Mountain-West signs Lopehandia option agreement
2011-06-06 18:24 MT - News Release
Mr. Brent Johnson reports
OPTION AGREEMENT MINA PASCUA PROPERTY, CHILE
Further to the news release dated April 15, 2011, Mountain-West Resources Inc. has now entered into a written option agreement with Jorge Lopehandia and into a related historical disclosure agreement.
Pursuant to the Option Agreement, Mountain-West has acquired the right to purchase an option.
The price of purchasing the Option is 2,000 troy ounces of gold. The purchase price is payable as follows:
(a) US925,589.88, which amount Lopehandia has acknowledged receiving; (b) A further $1,000,000 within 10 days of Exchange Approval; and (c) The balance of the purchase price within 15 days of Exchange Approval which amongst other things, is to confirm the registration of the Option Agreement against the mining claims (using a price of gold of US$1,500 per troy ounce and an exchange ratio of $1.00 CDN equals $1.00 US, the balance would be $1,074,410.12).
There is no express provision in the Option Agreement for extending the period in which to exercise the Purchase Right.
Upon exercise of the Purchase Right, Lopehandia will be deemed to have been granted Mountain-West the Option to purchase 50% of the property of Lopehandia (the "Property"), as described below.
The Option is exercised by delivering a Notice of Option Exercise which must be delivered within one year of the grant of the Option and then paying to Lopehandia 7% of 18,000,000 troy ounces of gold (assuming the above gold price and exchange rates, the exercise price would be $1.89 Billion). The payment and exercise of the Option is conditional upon the delivery of a legal opinion opining, amongst other things, that the Property is free and clear of all liens, charges, encumbrances, claims, or rights of any kind whatsoever, including, but not restricted to those of the owners of any underlying mining claims.
The Option Period may be extended for one year by the payment in cash of the cost of 2,000 troy ounces of gold, as determined in the Agreement.
If Lopehandia fails to provide clear title, then all funds provided by the Company become refundable. On the other hand, if for some other reason, the Company fails to exercise either the Purchase Right or the Option, then all amounts paid to Lopehandia become non refundable.
The Property includes some Chilean mining claims that Lopehandia recently acquired and which he claims covers a portion of Mina Pascua, which is the Chilean portion of the mining deposit commonly called the Pascua Lama deposit which lies in both Chile and Argentina. Barrick Gold Corporation claims to own the Pascua Lama deposit and thus, the Mina Pascua deposit.
Lopehandia has a legal dispute with Barrick. The following is a very brief description of that dispute.
Lopehandia claims that he met John Lill, the President of a Barrick Chilean subsidiary, at the offices of the Barrick subsidiary in Santiago, Chile in late 1996 at which meeting he entered into an oral agreement pursuant to which Lopehandia agreed to sell and John Lill on behalf of the Barrick subsidiary agreed to purchase, certain mining claims. Lopehandia says that those mining claims covered a significant portion of Mina Pascua, as Mina Pascua existed in 1996. Lopehandia claims that he acquired those mining claims as a result of his due diligence of Barrick and Mina Pascua mining property areas pursuant to which he discovered in late 1995 and early 1996 some defects in Barrick's title to the Mina Pascua mining claims. Lopehandia advises that following his discovery of those defects he financed and organized the registration of his mining claims in the name of his mining engineer, Mr. Villar. Lopehandia advises that it was a common mining business practice to hold one's mining claims in the name of his mining engineer or in the name of his lawyer.
In 1996 Lopehandia informed Villar, his mining engineer of Lopehandia's proposed sale to John Lill of Barrick and authorized Villar and his wife (in Chile a husband and wife must sign mining transfer documents) to sign a sale agreement regarding such. Villar and his wife attended the office of Mr. Eduardo Avello Concha, a notary in Santiago, Chile, just before the close of business on March 4, 1997 at which time Mr. Villar and his wife hurriedly signed a written agreement to sell the mining claims being the subject of the oral agreement between Lopehandia and John Lill. Lopehandia says that Villar and his wife signed hurriedly as the office of Notary Eduardo Avello Concha was about to close. Mr. Lopehandia claims that Barrick or the lawyers for Barrick prepared the form of purchase agreement, that Barrick did not provide Lopehandia any drafts of the agreement for review, that neither Lopehandia nor Villar reviewed any drafts of the agreement and that neither Lopehandia nor Villar had a lawyer present at the signing. Neither Lopehandia nor Villar was given a copy of the signed agreement and neither Lopehandia nor Villar was paid anything for the mining claims.
After numerous requests by Villar to John Lill of Barrick Chile for a copy of the signed purchase agreement, Villar then attended the office of Notary Eduardo Avello Concha (about three months after the signing of the purchase agreement) whereat Villar was given a copy of the signed purchase agreement for the first time. Also for the first time, Villar noticed that the purchase price was 10,000 Chilean pesos (approximately $20.00 CDN). Lopehandia claims this was not the price that he agreed with John Lill. Lopehandia says that John Lill agreed to a very substantial price.
Unbeknownst to Lopehandia, just four days before the signing of the agreement, Mr. Hector Unda Llanos, a mining engineer, staked some mining claims over very much the same area (the "Tesoros claims"). Lopehandia claims that Hector Unda Llanos was the mining engineer for Barrick and staked the mining claims at the instruction of Barrick and for Barrick.
Following the signing of the purchase agreement, Barrick allowed the claims purchased from Lopehandia and Villar to expire. On the other hand, Barrick kept the Tesoros mining claims in good standing and they now form part of each of Mina Pascua and Pascua Lama deposits.
Lopehandia advises that in about 2000 Villar and Lopehandia had evidence that Hector Unda Llanos was applying to have the Tesoros mining claims transferred to a Barrick subsidiary. On March 4, 2001 at the instructions and funding of Lopehandia and for the benefit of Lopehandia, legal proceedings were commenced in the name of Villar in Santiago, Chile in the 14th Civil Court, Court Action No. C-1912-2001 against Barrick subsidiary then named Compania Minera Nevada S.A. ("CMN") asserting that the written purchase and sale agreement of March 4, 1997 was null and void. Further, the lawyers for Lopehandia and Villar sought, and on June 5, 2001 obtained, an injunction prohibiting the transfer of the Tesoros mining claims to anyone. Lopehandia says that Barrick has attempted on numerous occasions to remove the injunction but Barrick has failed each time. According to Lopehandia, the injunction as ordered by the Chile 14th Civil Court, remains in place and in full force and effect.
The Barrick 2003 Annual Information Form dated March 31, 2004 and filed in SEDAR (the AIF was also filed in EDGAR as part of the Barrick 40-F filing in the US) admits to the commencement of the Villar legal proceedings and admits to the granting of the injunction (see the top of page 71 of the Barrick 2003 AIF). Mountain-West has not located any other public disclosure of Barrick admitting to the existence of the Villar litigation and Villar injunction.
Barrick and Lopehandia also have had other legal proceedings between them. Barrick successfully sued Lopehandia for defamation in the Ontario Superior Court of Justice, Court File No. 02-CV-238169CM2 (the judgment was a default judgment meaning that Lopehandia did not attend the Court). Patrick Garver, the then General Counsel for Barrick, swore an affidavit dated February 11, 2003.
At paragraph 8, Garver stated the following: "8. One of Barrick's major mining projects is the "Pascua Lama Project" in Chile. The Pascua Lama Project is extremely important to Barrick, and represents almost one quarter of our worldwide gold reserves. That project, which will be developed through Barrick's subsidiaries or affiliates, is located at the northern end of the El Indio Belt in Chile. The Pascua Lama Project straddles the border between Chile and Argentina. Lopehandia's many false and defamatory postings are particularly troublesome to Barrick, and particularly damaging, because they call in question Barrick's title at Pascua Lama."
At paragraph 17, Mr. Garver stated the following: "17. The essence of Lopehandia's complaints appears to be that during a meeting that he allegedly had with John Lill, the then President of CMN, he conveyed confidential information to Lill regarding the "Amarillo Claims", of which he allegedly was one of the four beneficial owners. He alleges that Villar, who was the only registered owner of the Amarillo Claims, was, in effect, a "trustee" of the Amarillo Claims for the undisclosed beneficial owners. He further alleges that during his meeting with Lill, Lill agreed to pay US$3 million for the Amarillo Claims. Lopehandia claims that Villar ultimately sold the Amarillo Claims to CMN without his authority for only Cdn.$25,000 and that the public documents evidencing the sale did not reflect the actual price of the sale in order to evade taxes. Lopehandia claims that the sale is null and void under Chilean law. Lastly, Lopehandia claims that the property comprising the Amarillo Claims comprise the entire property of the Pascua Lama Project. These allegations are more fully set out in a letter dated January 23, 2001 from Lawrence Page, Q.C., who, for a brief period, represented Lopehandia."
At paragraph 18, Mr. Garver stated, "Mr. Page stressed in his letter of January 23, 2001 that there was considerable urgency associated with resolving Lopehandia's claims because, he maintained, the applicable limitation period in Chile was about to expire. Notwithstanding his assertion, no legal action has been commenced against Barrick or CMN by Lopehandia or CMFCL."
At paragraph 20, Mr. Garver stated, "Following the delivery of our counsel's letter of February 26, 2001, Lopehandia and his counsel stopped writing to Barrick and made no effort to commence legal proceedings against Barrick, either in Chile or in Canada."
Mr. Garver's February 11, 2003 affidavit does not disclose the commencement of the Villar litigation in Santiago, Chile on March 4, 2001. Mr. Garver's affidavit also does not disclose the granting of the Villar injunction on June 5, 2001. As stated above, the Barrick 2003 Annual Information Form dated March 31, 2004 and filed in SEDAR does disclose at page 71 the existence of the Villar litigation and does disclose the granting of the Villar injunction. Mountain-West needs to conduct further due diligence.
Lopehandia relies on a 2006 Judgment of the 14th Civil Court (this was a trial judgment). The judge did not believe that the written price of 10,000 Chilean pesos was the agreed upon and proper purchase price. Further, she found the purchase and sale agreement to be null and void and that certain mining claims be restituted to Villar. Lopehandia states that the Court ordered that the Tesoros mining claims be struck from the register in favour of the Amarillo North and South Mining Claims.
Various appeals and other hearings have since occurred. Lopehandia and Barrick agree that the last decision was not in Lopehandia's favour. Lopehandia says that he is appealing that decision. He says that the appeal should be heard shortly.
Barrick and Lopehandia do not agree on much more relating to the litigation following the 2006 Judgment. Lopehandia states that Barrick's and Lopeahania's views of the facts, history and evidence are diametrically opposite.
Barrick suggests that the Villar legal proceedings have been defeated (Barrick letter of March 29, 2011). Lopehandia says that the legal proceedings are ongoing. Barrick further says, "the concessions claimed by Mr. Villar are located outside of Pascua Lama's ore body." Lopehandia adamantly alleges that his mining claims cover at least 75% of Mina Pascua and probably much more.
Barrick in its March 29, 2011 letter threatened to sue Mountain-West for defamation. Mountain- West retained a very well known Vancouver lawyer specializing in the law of defamation. Many weeks ago that defamation lawyer made written requests that Barrick provide:
(a) a map setting out the deposit and the mining claims of Lopehandia and Barrick; and (b) copies of all of the Chile judgments.
Barrick has not provided the requested map nor has Barrick provided copies of all of the Chile judgments to Mountain-West or its legal counsel. On the other hand, Lopehandia has provided maps allegedly prepared by some Chile Government officials. Mountain-West needs to conduct further due diligence.
On April 15, 2011 it announced a $900,000 private placement. The funds from this private placement are to be used to fund due diligence, both past and future and for general corporate purposes. The Exchange has required that none of those proceeds be provided to Lopehandia.
Provided that Mountain-West is satisfied with the results of the due diligence, Mountain-West will need to raise at least a further approximate $2,500,000 and settle some debt in order to place itself in compliance with Exchange working capital requirements in order to place itself in a position for approval of the Option Agreement (once again, there is no guarantee that the Exchange will grant approval).
Investors and the general public are urged to note that there are many great risks relating to these entire matters. Some, but not all, of those risk factors include:
1. The Option Agreement is subject to Exchange approval. There is no guarantee that the Exchange will grant approval.
2. Mountain-West has advanced a large sum of money US$925,589.88 to Lopehandia towards the exercise of an option with Lopehandia without obtaining any security for those advances. If Mountain-West fails to exercise the Purchase Right or the Option, then all amounts paid to Lopehandia are non refundable.
3. Mountain-West may not be able to complete the due diligence private placement.
4. The further due diligence may not support the allegations of Lopehandia.
5. Mountain-West may not be able to complete the further financing required to exercise the Option and place Mountain-West in compliance with Exchange working capital requirements.
6. The matters relating to the Pascua Lama deposit and mining claims forming Pascua Lama are very complex. In particular, the issues of the title to the various mining claims are very complex. Further, the issues relating to the ongoing Chile litigation relating to the various mining claims are very complex.
7. Mountain-West has not retained legal counsel in Chile to confirm the status of the legal proceedings in Chile and to confirm the status of the various mining claims.
8. The legal issues, including the Chile litigation, may take years to be resolved. This is supported by the fact that the Chile litigation between Villar/Lopehandia and Barrick has been ongoing for approximately 10 years and it is still not resolved.
9. The mining property and mineral rights issues of the underlying mining claims may not be resolved in favour of Lopehandia.
10. Mountain-West has not yet been able to confirm Mr. Lopehandia's claim that the Mina Pascua deposit is substantially covered by his mining claims.
11. Many of the statements of Mr. Lopehandia appear to be directly contradicted by the statements of Barrick.
12. As a very senior mining company, Barrick should be considered to have well informed itself of all litigation risks.
13. Barrick has claimed in a letter dated March 29, 2011 that the March 2, 2011 news release of Mountain-West was defamatory and threatened legal proceedings. Although Mountain-West is not aware of Barrick commencing any legal proceedings, Barrick may commence such legal proceedings in the future. If Barrick does commence legal proceedings claiming defamation, it may take years to revolve. Any such litigation could be extremely expensive for Mountain-West to defend. Barrick has far greater financial resources than does Mountain-West.
We seek Safe Harbor.