St. LOUIS () -- In a press release yesterday, Banro Corporation [AMEX:BAA; TSX:BAA] clarified some "confusion" created in the market-place as a result of public statements made by La Quinta Resources Corporation [TSXv:LAQ] regarding properties located in the Democratic Republic of the Congo (DRC).
On March 14, La Quinta Resources reported that the Commercial Court of the DRC awarded the company licence areas totalling over 7,010 square kilometres, in Maniema and South Kivu Provinces in South Eastern DRC, refuting claims by Banro to uphold a prior agreement over the property. The Court also found for costs and damages totalling $200,000.
After the news, Banro's stock promptly fell 35 cents to close $11.47 on March 14. Shares touched a low of $10.98 on Monday, but have since recovered to $11.70, closing up 27 cents yesterday on AMEX.
Banro responded to La Quinta yesterday, saying that the company's four gold projects, Twangiza, Lugushwa, Namoya and Kamituga, which consist of a total of 13 exploitation permits, will not be effected in any way. La Quinta has applied for properties located between the company's Lugushwa and Namoya projects, and the titles to which are not in question.
Furthermore, Banro said the dispute also does not affect in any way the 14 exploration permits that were recently acquired, which are located between the Twangiza and Kamituga projects and between the Kamituga and Lugushwa projects.
Martin Jones, VP Corporate Development for Banro, confirmed with RI that the disputed ground has nothing to do with its four projects or 14 exploration permits. He added that the claim amount of $200,000 was "very confusing."
In 2003, shortly after implementation of the New Mining Code, Banro submitted applications for 23 exploration permits (PRs) covering ground between the company's Lugushwa and Namoya projects - the disputed ground.
Soon after filing these applications, the company was advised that WB Kasai Congo SPRL (WBK), a private DRC company, had claimed priority to the land based on applications for ZERs (Zone de Researches Exclusive) filed under the Old Mining Code in 1999.
In 2005, WBK approached Banro seeking to joint venture the disputed land, whereby Banro decided to enter an agreement with the company in the event that WBK would be successful in its claim for priority, according to Banro. The agreement was subject to WBK obtaining title to its PR applications.
Banro Congo agreed to pay approximately $113,000 over a 4-year period in addition to providing management and capital to develop the property. After which, Banro would hold 85% of the JV, with WBK holding the other 15%.
WBK subsequently repudiated its agreement with Banro Congo, entered into an agreement with La Quinta and filed a lawsuit against Banro for ownership of the property.
Glen Watson, President of La Quinta, told Resource Investor that there was never any formal agreement in place and Banro failed to produce any such agreement in court.
"I think we caught them with their pants down," he said.
Watson said Banro and WBK met to discuss an agreement in 2005, but never concluded anything. He said Banro failed to produce any valid agreement in court.
Jones said the court's judgement caught Banro by surprise, most especially the awarding of $200,000 in damages. WBK was not in possession of title certificates during the period in question and thus the lawsuit and damages are unsubstantiated, he said.
According to Jones, WBK tried to renegotiate for more money in 2006. After Banro refused, WBK negotiated a new agreement with La Quinta.
Watson said Banro did not fulfill its side of the deal, and has thus far paid WBK only about $5,000 of the $113,000.
He said WBK has had rights to the land since the 90s, and has now received the final completed licences for all 32 of the disputed claims.
The area totals some 7,010 square kilometres, occupying all the ground between Banro's Lugushwa, which hosts 2.7 million gold ounces of Inferred resources, and Namoya properties which hosts 691,000 ounces of Indicated and 583,000 ounces of Inferred resources, in the south of the Twangiza - Namoya gold belt.
"At the end of the day, it's a big prize and they're going to put up a fight, but we're going to put up a bigger fight," said Watson.
Banro plans to appeal the court's judgment. More on this as it develops.
