Mozambique Court Update

RNS Number : 5717U

Pathfinder Minerals Plc

08 April 2016

 

Embargoed: 0700hrs 8 April 2016

Pathfinder Minerals Plc

("Pathfinder" or the "Company")

Mozambique Court Update

The Board of Pathfinder announces that the First Commercial Section of the Judicial Court of the City of Maputo (the "Maputo Court") has recently handed down judgment (the "Maputo Judgment"), on a preliminary issue raised in one of the various outstanding legal actions pending in Mozambique, declining to hear a challenge brought by the Company's subsidiary, IM Minerals Limited ("IMM"), to the validity of a shareholder resolution of Companhia Mineira de Naburi SARL ("CMDN"), purportedly passed in May 2009 (the "May 2009 Resolution"), further details of which are provided below.

The background to the Maputo Judgment is that, as previously announced, there are a number of legal actions pending in the Mozambique courts in which the key issue of the ownership of CMDN by IMM arises. These actions include a challenge by IMM to the May 2009 Resolution. The May 2009 Resolution purports to evidence confirmation by the shareholders of CMDN that an earlier alleged agreement, purportedly made between Jacinto Soares Veloso, J.V. Consultores, Limitada ("JVC"), Diogo Cavaco (the "Defendants") and CMDN and dated 27 February 2006 (the "2006 Agreement"), should apply to mining concession licence 4623C, known as the "Moebase Licence", which was then in the process of being acquired from BHP Billiton using funds provided by IMM, as well as to licence 760C.

Absurdly, a term of the 2006 Agreement, the authenticity of which Pathfinder strongly disputes, was that it had to be kept secret by the Defendants from the board of CMDN (on penalty of US$1 million) unless and until one of the Defendants ceased to be a director of CMDN. The 2006 Agreement provides, broadly, that CMDN is obliged to transfer licence 760C to JVC in the event that: (a) US$2 million is not paid by CMDN to JVC; or (b) the project is not progressed to export, both within 5 years of the agreement. The 2006 Agreement further absurdly provides that, in that event, the sum of US$100 million will be paid by CMDN to JVC.  

Neither the 2006 Agreement nor the May 2009 Resolution had been disclosed to the Company or to its Directors prior to February 2012, despite representations having been received from the Defendants that there were no undisclosed material contracts. The Company has disputed the authenticity of the 2006 Agreement and the May 2009 Resolution and, amongst other actions, commenced an action in the Mozambique courts to seek annulment of the May 2009 Resolution.  The Defendants raised, as a preliminary issue in that action, the question of IMM's status as a shareholder of CMDN to challenge the validity of the May 2009 Resolution. Following a hearing in Maputo in May 2013, the Company was notified by the Maputo Court on Wednesday (an English translation of which was received yesterday) that judgment had been delivered on the preliminary issue. 

The Maputo Judgment determines, in summary, that IMM was not a shareholder in CMDN in May 2009 and does not therefore have legal standing to bring an action for the annulment of the May 2009 Resolution.  In reaching this conclusion the judge appears to have found that:

·     the effect of an agreement entered into in 2006 (the "Share Option Agreement") was that IMM would only become a shareholder of CMDN after it had paid the full amount referred to in the agreement.  As that payment had not been made, IMM did not acquire shares in CMDN; and

·     the judgment delivered by the Mozambique Court on 21 October 2013 (the "October 2013 Judgment"), which found that IMM was not a shareholder in CMDN, was binding on IMM.

In giving judgment, the Maputo Court appears to have disregarded the fact that the Share Option Agreement is governed by English law and that its validity and effect have already been determined by the English Court in a judgment which found that IMM validly acquired 99.99 per cent. of the shares in CMDN, including under the Share Option Agreement. The Judgment is also inconsistent with two previous judgments of the Mozambique court delivered in October 2012 and December 2014 (the "December 2014 Judgment"), in which IMM's challenges to certain resolutions purportedly passed by CMDN's shareholders without the knowledge of IMM, its 99.99 per cent. shareholder, were upheld and IMM's ownership of CMDN at that time (9 December 2011) was expressly confirmed.

In finding that the October 2013 Judgment was res judicata and binding on IMM, the Maputo Judgment also contradicts the December 2014 Judgment as well as a previous judgment of the Mozambique Supreme Court, both of which determined that the October 2013 Judgment was not res judicata and binding on Pathfinder/IMM because Pathfinder/IMM were not a party to the proceedings in which the judgment was given.  Those proceedings were brought by the Supervisory Board of CMDN and the defendant to that action was CMDN, both of which were under the de facto control of the Defendants, who unsurprisingly determined not to provide a defence to their own action.  This led to the facts presented by the Defendants simply being accepted by the court. 

In light of these defects, the Company has instructed its lawyers in Mozambique to appeal the Maputo Judgment.

Speaking after the judgment, Nick Trew, CEO of Pathfinder, said:  "The Company has binding judgments in its favour from both the English and Mozambique courts that it validly acquired 99.99 per cent. of the shares in CMDN and that it was at all material times a shareholder of CMDN. We will appeal this latest judgment and continue to take all active steps in the courts and through other channels to seek recovery of the Licences for the benefit of Pathfinder and its shareholders and I remain very grateful to the Company's shareholders for their continued support."

Enquiries:

Pathfinder Minerals Plc

Nick Trew, Chief Executive

Tel. [phone]

WH Ireland Limited (Nomad and Broker)

Paul Shackleton or Mark Leonard

Tel. [phone]

Vigo Communications

Ben Simons or Ali Roper

Tel. [phone]

Email. [e-mail]

Notes to Editors:

Pathfinder Minerals Plc is incorporated in England & Wales and is admitted to trading on the AIM market of the London Stock Exchange.

Companhia Mineira de Naburi S.A.R.L., a subsidiary of Pathfinder Minerals, was issued mining concession licences 760C and 4623C on 13 September 2004 and 13 July 2011 respectively, each for a period of twenty-five years. Taken together, these mining concessions cover approximately 32,000 hectares of land on the Indian Ocean coast of the Zambezia province of Mozambique, known to contain the heavy minerals, ilmenite, rutile and zircon.

As announced on 3 February 2012, ownership of these licences is being disputed.

 

END

 

 

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