Inca Pacific Files Magistral Claim
27 October 2010 - 4:34AM
Marketwired
Inca Pacific Resources Inc. (TSX VENTURE: IPR) ("Inca Pacific" or
the "Company") reports that the Company's subsidiary, Minera Ancash
Cobre S.A. ("MACSA"), officially filed its claim with the
arbitration panel as part of the dispute with Activos Mineros
S.A.C. ("Activos Mineros") over the Magistral Transfer Agreement.
The Transfer Agreement governs the privatization terms for 5 of the
26 concessions controlled by MACSA that host the Magistral
copper/molybdenum deposit.
MACSA's arbitration complaint includes the following terms:
1. First Claim: That the arbitration panel declares invalid the
termination claim of the Transfer Agreement by Activos Mineros on
December 1, 2009.
2. Second Claim: That the arbitration panel declares that, the
execution of the Performance Bond in the amount of US$3,000,000
which was in place to guarantee the investment commitment by MACSA
under the Transfer Agreement for expenditures incurred from 2008 to
2009, constitutes a breach of contract by Activos Mineros.
3. Third Claim: That the arbitration panel orders Activos
Mineros to pay MACSA US$3,000,000 (plus accrued interest)
corresponding to the amount charged as a result of the undue
execution of the Performance Bond requested by Activos Mineros.
4. Fourth Claim: That the arbitration panel terminates the
Transfer Agreement due to serious breach of contract by Activos
Mineros with respect to its obligations under the Transfer
Agreement.
5. Fifth Claim: That the arbitration panel orders Activos
Mineros to pay MACSA approximately US$195 million for the damages
caused by the illegal termination of the Transfer Agreement.
6. Sixth Claim: That the arbitration panel orders Activos
Mineros to pay the legal expenses and fees that may arise from the
arbitration proceeding.
The dispute with Activos Mineros relates to the investment
commitment that MACSA was required to spend on the Magistral
project for the period March 1, 2008 to February 28, 2009. During
this period, MACSA was required to spend US$9,676,769 representing
80% of the annual investment commitment (US$12,095,962). In
conjunction with this commitment, MACSA posted the US$3 million
performance bond. In June 2009, PriceWaterhouseCoopers forwarded to
Activos Mineros the results of the first year audit which showed
that MACSA and its related companies incurred US$15,124,482 in
expenditures.
Activos Mineros rejected expenditures not incurred by MACSA
directly as well as disputed the investments incurred by MACSA and
its related companies. The Transfer Agreement is clear that the
requirement is to spend 80% of the investment commitment towards
credible expenditures on the Magistral Project. The Transfer
Agreement does not specify that the expenditures have to be made
only through MACSA; and under Peruvian law, related companies like
the parent Inca Pacific, are able to incur expenditures.
MACSA actively tried to resolve the dispute with Activos Mineros
up to the point when Activos Mineros executed the US$3,000,000
Performance Bond. Upon execution of the Performance Bond, MACSA
informed Activos Mineros they were in breach of the Transfer
Agreement. As permitted under Peruvian law, MACSA is allowed to
suspend all obligations under the Transfer Agreement until a breach
has been cured. Activos Mineros disagreed with the breach and
requested that the Company post the second year performance bond in
relation to the second year investment commitment. Given the
disagreement over the expenditures for the first year and the
breach of the Transfer Agreement, the Company did not post the
second year performance bond. On December 1, 2009, Activos Mineros
illegally terminated the Transfer Agreement.
Despite the seizure of the Performance Bond and the illegal
termination of the Transfer Agreement, the Company was hopeful a
solution could be reached between the parties. The lack of interest
by Activos Mineros to discuss the dispute led the Company to
initiate arbitration proceedings in March 2010. Recent action by
the Government of Peru to put the Magistral property out for public
tender while the arbitration proceedings are taking place suggest
that the Government has little regard for the arbitration process.
In addition, Activos Mineros and ProInversion have continually
inflamed this dispute by spreading false information with respect
to MACSA within the Conchucos Community. MACSA has invested US$40
million in Magistral, and up until recently enjoyed a very good
relationship with the Conchucos Community and was dedicated to
seeing Magistral brought into production.
MACSA and the Company will continue to work for a solution
through the arbitration proceedings as well as through continued
dialogue with the government. In addition, the Company continues
with exploration plans to evaluate the 12,750 hectares of mining
concession surrounding the five core claims. Even though the claims
in dispute constitute the core of the known mineralization, they
represent less than 2% of the entire property area which remains
highly prospective for a variety of mineralized systems.
About Inca Pacific
Inca Pacific is a mineral exploration company with an
experienced team dedicated to preserving its rights and investment
in the Magistral Project, seeing the Magistral developed, and
evaluating additional opportunities in the Magistral district.
INCA PACIFIC RESOURCES INC.
Michael D. Winn, CEO & Director
Forward-Looking Statement - Some of the statements in this news
release contain forward-looking information that involves inherent
risk and uncertainty affecting the business of Inca Pacific
Resources Inc. Actual results may differ materially from those
currently anticipated in such statements.
Neither the TSX Venture Exchange nor the Investment Industry
Regulatory Organization of Canada accepts responsibility for the
adequacy or accuracy of this release.
Contacts: Inca Pacific Resources Inc. Julia Maxwell Investor
Relations 604 687-3727 Jmaxwell@incapacific.com
www.incapacific.com
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