06/07/2009 - 09:20

Round two for Murchison, Chameleon

06/07/2009 - 09:20


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Another legal showdown is looming between Murchison Metals and Sydney-based Chameleon Mining, which is claiming it is entitled to half of the the iron ore miner's Jack Hills tenements, valued at $1.5 billion.

Another legal showdown is looming between Murchison Metals and Sydney-based Chameleon Mining, which is claiming it is entitled to half of the the iron ore miner's Jack Hills tenements, valued at $1.5 billion.

Both parties wrapped up round one of proceedings late on Friday on a separate case with a settlement reached minutes before deadline.

Under the settlement deal, Murchison agreed to issue 3.5 million shares, a cash payment of $350,000 and payment of legal costs. Chameleon, which has accepted the offer, said the total value of the settlement is more than $7 million.

The litigation, funded by Chameleon, was brought by former directors David Evans and Siew Hong Koh against Murchison.

The directors claimed both had a 5 per cent interest in the Jack Hills iron ore tenements in the Mid West and were owed a quantity of shares in a deal done five years ago with the then Murchison board, which did not contain any of the present members.

Chameleon has previously said that the "value of the direct interest claimed in the Koh & Evans proceedings ranges between $150,000,000 and $250,000,000".

The matter was due to be heard in the Supreme Court of New South Wales on August 10. It has not been disclosed how much Messrs Evans and Koh received.

Chameleon chairman Ben Elias told WA Business News the company quite surprised by the settlement offer considering Murchison had continued to uphold the claims were baseless.

He added the company could have tried to get a larger amount from Murchison however due to the uncertain nature of litigation decided to accept the offer.

Murchison managing director Trevor Matthews said the company made the settlement offer as part of a legal tactic to keep risks to a minimum.

"We didn't think that they [Chameleon] were going to accept given that it took them a month to respond back," Mr Matthews said.

"We wouldn't have made that offer if it wasn't a fair reduction in our risk across our shareholders."

Meantime, both parties are preparing for another legal battle in the Federal Court over the Jack Hills tenements, scheduled for September 28 should mediation not be successful.

Chameleon is claiming up to $1.5 billion over the tenements, which contain an iron ore operation, on the alleged premise that past Murchison director Phillip Grimaldi had used money from Chameleon to buy the tenements in 2004.

Gregory Barnes, a former Chameleon director, has also been named as a defendant in the legal action.

Mr Elias said Chameleon is alleging that both Messrs Grimaldi and Barnes had breached their duties in 2004 when Murchison, used around $500,000 of Chameleon's cash and assets to help pay for the tenements, then valued at $1.1 million.

The tenements have become more valuable as a result of Murchison's mine operation, which is operated by half-owned subsidiary Crosslands Resources.

Mr Elias said the sizeable claim figure stems from the $1.5 billion Japan's Mitsubishi Corp paid for its 50 per cent stake in the tenements. Mitsubishi also own the balance of Crosslands.

"All we're going for is what's legally ours," Mr Elias said.

"This is arguably the largest constructive trust litigation case in the history of Australian mining."

Mr Matthews said the claim amount is "extremely optimistic".

"There is no basis for any sort of material claim on the Chameleon matter," he said.

"That will surface when we go through this process."

Mr Matthews added that Chameleon first had to prove that Messrs Grimaldi and Barnes had breached their duties before any claim could be made against Murchison.

He added that Murchison was not taking any action against Mr Grimaldi and Mr Barnes.

The trial has been set down for four weeks.



Below are both companies announcements:



The Company confirms that the claim by Koh & Evans against Murchison (in which the Company holds an 80% interest) has settled.

The Company (including Koh & Evans) and their legal team were extremely surprised to receive an offer from Murchison to settle the claim before trial considering that since 2005 Murchison have repeatedly stated that the claim is 'without merit'.

Chameleon Mining chairman Ben Elias confirms that "the settlement was for 3,500,000 Murchison shares, a $350,000 cash payment plus costs. The offer was accepted after taking into consideration the inherently uncertain nature of litigation".

"The Company is pleased to secure such a windfall (aggregate gross value in excess of $7.0m) in light of current economic times and given that Chameleon was only relatively recently reinstated to the official list with cash reserves of approximately $2.23m" continued Elias.

"We also note that despite being offered the opportunity, Murchison failed to secure any releases from the plaintiffs' as part of the settlement structure. By failing to secure those releases, Murchison may have also left themselves open to an additional series of separate actions claiming more shares" concluded Elias.

Chameleon v Murchison & Ors

In looking forward to the trial commencing 28 September 2009, Chameleon is extremely encouraged by the comments of Murchison's Executive Chairman, Paul Kopejtka who acknowledges that the Koh & Evans claim ".... is a legacy of the people who were running the Company before the current team became involved".

Chameleon's claim against Murchison and Others in the upcoming trial is for in excess of a 50% interest in Murchison. Substantial elements of the claims against Murchison also arise directly out of a legacy of the people who were running Murchison before the current team became involved.

This situation is further enforced by Murchison's own submissions in the Federal Court confirming that Murchison are, at least in part, in the position of being forced to rely on the evidence provided by Phillip Grimaldi (the former Managing Director of Murchison) and Gregory Barnes.

The Company confirms that preparations for the hearing, which is scheduled to commence within three months, are right on schedule.



Murchison Metals Ltd ("Murchison") refers to the ASX announcement by Chameleon Mining Ltd (CHM) on 6 July
2009 regarding the settlement of the claim by Evans and Koh against Murchison and provides the following

1. In an ASX release dated 26 September 2008 CHM stated that the Evans and Koh claim was worth between $150m and $250m. The settlement represents 2.8% of the mid-point of that estimate.

2. The Offer of Compromise that was accepted by the plaintiffs on 2 July was lodged by Murchison on 5 June 2009. Such offers are common in commercial litigation as a tactic to limit the defendant's exposure to paying the plainitiff's costs in the proceedings and reflect an assessment of the risk inherent in litigation.

3. In the negotiations that preceded the plaintiff's acceptance of Murchison's offer, the plaintiffs made a number of verbal and written counter-offers including offers of 10m shares, 7m shares and 6 million shares, all of which were rejected.

4. In relation to potential further proceedings by the plaintiffs for additional shares, Murchison believes that such proceedings would invariably fall foul of the rule in Anshun's case, be an abuse of process and would be liable to be struck out accordingly.

Murchison confirms that the Evans and Koh proceedings are unrelated to the litigation commenced by Chameleon against Murchison, Crosslands Resources Ltd and others.

The Chameleon litigation is entirely separate from the Evans & Koh matter in terms of pleadings and evidence and the settlement in the Evans and Koh proceedings should not be regarded as a precedent for a settlement in the Chameleon litigation.

No inferences can be drawn from the Evans & Koh settlement as to the likely outcome of the Chameleon litigation as it is fundamentally different in nature and character.


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