Pathfinder Minerals Regulatory News (PFP)

19 October 2012

Pathfinder Minerals Plc("Pathfinder" or "the Company")

Pathfinder obtains declaratory judgment against General Veloso and others in English High Court

High Court rules that Pathfinder validly acquired its 99.99% interest in Mozambican subsidiary CMDN

Restoration of Trading

As previously announced, Pathfinder has brought substantive legal proceedings in the English High Court against General Jacinto Veloso, JV Consultores Internacionais Limitada ("JVC", General Veloso's company) and Diogo Cavaco (together the "Defendants") seeking, amongst other things, declarations from the English court as to the validity and effect of the agreements by which 99.99% of the shares in Companhia Mineira de Naburi S.A. ("CMDN") were acquired by the Company's wholly owned subsidiary IM Minerals Limited ("IMM").

The Company announces that, following a full-day hearing, it has today obtained judgment against the Defendants from the English High Court. In summary, the English court has given declarations to the effect that, in the light of the legal agreements and the conduct of the parties:

·; IMM acquired 280,000 shares in CMDN, representing 70% of CMDN's share capital, from Mr Cavaco and JVC in 2008;

·; IMM acquired a further 20,000 shares in CMDN, representing 5% of CMDN's share capital, from Mr Cavaco in 2009 and a final 99,998 shares in CMDN, representing 24.99% of CMDN's share capital, from Mr Cavaco and JVC in 2010; and

·; IMM therefore acquired, in total, 399,998 shares in CMDN, representing 99.99% of CMDN's share capital, from Mr Cavaco and JVC.

The Judge also granted a permanent injunction restraining the Defendants from taking any steps to interfere with IMM's rights of ownership in its shares in CMDN.

In giving his judgment, the Judge confirmed that the Defendants had submitted to the jurisdiction of the English court for the purpose of the proceedings. He also found that all the agreements were governed by English law and that Mozambique law therefore had no bearing on the determination of the issues relating to the agreements which he had to decide. 

The Judge found that none of the relevant agreements was void for illegality, as the Defendants had alleged, and held that the Defendants were not entitled to terminate or rescind any of them. He also rejected the Defendants' argument that the agreement by which the shareholders in IMM exchanged their shares for shares in Pathfinder was not binding upon them and acknowledged the inconsistency of this argument with the Defendants' continued ownership of 19.12% of the shares in Pathfinder.

The Judge also rejected the Defendants' allegation that the Company (and the other Claimants) had intended to perpetrate, and had perpetrated, a fraud on investors and the markets, by falsely presenting IMM to be the owner of shares in CMDN when in fact it was not. The Judge held that not only could this allegation not be true, given his findings that IMM had in fact acquired 99.99% of the shares in CMDN, but also that he was "entirely satisfied on the evidence that the Claimants at no time had the fraudulent intent alleged by the Defendants but instead they and the Defendants, honestly and genuinely believed, and proceeded throughout on the basis that the Claimants had acquired 70% of CMDN, certainly by [May 2008] and that this stake had thereafter been increased to 75% and then to 99.99% of [CMDN]".

The Judge found that it would be unconscionable if the Defendants were permitted to resile from the assumptions on which all the parties had operated throughout, because the result would be that Pathfinder would lose its interest in the Naburi and Moebase deposits whilst the Defendants would be left with the sole ownership and control of the projects which have since 2008 been funded and developed entirely by the Claimants.

The Defendants did not attend the hearing at the High Court. As previously announced, their defence had been struck out as a result of the Defendants having "flagrantly refused" to comply with English High Court orders. Nevertheless, the Judge gave his judgment following a full review of the evidence available to the court. As expressly stated in the judgment, the Judge proceeded on the basis that (1) the Claimants had to prove their case on the evidence available to the Court (including witness statements which had been served from Mr Cavaco and Mr Tim Horlick on behalf of the Defendants) and having regard to the allegations made in the Defendants' filed defence documents; and (2) the Claimants had to establish their case in law having regard, amongst other things, to the defences pleaded in the Defendants' defence documents. The Company is therefore pleased that its rights under English law have been examined in detail by the High Court and a full judgment given in its favour.

The Company has been advised that English court judgments are recognisable and enforceable in Mozambique. Accordingly, the Company intends to bring the English court's judgment to the attention of the Mozambique court which is currently presiding over a number of proceedings in which the Defendants allege that IMM was/is not a shareholder in CMDN on the basis that the agreements in question are not valid or binding and/or did not confer a right to acquire the shares in CMDN. The Company has been informed that there is a hearing scheduled to take place on 25 October 2012 in the Maputo court in which that court will consider as a preliminary issue, amongst other things, the question of IMM's status as a shareholder of CMDN. Although there is no guarantee that the Maputo court will give effect to the findings of the High Court, the Company believes the judgment is a clear assertion of Pathfinder's rights under the English law governed agreements which should provide compelling assistance to the Maputo court in its determination of the position. The Company also intends to take steps to have the judgment formally recognised and enforced by the Mozambique Supreme Court, although the Company is advised that this is a lengthy process during which the Defendants will have an opportunity to object. In conjunction with the actions over the ownership of CMDN, steps continue to be taken to restore to CMDN the relevant mining licences previously held by it.

The Judge has ordered the parties to make written submissions on the question of costs; the Company, as the successful party, intends to seek an order for payment of its costs by the Defendants in the usual way. The Company also intends to take steps to enforce against the Defendants and their assets in Mozambique the two previous costs orders obtained against the Defendants, which remain unpaid.

Speaking after the judgment was handed down, Nick Trew, CEO of Pathfinder, said: 

"For the sake of our loyal investors, we are very pleased that our rights have been recognised by the English High Court. It is of course deeply regrettable that the actions of the Defendants have forced us to establish our rights through the courts when we should be devoting the Company's resources to developing the project for the benefit of Pathfinder's shareholders and the citizens of Mozambique as a whole. However this latest court victory serves to reinforce our determination to take whatever steps are necessary to establish the Company's rights and to resume project development."

"In light of today's judgment, I very much hope that the Courts and Government of Mozambique will now acknowledge the wrongs which have been committed and facilitate the resumption of project development without any further delay". 

Restoration of Trading

Pathfinder Minerals announces that trading in the Company's shares will be restored at 10:50am today.

Enquiries:

Pathfinder Minerals Plc

Nick Trew, Chief Executive

Tel. +44 (0)20 7464 8413

Daniel Stewart & Company Plc

David Hart or James Thomas

Tel: +44 (0)20 7776 6550

M: Communications

Ben Simons or Maria Souvorov

Tel: +44 (0)20 7920 2340 /2327

Notes to Editors:

Pathfinder Minerals Plc is incorporated in England & Wales and is admitted to trading on the AIM market of the London Stock Exchange. 

Companhia Mineira de Naburi S.A.R.L., a subsidiary of Pathfinder Minerals, was issued mining concession licences 760C and 4623C on 13 September 2004 and 13 July 2011 respectively, each for a period of twenty-five years. Ownership of these licences is also being disputed, as announced on 3 February 2012. Taken together, these mining concessions cover approximately 32,000 hectares of land on the Indian Ocean coast of the Zambezia province of Mozambique, known to contain the heavy minerals, ilmenite, rutile and zircon.