LONDON (Alliance News) - Hunter Resources PLC Thursday said it has given two companies until the start of next week to transfer a controlling stake in a mining project in Peru, as the company stepped up its effort to resolve the long-running dispute.
Hunter Resources has been battling the two companies since last year after it exercised an option to acquire a 51% stake in the Pampamali gold, silver and base metal project in Peru.
However, Hunter is being forced to step up its efforts to resolve the issue as the dispute could result in the company's shares being suspended if it can not secure the stake in the project by early July - with the possibility of a lengthy legal case placing further pressure on the company.
Despite exercising that option on the first day of July 2015, Hunter is still waiting for that stake to be formally transferred to the company by the current owners of the project, H&P Contratistas Mineros SAC and CMP Compañia Minera Pampamali.
It is not clear why the stake has not been transferred, but, importantly, Hunter is not required to transfer any funds to the two companies to acquire the stake until the deal is completed.
The 51% stake is supposed to be transferred to Hunter's wholly-owned subsidiary, with the two Peruvian companies retaining the other 49% - meaning Hunter would hold the controlling interest if it ever secures the stake.
Despite warning it was considering taking legal action against the pair back in December, with little progression made since then, Hunter Resources gave the two companies one last chance to transfer the 51% stake on Thursday.
Hunter has hired a "highly qualified local agent" to expedite the process, and has given the two Peruvian firms until the close of business next Monday to transfer the stake. If that threat fails, Hunter said it will take legal action and commence formal arbitration proceedings.
If that action is taken, Hunter will commence proceedings through the American Chamber of Commerce of Peru.
However, whether the two companies give in to Hunter's demands and transfer the stake, or decide to hold out and take the dispute to court, Hunter looks set for a considerable wait.
If the companies decide to transfer the stake to Hunter before that deadline next week, it will still take up to two months to complete the "legal formalities" and formally acquire the stake, said the company.
More importantly, if Hunter is forced to take legal proceedings it could take up to 18 months for the dispute to be settled, but the company said it believes launching arbitration proceedings would "force a resolution much earlier".
The timing is integral. Back in 2014, certain AIM rules were imposed on Hunter after its shares were admitted to AIM following its reverse takeover of Gold Hunter SAC. Those rules included a condition for the company to exercise the option to acquire a 51% stake in the project, meaning the delay could now lead to Hunter infringing AIM rules.
Although the first two of three conditions concerning the option have been satisfied, Hunter said they have "not in substance been satisfied" because the third condition, which concerns the stake being transferred, has not been completed.
The first condition covers the transfer of the title of tenements covering Pampamali to Hunter's subsidiary, and the second condition requires Gold Hunter SAC own 51% of the subsidiary that holds the project.
Overall, it means neither of those two conditions have been formally satisfied until the 51% stake is transferred.
Under AIM rules, Hunter has to satisfy the first two options by July 4 or face its shares being suspended. That suggests Hunter is in for a tough time if it takes legal action as it is unlikely to resolve the issue before that date.
If Hunter's shares were suspended, it would only have six months to satisfy the conditions before its shares were cancelled. That again suggests legal proceedings could potentially lead to the company's exit from AIM.
"In the event that the shares are suspended the company will consider what other legal action is available to it and what reparations can be made by the vendors," said Hunter.
Hunter shares were trading down 11% to 0.165 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
