Queries International North American goes to court

It would be appreciated if you could review any recent developments which would account for the dramatic fall in the price of the shares of International North American Resources. Of particular interest is the status of the Sultan Mountain property in Colorado which was scheduled for production in 1986.

Does the company have money left over from the $4.8 million provided from the private placement in late 1985? P.B., Willowdale, Ont. The Canadian Mines Handbook 1986-87 describes the properties and activities of International North American Resources. However, since the Handbook was issued, the shares of the company have dropped from over $2 to 20 cents . Also what has happened to the almost $5 million that the company had at the beginning of 1986? W.M., San Jose, Costa Rica.

You could say Vancouver-listed International North American Resources has had its ups and downs. At the time the 1986/87 Canadian Mines Handbook was released last May, shares of the company were trading at about the $1.80 level with a 52-week high and low of $2.38 and $1.75, respectively. Today, these shares trade at about 22 cents .

The last time The Northern Miner wrote about International was in March, 1986. At that time the company had completed a $4.8- million private placement with a group of European investors which would go towards the development of the Sultan Mountain gold project in southwestern Colorado.

The company had already advanced approximately $5 million to its joint venture partner P & G Mining towards earning a 50% interest in the 2,725-ac property. Another $2.9 million would have to be paid by Oct 31, of that year.

Milling operations were expected to start April, 1986, at a rate of 150 tons per day, rising to 300 tons per day by the first quarter of 1987.

The latest word we have about the situation goes a long way to explain the price dip in International. The company’s wholly-owned U.S. subsidiary, Power Petroleums, has filed a lawsuit against P & G, its owner, Ralph Glendinning, and President Richard Peck.

The lawsuit alleges the following:

* The defendants violated U.S. securities laws.

* The defendants made certain misrepresentations to the company and that it was based on such misrepresentations that the company decided to invest in the Sultan project and to continue to make advances to the partnership.

* The defendants failed to maintain an effective cost accounting procedure for the partnership and they failed to prevent or caused substantial overruns to the budget and they failed to properly advise the company of the overruns.

* The defendants failed to perform exploration development work, failed to seek approval of budgets, failed to provide the company with accurate and timely quarterly financial reports and monthly progress reports, failed to maintain proper books and records of the partnership, failed to submit major activities and policy decisions of the partnership to the company for approval, and failed to hold quarterly partnership meetings.

* The defendants made substantial expenditures of partnership funds, all contrary to the provisions of the partnership agreement. The company also alleges the defendants failed to manage the partnership business in accordance with good mining practice.

International North American has asked for various remedies including rescission of the partnership agreement and the return of the company’s total investment in the partnership.

Or alternatively, in the event the rescission is not awarded, for an award of damages against the defendants for dissolution of the partnership and for an award of exemplary damages against the defendants.

To date, International North American has advanced a total of $5.21 million to the partnership.