Langlois Secures Major Arbitration Victory for Junior Mining Company Canadian Royalties
Langlois Kronström Desjardins recently secured a major victory for its long-standing client, Canadian Royalties Inc., in an on-going dispute with its joint venture partner, Ungava Minerals.
Canadian Royalties is the majority owner and operator of a nickel-copper-PGE property in the Ungava region of Quebec. Canadian Royalties has earned-in to partial ownership of the property, formerly wholly-owned by Ungava Minerals, under the terms of an option and joint venture agreement concluded in 2001.
The agreement stipulates that Canadian Royalties is entitled to an additional 10% right, title and interest in and to the property upon completion of a bankable feasibility study acceptable to a financial institution for the purposes of putting the property into commercial production on a non-recourse basis. Additionally under the terms of the agreement, a joint venture is then deemed to have been formed, with each partner being required to contribute to its pro-rata share of going forward expenses on the property.
In September, 2007, a dispute arose when Canadian Royalties completed a bankable feasibility study and sought to be vested with the additional 10% ownership interest in the property. Ungava Minerals challenged Canadian Royalties entitlement to vesting on numerous grounds, including that the BFS prepared for Canadian Royalties was deficient, premature, included a deposit not found on the joint venture property, was not bankable and had not been accepted for financing by a bank.
With the assistance of Langlois Kronström Desjardins, Canadian Royalties brought the matter to arbitration, which was vigorously contested by Ungava Minerals. After a multitude of preliminary proceedings, during the months of June to September, 2008, an arbitration hearing lasting approximately twenty-five (25) days took place, at which time CRI and Ungava Minerals tendered their evidence (consisting of almost twenty (20) witnesses in the aggregate, including multiple expert witnesses, and thousands of pages of exhibits) and advanced their respective arguments and cases.
On April 1, 2009, the arbitrator rendered an award accepting all of Canadian Royalties principal claims for relief. In so doing, the arbitrator declared that Canadian Royalties was entitled to an additional 10% right, title and interest in and to the property, and declared that the joint venture had been formed in September, 2007, when Canadian Royalties delivered the BFS to Ungava Minerals.
The 250 page decision of the arbitrator addresses a number of important issues of relevance to stakeholders in the global mining industry. It clarifies the meaning of “bankable feasibility study”, the notions of “bankability” and “acceptance of a bankable feasibility study” by a financial institution. In so doing, it canvasses complex factual and legal issues related to mining project finance and option-joint venture agreements in common use in the industry and, as such, constitutes one of the few global precedents on the subject.
Langlois Kronström Desjardins, with a team led by Dimitri Maniatis and composed of Marc-André Sansregret, Stéfan Chripounoff and Vincent de l`Étoile, is pleased to have acted for Canadian Royalties in this important case.