31 Aug 2011 11:31
Oxus Gold plcCommencement of Arbitration Proceedings
Oxus Gold plc (Company) refers to its announced intent to commence international arbitration proceedings if settlement cannot be reached with the Government of the Republic of Uzbekistan (Uzbek Government) over the shareholder interest of the Company's subsidiary, Oxus Resources Corporation (ORC), in Amantaytau Goldfields A.O. (AGF), the joint-venture vehicle for the Company's mining investment in Uzbekistan. The Company further refers to its recent declaration of force majeure in respect of its management and services agreement for AGF and under the charter of AGF.
International Arbitration
The Company hereby announces that negotiations with the Uzbek Government have failed, and that the Company has commenced international arbitration proceedings against the Uzbek Government under the Agreement for the Promotion and Protection of Investments dated 24 November 1993 between the United Kingdom and the Republic of Uzbekistan (Agreement).
Under the Agreement, the Company and the Uzbek Government are required to pursue good faith negotiations, for a period of three months, to attempt to resolve the Company's dispute amicably. While the Company has actively sought to engage in discussions and has requested meetings with the Uzbek Government on various occasions - including a formal invitation to the President of Uzbekistan - the Uzbek Government has not made itself available to discuss the issues with the Company to date. Regrettably, therefore, the Company is compelled to resort to arbitration for a resolution.
Among other things, the arbitration asserts that the Uzbek Government treated the Company and its subsidiaries, Oxus Resources Corporation Limited and Marakand Minerals Limited (collectively the Group), unfairly and inequitably, discriminated against the Group, and failed to provide the Group with full protection and security, all in violation of the Uzbek Government's obligations toward foreign investors under the Agreement. The arbitration requests that damages be awarded in favour of the Company in an amount to be proven and quantified in the proceedings and currently estimated as no less than US$400 million.
The Company further informs that on 21 July 2011 it was served with a claim commenced by the Ministry of Finance of Uzbekistan in the English High Courts to enforce an Uzbek judgment the Ministry of Finance obtained against the Company for the payment of a US$10 million special dividend by the Company. The Company had specifically identified the payment of such special dividend by the Company as one of the several basis upon which it would challenge the Uzbek Government in the arbitration under the Agreement. The Company considers the decision by the Ministry of Finance to commence these legal proceedings in the United Kingdom as an abuse of process which is motivated by a desire to derail the imminent arbitration under the Agreement. The Company is working together with its legal counsel to contest this claim.
Force Majeure Update
The Company recently advised its shareholders that ORC was no longer able to comply with its management obligations towards AGF as a consequence of an onerous and arbitrary audit instituted against AGF by the Uzbek Government.
Since the declaration of force majeure on 18 March 2011, ORC has continuously updated AGF's Uzbek shareholders regarding the force majeure circumstances by delivering notices that: (i) reiterate ORC's desire to negotiate regarding the future of AGF; and (ii) advise them of their duty to mitigate the force majeure circumstances affecting AGF. There have been no meaningful discussions between the Company and AGF's Uzbek shareholders regarding the future of AGF.
The Uzbek Government continues to exclude Company and ORC from AGF's operations, while denying the Company and ORC access to AGF data.
The Company is continuing its efforts, with assistance from international legal counsel, to protect the interests of the Company's shareholders. The Company is pursuing all available remedies to seek appropriate redress and compensation for its losses. The Company will continue to advise its shareholders of any further material developments concerning AGF as and when they occur.
Enquiries:
Oxus Gold plc Tel: +44 (0)20 7907 2000Richard Shead
Fairfax I.S. PLCNominated Adviser and BrokerEwan Leggat Tel: + 44(0)20 7598 5368