Scion strikes back (January 20, 2006)

Chalk one up for Scion Capital.

On Jan.19, the California-based investment company — and leading dissenter of the proposed Gold Fields (GFI-N, GOF-L) and Bolivar Gold(BGC-T) deal — convinced the Yukon Supreme Court to postpone a hearing set to provide final approval for completion of the deal.

Such court approvals are generally a rubber stamp affair. Not this time.

Scion — the single largest holder of Bolivar common shares — is fighting in the Yukon on two fronts. It argues the process leading up to the court hearing has been both unfair and oppressive to shareholders.

“Bolivar’s security holders were not in a position to make an informed, considered and reasoned decision about the transaction,” Scion wrote in a legal document submitted to the court.

The Yukon court judge said the court will deal with the issues of fairness and oppression congruently.

The hearing has been adjourned for an undetermined period so the court and lawyers can co-ordinate schedules. When the hearing resumes – likely in early February – it will proceed with the cross-examinations of both sides.

Scion spokesman John Lute says the court decision is very significant. “The Yukon court saw the merits of our argument, and will hear the case of the opposition.”

On Jan. 12, Scion lost in its attempt to convince enough shareholders to join it in voting down the US$360-million takeover of Bolivar by Gold Fields. The deal was unofficially approved by roughly 77% of shareholders after Gold Fields bumped up its offer 6.7% the day before a revised voting deadline.

However, it’s continued to fight the deal through legal action. It also has a case before the Ontario Superior Court, asking it to look at aspects of the voting process that Scion believes to be suspect. Those hearings are on hold until a third-party transfer agent provides an official count and breakdown of the Jan. 12 shareholder vote.

Speaking to Reuters in South Africa, Gold Fields expressed dismay at the legal holdup, but was optimistic the matter could be resolved.

“We are disappointed in this delay, but are confident that the courts will favourably resolve the matter,” Gold Fields chief executive Ian Cockerill said.

Bolivar operates the Choco 10 open-pit gold mine in Venezuela, which was expected to produce 48,000 oz. in 2005 and 190,000 oz. this year.

The deal will help Gold Fields, the world’s fourth largest producer, meet its target to increase foreign output by 1.5 million oz. by 2009.