Aber reveals $50-million offer in Winspear suit
Aber Resources Ltd ABZ
Shares issued 45,802,883 Mar 30 close $9.65
Tue 30 Mar 99 Street Wire
Also Winspear Resources Ltd (WSP) SPARKLING HARDBALL
by Brent Mudry
In an apparent high stakes hardball move, Winspear Resources made a $50-million cash-and-share offer to buy out Aber Resources' one-third interest in the Camsell Lake property, then abruptly halved Aber's interest days or weeks later after its offer was spurned, according to Aber's suit over the Northwest Territories diamond property. In a statement of claim filed Tuesday in the Supreme Court of British Columbia, Aber claims Winspear did not provide execution documents for the 1999 exploration program, contrary to its previous practice. The suit also reveals that Winspear notified Aber of its deemed non-participation in the 1999 program on March 3, almost two weeks before Winspear disclosed this remarkable development to the public.
Court filings also note Aber informed Winspear during several meetings in recent months of its intention to spin off an exploration subsidiary, Aberex Minerals. Aber intended to retain its flagship Diavik property and transfer its exploration properties, including the exploration flagship Camsell Lake interest, into Aberex. This spinoff would raise part of its share of the $12-million 1999 Camsell Lake exploration budget through a public financing, although no further details are noted. Aber's lawyer, the scrappy Howard Shapray, further notes that Aber was concerned over Winspear's level of public disclosure during the 1998 Camsell Lake program last summer and the previous year. Winspear has not yet filed a statement of defence to address the allegations. Neither of Winspear's delegated spokesmen, president Randy Turner and exploration vice-president John McDonald, could be reached for comment.
Aber filed the suit in response to the purported reduction of its 32.24 per cent interest in the Camsell Lake property by Winspear, the operator, which holds the other 68 per cent. Winspear claims Aber relinquished its full interest by electing not to contribute to the 1999 exploration program. Winspear assumed responsibility for 100 per cent of the exploration budget, purportedly boosting its Camsell Lake interest to 84 per cent and diluting Aber's interest to about 16 per cent. Winspear disclosed the move to the general public on March 15, when it noted it had delivered a letter to Aber to confirm its position.
The suit traces the Camsell Lake partnership back to Feb. 5, 1993, when Winspear entered a joint venture agreement with Amarado Resources and Commonwealth Gold. About a year later, in April 1994, Aber amalgamated with Commonwealth and acquired its 40 per cent interest in the joint venture. Winspear subsequently held the other 60 per cent, after acquiring Amarado's interest. Aber and Winspear also have a similar joint venture known as the Athenia project. The suit claims that Aber and Winspear generally dealt with each other in an informal manner, except for a stipulation that Aber approve the use of its name in any press release issued by Winspear. “As a result of concerns which arose with respect to the accuracy and completeness of public information disclosed by Winspear in 1997, Aber insisted on strict compliance” of the name-dropping clause and “prohibited the use of its name in any press release issued by Winspear,” states Mr. Shapray in the court filing.
The suit claims that in all other respects, the two had a “fundamentally informal” working relationship on the joint venture. “Winspear has been continuously in default of its obligations to produce quarterly and annual reports as and when required under the joint venture agreement and, in spite of such defaults, Aber has not insisted upon strict compliance with these reporting requirements or exercised its remedies,” states Mr. Shapray. The lawyer also notes the partners approved budgets and exploration programs in an informal manner and they have previously waived the requirements of the formality of written notice. This pattern of notice is particularly crucial to the dispute between the two companies. Aber notes that in the informal partnership practice, Winspear, as operator, would deliver a proposed budget and exploration program prior to the joint venture management committee meeting which would formally approve the exploration program. After the partners discussed a preliminary review of the proposed budget and exploration program, Winspear would call a management meeting and obtain Aber's verbal position on its participation in the upcoming program. Winspear would then prepare and cirulate the respective execution documents, which included a place for the partners to formally acknowledge their acceptance of the budget and exploration program. Mr. Shapray claims that Winspear did not have a practice of requiring written notice of Aber's election to participate in the upcoming exploration program. The lawyer notes the execution documentation sometimes include a place for Aber to sign to confirm its participation intention, and sometimes it did not. The suit also alleges that if a joint venture partner elected not to participate, Winspear would required confirmation in writing.
Aber notes that in accordance with this informal practice, both it and Winspear elected to fully participate in the Camsell Lake exploration programs adopted by the management committee for the years 1995, 1996 and 1997, in direct proportion to their respective interests. The suit notes that Aber elected to opt out for 1998 exploration season. In December 1997, when Aber and Winspear still held their 40 per cent and 60 per cent interests in the joint venture, Winspear presented a proposed 1998 exploration program and budget. At the management committee meeting on Dec. 22, 1997, Aber informed Winspear that it might not elect to participate in the 1998 Camsell Lake program, although it intended to continue participating in the Athenia joint venture. Mr. Shapray notes that in accordance with the informal procedure, Winspear did not require written confirmation of Aber's Athenia participation, but did ask Aber to confirm in writing its non-participation in Camsell Lake.
Aber subsequently sent this confirmation on Feb. 2, 1998, noting it had elected not to finance its $2.68-million pro rata share of the Camsell Lake venture. The suit notes that Winspear asked Aber to acknowledge in writing its approval of the Athenia budget, but it did not ask Aber for written confirmation of its Athenia participation. The next day, on Feb. 3, 1998, Winspear issued a press release confirming Aber's non-participation in the Camsell Lake program for 1998.
With this partnership history in perspective, Aber traces its version of the Camsell Lake development in the past year. Aber notes the Camsell Lake exploration results were positive, prompting Winspear's wish to implement a supplementary exploration program to follow up on the positive results. Mr. Shapray notes that during July 1998, a dispute arose between Aber and Winspear over the public disclosure made by Winspear regarding the 1998 results and over the details of the proposed supplementary program. Aber was also unhappy with the manner in which Winspear called a management meeting on July 21, 1998, at a time and place when Winspear allegedly knew that Aber officials could not attend. The purpose of this meeting was to consider the supplementary program budget for additional exploration work. The meeting went ahead on this date, without any Aber representatives, and Winspear purported to approve its supplementary program. After Aber protested this meeting and after discussions between the two companies, five days later Winspear withdrew the 1998 supplementary program and budget. Winspear also advised Aber both orally and in a July 26, 1998, letter that it regretted holding the meeting in Aber's absence and pledged to work diligently to “develop a cordial relationship” to ensure the progress of the joint venture. Winspear also advised Aber it planned to retain an independent expert to review the results of the 1998 exploration program and the diamonds recovered. Aber claims it relied afterwards on the July 26 representations as an assurance of “good faith and fair dealing” by Winspear on the Camsell Lake venture.
The suit notes that both parties agreed that after the initial 1998 program, further exploration work was warranted, but Aber considered its consent was necessary. The two companies subsequently entered into an agreement on Aug. 21, 1998, to allow for the adoption of a supplementary exploration program for the summer and fall of 1998. Under this agreement, both Aber and Winspear elected to pay their proportional share. After the conclusion of the 1998 exploration programs, Winspear held a 67.76 per cent interest in the Camsell Lake venture and Aber held a 32.24 per cent interest.
The partners had a management committee meeting on Dec. 16, 1998, to consider the 1999 exploration program and budget. “At that meeting, Aber orally notified Winspear that Aber elected to participate in the 1999 exploration program and asked Winspear whether Winspear required Aber to sign any document in that regard,” states Mr. Shapray. The Aber lawyer notes that unnamed Winspear officials stated words to the effect that no such documentation was then required, and a copy of the approved 1999 budget and exploration program would be sent to Aber. The suit claims that despite these good-faith representations, Winspear did not subsequently prepare and deliver Aber with any document for execution to further confirm Aber's election to participate in the 1999 program, or its approval or acknowledgement of the 1999 budget and exploration program. The suit claims the “purport and intent” of the Dec. 16 representations was to induce Aber to rely on the informal practice, especially the practice of only signing and delivering to Winspear any confirming documents which Winspear prepared. On Dec. 18, 1998, Winspear delivered a copy of the adopted budget and exploration program to Aber. Contrary to the informal practice, however, Winspear did not include any execution documentation. Aber claims that in several meetings between the Dec. 16 management meeting until February, it orally reiterated and confirmed to Winspear that it elected to participate in the 1999 program. Aber also informed Winspear of its proposed Aberex spinoff.
During these discussions, Winspear and Aber also discussed the possible sale of Aber's interest in the Camsell Lake venture to Winspear. Sometime in February, on a date undisclosed in court filings, Winspear director Hugh Morris requested a meeting with Aber president and chief executive Ken Hanna, to propose that Winspear purchase Aber's interest in the Camsell Lake venture for approximately $50-million in cash and Winspear shares. Mr. Hanna declined Winspear's proposal. Some days or weeks later, Winspear dropped its March 3 bombshell on Aber, repudiating Aber's participation and claiming Aber elected not to be involved in the 1999 program. The suit seeks a declaration that Aber has the right to participate in the 1999 budget and exploration program, or an order against forfeiture of Aber's right to participate. Aber claims that Winspear has been “motivated by malice and ill will towards Aber” resulting from the 1998 dispute and the spurning of Winspear's $60-million buyout offer.
© Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
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