Sutton alleges secret agreement

The ongoing battle for control of Sutton Resources (STT-V) has taken a new direction, with the company accusing its former chairman of making a secret deal to joint-venture its Tanzanian gold property.

Sutton has obtained a secret memo between James Sinclair and JCI Ltd, giving that company an option to earn a 50.1% interest in Sutton’s Bulyanhulu gold property in the African nation.

The memo, dated Dec. 24, 1995, was among documents that the South African mining giant was required to disclose as a result of Vancouver-based Sutton’s lawsuit against JCI and Sinclair. Sutton turned this information over to the British Columbia Securities Commission, which then authorized the company to release the information to shareholders.

Sutton currently holds 100% of the Bulyanhulu gold property, though its stake will be reduced to 85% once the project enters production. At that point, the government of Tanzania will acquire the remaining 15%.

The memo sets out the terms of an apparent agreement in which Sinclair agreed that Sutton would give JCI

the option to Bulyanhulu, plus a “call option” on the balance of the property. Meanwhile, JCI and another junior are exploring ground adjacent to Bulyanhulu.

Sutton says Sinclair did not disclose the deal last spring when he waged his unsuccessful proxy fight for control of Sutton’s board. The company also alleges that Sinclair and JCI planned to replace the company’s current board and present the secret agreement to a new board selected by Sinclair.

Sinclair denies having a legal relationship with JCI and says no agreement was made, consummated or entered into regarding a joint-venture at Bulyanhulu. He described the memo as a “copy of draft terms of the type of joint-venture agreement JCI indicated it would be prepared to consider, should the opportunity ever arise”.

While legal and backroom manoeuvring continues, so does exploration. In recent drilling from the narrower, western side of the Reef 1 system, hole 197 hit 2.3 metres grading 0.74 oz. gold per ton at a depth of 404.9 metres, whereas hole 198 hit 2 metres grading 0.95 oz. gold at 431.5 metres and hole 199 hit 2.2 metres grading 0.43 oz. gold.

Bulyanhulu is reported to host an underground resource of 7.25 million tonnes grading 15.01 grams gold per tonne, or 3.5 million contained ounces.

In other news, Sutton reported that the Tanzanian government has relocated illegal miners who had been impeding access to some of the prospective reefs at Bulyanhulu.

Sutton President Michael Kenyon says the government’s action will allow the company to test the oxide potential of the property. “We have some great oxide zones with open-pit potential that we have not been able to test (because of the illegal miners).”

Kenyon says the main reef at Bulyanhulu is a stratabound gold deposit believed to have similarities to the Bousquet, Doyon and Hemlo gold deposits in eastern Canada. “It has good strike and depth continuity, as well as uniform grade,” he says.