Update Regarding Rio Tinto Litigation Star Diamond Provides Update Regarding Rio Tinto Litigation 08/11/2020 07:00 AM ET
Stock Symbol: TSX: DIAM
SASKATOON, SK, Aug. 11, 2020 /CNW/ - Star Diamond Corporation ("Star Diamond" or the "Corporation") today provided an update in connection with its ongoing legal proceedings (the "Legal Proceedings") against Rio Tinto Exploration Canada Inc. ("RTEC") related to RTEC's purported exercise in November 2019 of its four options under the Option to Joint Venture Agreement dated June 22, 2017 (the "Option Agreement"). Yesterday, the Court of Queen's Bench for Saskatchewan (Judicial Centre of Saskatoon) released its decision (the "Decision") on the interim injunction application that had been brought by Star Diamond as one step in the Legal Proceedings.
In the Decision, the Court found that Star Diamond had successfully met its onus of establishing a serious issue to be tried in the Legal Proceedings with respect to each of the following key claims advanced by Star Diamond:
-- that RTEC did not validly exercise the second, third or fourth option in accordance with the Option Agreement; -- that RTEC engaged in misrepresentation about both the costs associated with RTEC's work under the Option Agreement and about RTEC not exercising its options until results were available from the bulk sample cutter holes excavated by RTEC in 2019; and -- that RTEC breached its duties of good faith and honest dealing in that RTEC exercised its discretionary powers to deliberately undermine Star Diamond's contractual interests and dilute Star Diamond's interest in the joint venture, and that RTEC misled Star Diamond as to when it would exercise the options so as to form the joint venture.
While each of these claims will ultimately need to be assessed and determined by the Court at the hearing on the merits in the Legal Proceedings, Star Diamond is pleased that the Court recognized, at this preliminary stage, that these claims represent serious issues to be tried at the merits hearing. Star Diamond cautions that there can be no assurance that the Court will find in the Company's favour on these issues at the hearing on the merits. Star Diamond also cautions that, at this preliminary stage in the Legal Proceedings, none of these claims had yet reached the stage of constituting a strong prima facie case, as the Court noted in the Decision.
As the Court stated in the Decision, after the interim injunction application was brought by Star Diamond, RTEC agreed, as part of its response to the injunction application, that RTEC would not call and/or conduct any meeting of the management committee under the RTEC/Star Diamond joint venture agreement (the "JV Agreement") for a period of 120 days following RTEC completing the processing, diamond recovery and reporting of all diamond results on the samples previously taken from the 10 cutter holes completed on the Star Kimberlite by RTEC during 2019. Relying on RTEC's commitment during the hearing of the injunction application that this represented an undertaking of RTEC to the Court, the Court ultimately determined, after taking account of the balance of convenience between Star Diamond and RTEC, that an interim injunction would not be granted, which would have extended the prohibition on RTEC calling and/or conducting a meeting of the management committee until a further five cutter holes on the Orion South Kimberlite were drilled and fully reported on, as had been requested by Star Diamond.
In the result, RTEC will be prohibited from calling and/or conducting any meeting of the management committee under the JV Agreement for a period of 120 days following RTEC completing the processing, diamond recovery and reporting of all diamond results on the samples previously taken from the 10 cutter holes completed during 2019.
As previously disclosed, Star Diamond currently expects that all or substantially all of the bulk samples from the ten cutter holes collected during 2019 will be processed by RTEC during calendar 2020, provided that there are not any unexpected material delays in this process including issues arising from COVID19. However, even if the processing by RTEC of these samples is completed during calendar 2020, the timing for the completion of diamond recovery and reporting of all diamond results from these samples remains uncertain and may take longer.
The Court has not yet established a timetable for the hearing on the merits in the Legal Proceedings or the various pre-trial steps that will precede it. Star Diamond will provide further updates on the Legal Proceedings as developments warrant.