Lepanto loses in exploration bid

By PAUL C.H. HOW, BusinessWorld Reporter The Supreme Court has upheld the transfer of a financial and technical assistance agreement (FTAA) from Australian-based Western Mining Corp. (WMC) Philippines to Sagittarius Mines, Inc., to take over a mining exploration project covering four Mindanaoan provinces. The high court’s First Division affirmed a Court of Appeals decision to deny a petition made by listed firm Lepanto Consolidated Mining Co. to review former Department of Environment and Natural Resources Secretary Heherson T. Alvarez’ approval of the FTAA’s transfer back in 2001. Lepanto, which earlier sought to buy WMC’s shares, had argued that the transfer was subject to approval of the Office of the President and not the Natural Resources chief, pursuant to Republic Act No. 7942 or the Mining Act of 1995. Associate Justice Minita Chico-Nazario ruled that the transfer of the FTAA did not need presidential approval, as the FTAA had been entered into on March 22, 1995, before the Mining Act took effect, on April 14 of the same year. Had the law been applied retroactively, she added, "it would effectively restrict the right of the parties to assign or transfer their interests in the said FTAA." Furthermore, the matter had already been raised to the Office of the President, which also gave its nod to the transfer, in a July 23, 2002 decision. Sought to comment, Lepanto declined saying it had not yet received a copy of the decision. The March 22, 1995 FTAA was executed by WMC and the government, for the large-scale exploration of possible mineral resources in a 99,387-hectare site located in the provinces of South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. Prior to this, as early as April 25, 1991, an agreement between several mining firms including Sagittarius had been made that granted them the right of first refusal in case WMC disposed of its rights and interests. This meant that Sagittarius would be allowed to match the terms of any proposed contract with another party in the disposal of WMC’s shares. WMC subsequently divested itself of its interests in the FTAA, and on July 12, 2000 executed a purchase agreement with Lepanto over its entire shareholdings. Before this was finalized, however, Sagittarius exercised its right of first refusal, and the sale to Lepanto was stopped. Lepanto opposed this and brought the matter to the Court of Appeals, which dismissed the case on the ground of forum shopping, since the mining firm had also lodged a complaint with the Mines and Geosciences Bureau. This was affirmed by the high court on Sept. 24, 2003. During the pendency of this case, WMC forged another purchase agreement on Jan. 10, 2001, this time with Sagittarius. This was approved by former secretary Alvarez on December 18 of that year, and later affirmed by the Office of the President and the appellate court despite Lepanto’s objections.