Court ruled in favor of Goldcorp on El Morro issue setting a precedent for the Codelco-Anglo dispute
27-06-2012 Diario Financiero – News
Canadian courts announced yesterday an expected judgment that might have important repercussions in Chile as experts in mining industry have stated that it would set a key precedent for the dispute Codelco and Anglo have for the ownership of the local subsidiary Anglo Sur.
Judge Herman Wilton-Siegel, Ontario, rejected the intention of Barrick Gold to block Goldcorp from purchasing a major participation in El Morro copper and gold project in Chile in 2010.
The announcement was directly made by Goldcorp as the legal document was not immediately available. “We are satisfied that the court has confirmed our position on the appropriateness of El Morro acquisition as well as its consistency with relevant agreements and Chilean law, and that the Goldcorp 70% ownership of project has been clarified for our stockholders”, the CEO Chuck Jeannes asserted.
The case started in 2009 when Xstrata called for bids to sell its 70% participation in El Morro. The contract was awarded to Barrick whose only condition was a guarantee in case New Gold, a minor stockholder would exercise its preferent purchase option for the block of shares. Nuevo Gold, lacking of the required financing looked for a partner. This is the point where Goldcorp appeared in scene by offering the necessary resources. Thus, Goldcorp provided financing for the operation and then New Gold transferred the assets to its partner and only withheld the capital gain.
The operation has many similarities with the Codelco – Anglo American dispute where Anglo American blocked the intention of the Chilean state-owned company to exercise a purchase option for a block of shares in Anglo Sur project. Codelco plans were to gather resources through an agreement with Japanese Mitsui and then transferring the property to its partner, but Anglo frustrated the operation by anticipating and selling the block of shares to another Japanese company, Mitsubishi.
Industry observers anticipate the Canadian court resolution might set a precedent on Codelco’s aspirations as to the fact that any contracts supported by Chilean law must be complied without any objections. However, experts agree that this court decision implications are complex and must be further analyzed to determine which of the parts is favored. Resolution might also have impact over current negotiations between Codelco and Anglo.
