Firms Go to Arbitration Over Failed Gold Mining License Deal

Despite touting its Cambodian venture on the Frankfurt Stock Exchange (FSE), a British registered mining firm’s plan to extract gold in Ratanakkiri province has stalled and the firm may face legal action over a failed deal to obtain an exploration license.

Astra Resources Plc. has also gone ahead with making a string of promising announcements to the market in Germany, including the estimation of a large gold resource in Ratanakkiri, even though it has undertaken absolutely no exploration work in the area.

In a statement in October 2011, one month after it launched its initial public offering, Astra Resources said it had paid a 10 percent deposit toward a license to mine on 222 square km of the province’s land in O’yadaw district.

The firm’s CEO, Jaydeep Biswas, was also quoted in the statement estimating that there was 350,000 ounces of gold at the O’yadaw site and claiming that extraction would begin within a year of the deal’s completion, which he expected to be wrapped up in December 2011.

But since then, no mining work has taken place and extraction still seems a long way off. The claims made by the company also raise questions about the legitimacy of the firm’s public announcements regarding its operations in Cambodia, mining experts said.

Astra signed a joint venture agreement with Australian firm Petone Mining (Asia) Pty. Ltd. in 2011 to obtain the Ratanakkiri exploration license from Vietnamese company Nam Hai Mineral Joint Stock Company at a cost of roughly $3 million.

But, Paul Menere, CEO of Petone Mining, said this week that his company had never received the money from Astra for the license, and that Petone was now seeking legal action after Astra refused to pay.

“They [Astra] have terminated the contract with Petone and we are proceeding with legal action to enforce the sale,” Mr. Menere said, adding that Petone was looking to enter the arbitration process in Australia, where Astra has offices, for breach of contract.

In a statement yesterday from Astra’s Phnom Penh lawyers Gordon & Associates, the firm confirmed it had terminated the joint venture, but called Mr. Menere’s complaints “frivolous and without merit.”

“The termination by Astra Cambodia was entirely due to the complete failure by Petone Mining (Asia) Pty. Ltd. to fulfill its obligations to the joint venture, specifically in not being able procure a mining license….”

The statement also claimed that Astra was continuing to pursue the acquisition of the exploration license in Cambodia.

Hem Vanthan, director of the Ratanakkiri provincial department of industry, mines and energy, said he was unaware of a company by the name of Astra. “But the Vietnamese company, Nam Hai, is still progressing with its feasibility study research and exploration,” he said.

Astra Resources’ website still lists the O’yadaw site among its projects—which also include mining projects in Nigeria, India, the Philippines and Australia, as well as a Hungarian project in which it purports to be producing an extra strong alloy called “T-steel.”

The website also hosts a preliminary report on the O’yadaw project by geologist Michael Leu, and claims that the cost of extracting gold from the project is estimated at $670 per ounce.

Mr. Menere, of Petone Mining, said that he had arranged the geologist’s report two years ago, and claimed that Mr. Leu, who is now out of the country, was unhappy with how his research had been represented by Astra. “He does not want to be associated with the website,” Mr. Menere said.

Richard Stanger, president of the Cambodian Association for Mining and Exploration Companies, said that he was unfamiliar with Astra’s circumstances, but said that it was “not realistic” to make estimates about a gold resource before drilling commences.

“They don’t know how much gold there is, they don’t know what the metallurgic material is like and how hard it will be [to mine],” he said.

According to Bloomberg data, Astra had a market capitalization of 2.53 billion euros, or about $3.14 billion, when trading of its shares were unexpectedly suspended in May, after the Frankfurt bourse announced that it was planning to close the part of the exchange on which Astra Resources was listed by the end of 2012.

A statement at the time from Deutsche Borse explained that the closure of that part of the FSE —where Astra was listed—had “the lowest transparency requirements” and “has experienced suspected cases of market manipulation multiple times.”

Astra released a statement at the time saying its suspension was “not reflective of any lack of solvency of Astra, nor is it reflective in any manner of any business activity being conducted by Astra.”

(Additional reporting by Kuch Naren)

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