JV’s phantom board haunts St. Augustine in the Philippines

Sometimes working with minority shareholders in joint-venture partnerships in Southeast Asia can present unusual challenges — a lesson St. Augustine Gold & Copper (TSX: SAU; US-OTC: RTLGF) is learning all too well at its enormous King-King copper-gold joint-venture project in the Philippines.

In a recent article published in the Business Mirror, a newspaper in the Philippines, a journalist reported that St. Augustine’s joint-venture partner, Nationwide Development Corp. (Nadecor), had rescinded its joint-venture agreement with the U.S.-based company for its “failure to fulfill its contractual commitments in connection with the development of its mine site in Pantukan town, Compostela Valley province.”

St. Augustine says the media report is false, and that the man who claims he is still the president of the Nadecor board is an impostor who has created a phantom board with its own website. The twist is that the individual, Jose “Ping” de Jesus — an influential businessman in the country and a former secretary of transportation — was ousted from Nadecor’s real board of directors by a shareholder vote in 2011, and yet continues to masquerade as its president.

De Jesus could not be reached for comment by press time.

In a press release on Aug. 14, St. Augustine said it has an excellent working relationship with the “real” board of directors at joint-venture partner Nadecor, in which it owns a 25% stake, and that its agreements are all in good standing. What is happening, St. Augustine claims, is that individuals who were ousted as board members of the company by a shareholder vote in 2011 are now masquerading as the real board of Nadecor, and have made numerous false claims to be board members of Nadecor via bogus websites and media exposure in the Philippines.

St. Augustine also noted that the Philippine Court of Appeals in June last year ruled that the board elected in August 2011 and led by president Conrado T. Calalang and chairman Roberto Romulo is in fact the valid board of the company, and confirmed that the agreements between St. Augustine and Nadecor had not been rescinded. The writ was made permanent in February 2013.

“Subsequent to these rulings St. Augustine received a letter confirming it was in good standing from Nadecor,” St. Augustine stated. “Any claims made in the media that are contrary to this are fraudulent.” 

The gold-rich porphyry copper deposit that St. Augustine describes as being one of the largest undeveloped copper-gold deposits in the world, 35 km east of the city of Davao and 13 km from the coast, is listed as one of the top-priority projects by the country’s Mines and Geosciences Bureau.

Nadecor has the exclusive rights to explore and develop the project under a Mineral Production Sharing Agreement.

“We find it all a bit annoying,” St. Augustine’s COO Tom Henderson said in a telephone interview from Manila. “There is a legitimate Nadecor organization that we work with under the guidance of Conrado Calalang and Roberto Romulo. They were elected to the board several years ago.

“From my perspective, maybe there is just a little remorse from the de Jesus side, having worked with our company for so long and not being part of the management team. It could be that they wanted to find their way back in and restructure their relationship.”

Henderson added that because it’s a good project, “anybody who becomes aware of its quality is going to want a piece of the action, I suppose, but Ping has no authority to cancel an agreement — that can only be done by Nadecor.”

“We work daily with Nadecor on the project and share an office with them, and both of us will consider our options and weigh the actions we choose to take . . . these are individuals who are, for whatever reason, disenfranchised. If they continue to take actions we will produce a measured response.”

In an email to The Northern Miner dated Aug. 31, Ruy Moreno — who signed his message as “executive vice-president and director of Nadecor” — disputed St. Augustine’s version of events and said that Nadecor “rescinded all agreements with St. Augustine” as early as March 26, 2012. The email also said that “the rescission was approved by shareholders in a June 13, 2012, shareholders meeting.”

In addition, Moreno disputed St. Augustine’s claims that the ruling by the Philippine Court of Appeals in June 2012 that the board elected in August 2011 and led by Calalang and Romulo was the valid board of the company, and that the agreements between St. Augustine and Nadecor had not been rescinded. “Such a claim is wrong, and is based on a writ that is moot and academic, as it covers only the 2011 Nadecor board and does not cover the 2012 duly elected board and the recently elected 2013 board,” Moreno wrote. “This means that the legitimate board is that which was installed at the annual stockholders’ meeting (ASM) held on Aug. 22, 2012. The board that was elected at the ASM of April 15, 2011, ceased to exist when Nadecor elected a new board on Aug. 22, 2012 . . . it is clear that the board on which Mr. de Jesus presides [the 2012 board and the recently elected 2013 board] is the correct one — there is only one board, and this is the board presided by Mr. de Jesus.”

The feasibility stage project on Mindanao Island is estimated to contain 5.4 billion lb. copper and 10.3 millon oz. gold. It has a National Instrument 43-101-compliant measured and indicated resource of 962.3 million tonnes grading 0.254% copper and 0.334 gram gold per tonne. Inferred resources add 188.8 million tonnes at 0.215% copper and 0.265 gram gold.

The deposit is located on the western flank of the Eastern Mindanao Cordillera, between two major splays of the Philippine fault system. Gold-copper mineralization is located on, or nearby, the apex of a composite diorite intrusive complex. Mineralization occurs within the intrusive rocks , and extends into the surrounding wall rocks.