Petaquilla Minerals Ltd PTQMF

Background on LP Ownership Dispute

[ajootian]

From pg. 5 of the Mgt. Info Circular filed yesterday:

Iberian has advised Petaquilla of the following:

• Prior to Iberian successfully acquiring the Lomero-Poyatos concession from San Telmo Iberica

Minera S.A. (“STIM”), Sigirya Capital PTY Limited (“Sigirya”) entered into a term sheet

agreement (the “TS Agreement”) with Cambridge Mineral Resources pls (“CMR”) dated

October 20, 2009, for the acquisition of mining rights in Lomero-Poyatos (leased by CMR’s

subsidiary, Recursos Metalicos SL (“RMSL”)) and mining rights in Masa Valverde (owned by

RMSL). When CMR was unable to deliver evidence of its concession title, this triggered a breakfee

claim for US$750,000.

• Iberian then entered into an agreement with Sigirya to acquire the Lomero-Poyatos and Masa

Valverde concessions, along with Sigirya’s rights under the TS Agreement, which included the

break-fee claim. Iberian chose to pursue enforcement of the break-fee against CMR by filing a

statutory claim in the United Kingdom on February 17, 2010.

• A court action was also initiated in Spain as a cautionary measure intended to secure assets of

CMR to cover the break-fee should Iberian be successful in its claim in the United Kingdom. At

the time, CMR’s only assets of value were its shares in RMSL, and the corresponding mining

rights of RMSL. Iberian filed a claim for the cautionary measure on March 29, 2010.

• After commencing the claim for the cautionary measure, Iberian learned that RMSL’s mining

rights were of little value. Namely, Iberian’s Spanish subsidiary, Corporacion de Recursos Iberia

S.L. (“CRI”), had already acquired the mining rights in Lomero-Poyatos from STIM for

US$616,444 in April 2010, the Spanish government had cancelled RMSL’s mining rights in

Masa Valverde, and the remaining mining rights of RMSL were in areas of little interest to

Iberian. Accordingly, Iberian decided that there was no value in continuing its statutory claim in

the United Kingdom and instead adjourned proceedings in April 2010.

• The court case in Spain was delayed significantly because of difficulties encountered by the

Spanish court in delivering the required notice to CMR. Given that the matter in the United

Kingdom had already been adjourned, Iberian had no real interest in continuing the court case in

Spain. The Spanish court case was finally heard on January 17, 2011. When the Spanish court

learned of Iberian’s adjournment in the United Kingdom, it decided to similarly reject the request

for a cautionary measure and issued its decision on January 24, 2011.

• Given that RMSL’s assets are of little value (consisting of only investigation permits far from

Lomero-Poyatos and of little interest to Iberian), Iberian decided that there is no value in

appealing the decision of the Spanish court or in reopening its case in the United Kingdom.

Petaquilla entered into negotiations with Iberian in November 2010. High level discussions subsequently

took place along with technical, legal and financial due diligence by both parties, and on April 5, 2011,

Petaquilla and Iberian executed a letter of intent with respect to a proposed transaction between the two

companies. After further negotiations and due diligence by the parties, on May 18, 2011, the parties

executed the Amalgamation Agreement.

From pg. 13:

Potential litigation relating to the Lomero-Poyatos property could impact future business and financial

results.

A third party has made claims in respect of certain rights over the Lomero-Poyatos property. The

Company has conducted thorough due diligence on the title of the Lomero-Poyatos property, including

obtaining an opinion of Spanish counsel which confirms that CRI has sole and exclusive ownership of the

Lomero-Poyatos concessions and the exclusive right to exploit the mineral rights in connection therewith

(see “The Acquisition of Iberian – Background”). Even though in the view of the Company’s

management such claims are unfounded and wholly without merit, substantial commitments of time and

resources by the Company’s management and employees may be required to defend such claims. The

Company may incur substantial legal fees and expenses in connection therewith, and the Acquisition may

be delayed as a result.

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So if I understand the above correctly, we now just have to sit back and see whether CMR decides to attempt to get the court to issue a stay order on the acquisition sometime in the next 21 days.  If they do and the court grants it then we are back on hold.  Would appreciate any corrections/comments on this.