The Shahuindo project in northern Peru may contain 1.5 million oz of gold and 35.0 million oz of silver, making it potentially a very profitable undertaking for its owner. The deposit certainly lies in the right spot, located between the Yanacocha mine (709 km to the north) and Lagunas Norte mine (25 km to the south).
SULLIDEN EXPLORATION of Montreal bought a 100% interest in the Shahuindo property in November 2002 from COMPANIA MINERA ALGAMARCA. The deal cost US$4.1 million payable over two years. Part of the agreement was that SOCRATE CAPITAL could buy up to a 30% interest for an initial payment of US$1.5 million. Socrate earned its interest in July 2003.
However, the legitimacy of Sulliden's purchase contract was soon before the Peruvian courts. New shareholders at Algamarca objected to the sale of the Shahuindo deposit. The Canadian company began its defence by naming as its VP corporate development and legal affairs a well-known Peruvian lawyer in August 2003. The case rambled its way through the court system. First one ruling went against Sulliden, and then the judge in the case was declared "legally incompetent" in November 2003, and his ruling was set aside.
At the end of May 2004, Sulliden announced that it had made the final payment to Algamarca. The legal uncertainty must have made Socrate Capital nervous because it sold its 30% interest back to Sulliden in June 2004.
Meanwhile, the company put the Shahuindo ownership question before an arbitrator in Lima. Arbitration was interrupted at least twice but eventually handed down a ruling favourable to Sulliden in June 2006. It was appealed to the Supreme Court, which upheld Sulliden's title to the Shahuindo property in May 2007.
Now things get really sticky. In June 2007, it was revealed that an entity known as the Sanchez Paredes Group had filed criminal charges against Sulliden in March 2007 for various frauds related to title transfers. And it comes to light that CENTURY MINING of Blaine, Washington, has bought up 100% of Algamarca. A press release issued by Century insists that the Peruvian courts did not rule in Sulliden's favour (which is not the same as saying they ruled in Algamarca's favour).
The latest salvo in this war is Algamarca's motion to the Commercial Chamber of the Superior Court of Lima to set aside the arbitration award in Sulliden's favour. On August 15, 2007, Century issued a press release saying the commercial chamber ruled in Algamarca's favour, setting aside the award to Sulliden.
Century president and CEO Margaret Kent (a.k.a. Peggy Witte) is patting herself on the back over this "victory", but she might want to consider the two lawsuits filed by Sulliden in Canada. One involves enforcement of the arbitration decision. The other could be worth over US$200 million and has been filed against Algamarca, Century Mining and Sanchez Paredes.
The gold at Shahuindo will still be there when the army of lawyers who are certainly involved finish their legal contortions. Don't hold your breath; resolution of this question won't come any time soon.
Comments