Maximum sues for Western Prospector’s Mongolian projects (March 20, 2006)

Vancouver — Western Prospector Group (WNP-V) has been hit with a lawsuit by Maximum Ventures (MVI.H-V, MXRVF-O), challenging rights and title to some of its Mongolian mineral properties.

Maximum’s lawsuit, in the Supreme Court of British Columbia, targets Kenneth de Graaf, his controlled companies and Western Prospector as defendants, alleging certain Mongolian mineral projects (including portions of the Saddle Hills uranium project) were to be acquired on its behalf, but have been wrongfully transferred to Western Prospector or retained by de Graaf. De Graaf is currently a director and vice-president of operations for Western Prospector.

In its statement of claim, Maximum alleges it entered into a partnership with de Graaf and Anthony Beruschi (an investor) in mid-2002 whereby it would cover the cost of a Mongolian reconnaissance program for first rights on any acquired projects. From mid-2002 to mid-2004, Maximum reports it advanced over $340,000 to fund the effort that resulted in the staking or acquisition of more than 30 separate mineral properties throughout the country.

In late 2003, Maximum reported it entered into an option agreement with de Graaf’s private company (Brant Enterprises), to acquire up to 75% interests in the Edren and Ulaan properties located in the Gobi Altai Aimag of southwestern Mongolia.

The Edren gold-copper property portfolio consists of exploration licences covering about 126 sq. km over an area of known porphyry copper-gold-molybdenum mineralization. The Ulaan gold properties encompass 205 sq. km of exploration licences covering an area of potential for gold-rich volcanogenic massive sulphides, skarns, structurally hosted and stockwork-intrusive related mineralization.

Maximum further alleges that in late 2003, de Graaf initiated a restructuring of his partnership agreement with Beruschi, whereby he and his private company (Brant) would relinquish its interest in the Mongolian claims, except for the two projects (Edren and Ulaan) already optioned to Maximum. Beruschi was to become the sole beneficial owner of all Mongolian claims, which would be held in trust for him by de Graaf and Brant. De Graaf was to then become president of Maximum and assist in raising funds to advance the projects.

Subsequent to the agreement, the company alleges that de Graaf wrongfully caused certain claims within the Mongolian package to be sold to Western Prospector, including sections of the Saddle Hills uranium project, and also failed to help manage Maximum and raise funds for the company, impeding its ability to make the required property payments on Edren and Ulaan.

Maximum further alleges that de Graaf did not supply assay results from samples taken from the Edren and Ulaan claims to either the company or Beruschi.

Beruschi recently struck an agreement with Maximum, assigning all his rights and claims against the defendants to the company. He will receive a 30% carried interest in the properties through to feasibility, exclusive marketing rights to any uranium production from the Mongolian claims, a 2% net smelter royalty and a further royalty to his private company of US$1.50 per lb. for uranium sales at less than US$20 per lb. of U3O8, increasing with higher sale prices.

De Graaf, who became a director of Western Prospector in early 2004, has operated in Mongolia since the mid-1990s. His private company, Cascadia Mining, acquired and assembled dozens of prospective mineral projects throughout the country.

In September 2005, Maximum was downgraded from a Tier 2 TSX Venture listing to the NEX Board following cease-trade orders issued earlier in the year by the British Columbia and Alberta Securities Commissions for failure to file financials. The company was reinstated for trading in early 2006. Trading in Maximum surged on the news of the lawsuit, with its shares jumping 127% to close at 67 on light volume of just 76,000 shares.

Western Prospector says it views the charges and allegations by Maximum as being “without foundation or merit,” and that it will “vigorously defend the action and take all appropriate steps to protect the company’s interests.” The company requested a trading halt upon notice of the lawsuit, but when trading resumed, its shares closed down about 20%, or $1.00, to $3.85 apiece on strong volume of almost 900,000.