Fresnillo dodges silver bullets in legal case

9th May 2011 08:39

Mexican precious metals miner Fresnillo said the most serious claims for damages made against it by Vancouver-based MAG Silver have been dismissed by an arbitration panel.MAG, Fresnillo's joint venture partner in the advanced exploration stage Juanicipio silver project in Mexico, had accused Fresnillo of foot-dragging in the execution pace or performance of drilling at the project.The arbitration panel formed according to the Arbitration Rules of the International Chamber of Commerce rejected this claim and with it MAG's request that Fresnillo pay up to US$61m in damages to MAG. The panel also chucked out MAG's request that Fresnillo be ordered to sell or transfer its equity participation in the Minera Juanicipio joint venture to MAG.The panel upheld certain other MAG claims, including claims related to Fresnillo's announcement in December 2008 that it intended to make an unsolicited bid to acquire MAG. Fresnillo's intention to do so was based on the interpretation by external legal advisers of a certain clause in the joint venture agreement with MAG, but the panel came to a different interpretation, and therefore ordered Fresnillo to reimburse MAG for legal fees of US$1.86m incurred as a result of MAG's bid defence preparation.The cost of the arbitration was US$775,000. The arbitration panel ruled that each party should pay 50% of the arbitration cost and bear its own legal costs. ---jh