hostile takeover in August, 1985. By then, 861,000 tons of grade 0.20 oz. gold per ton of preliminary reserves had been outlined in the Ellison A zone. A second “C” zone, which Yorbeau said could prove to be more important than the A zone, was also intersected further north. While Yorbeau said it would spend $8 million to bring the property to the feasibility stage by sinking a 1,500-ft. exploration shaft and conducting exploration drilling on the 1,400-ft. level, those plans were never carried out. Having outlined 1.1 million tons of 0.17 oz. gold on its nearby Astoria project, 60 miles east of Val d’Or, Que., Yorbeau elected instead to delay exploration at Ellison to enable it to spend $7 million on the Astoria bet. Meanwhile, Yorbeau hired consultants Roche Ltd. to prepare a preliminary feasibility study on the Ellison claims which Yorbeau President Karl Glackmeyer delivered to Max Ellison’s Montreal apartment, July, 1987. The Roche report stated that “it is Yorbeau’s intention to continue with an underground exploration program recommended by Kilborn and Associates in 1985. The program was expected to cost $13 million and would take 18 months to complete. But when Glackmeyer delivered the report and a written notice indicating Yorbeau’s intention to take full ownership of the Bousquet claims, Ellison said he had found a new partner and would contest Yorbeau’s ownership claim in court. Yorbeau responded by suing the numbered company and Max Ellison and claiming $9.4 million in damages. In its statement of claim, Yorbeau accused Ellison of interferring with its rights as a registered owner of the property. When contacted by The Northern Miner, Glackmeyer’s successor Jean Rainville declined to comment on the specifics of the lawsuit. Yorbeau says it was obliged only to make a “best efforts” attempt to sink the shaft and do the underground drilling it was planning in 1985. But Max Ellison’s son Howard, a Montreal lawyer, who is managing the family’s business affairs, claims Yorbeau was obligated to complete the underground work before assuming ownership of the property. “They had agreed to do a certain amount of work and our contention is that there was a default,” said Ellison in a telephone interview with The Northern Miner. Ellison says the family is attempting to defend its case both technically and financially by aligning itself with Republic Goldfields. In return for being given the right to purchase the property, Republic will fund Ellison’s legal costs should the case go to court. But sources close to the companies say they are anxious to settle the issue before a costly and perhaps lengthy court battle begins. Meetings have taken place, and while none of the players involved are willing to say what form a settlement might take, Yorbeau appears to hold the key to a settlement.