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Item 3. Legal Proceedings

2022-08-23 compared with 2019-09-24 · 27 added, 253 removed, 2 unchanged (99% of the section changed)

LEGAL PROCEEDINGS

filed by Goldgroup / DynaMéxico Complaint against Goldgroup

March 14, 2014, Goldgroup filed for arbitration in the United States with the American Arbitration Association ("AAA"),

citing the Earn In Agreement dated September 1, 2006 as the basis for the arbitration filing.

The Company filed an answer on April

10, 2014, disputing that any issues exist which provide for arbitration.

December 9, 2014, DynaMéxico filed an Ordinary commercial lawsuit (Civil Claims) against Goldgroup Mining Inc., its parent

company Goldgroup Resources Inc., and the AAA, in the Thirty Sixth Civil Court in the Federal District of México, under

file 1120 number / 2014 ("the DynaMéxico Trial").

The DynaMéxico Trial seeks to terminate the U.S.-based

arbitration proceedings, as DynaMéxico believes there is no legal basis for arbitration, and to nullify the arbitration

proceedings since Goldgroup previously sought recourse in the Mexican courts.

In the DynaMéxico Trial, DynaMéxico

also requests that substantial damages (in the amount of US $50 million) be awarded to DynaMéxico against Goldgroup for:

using and disseminating confidential information and data belonging to DynaMéxico;

that Goldgroup owns any interest in the San Jose de Gracia Project in northern Sinaloa, México, rather than accurately

disclosing that Goldgroup owns a common shares equity interest (shareholder’s interest) in DynaMéxico;

disclosing the percentage of common shares equity interest (shareholder’s interest) owned by Goldgroup in DynaMéxico;

disclosing or implying that Goldgroup is the operator of the San Jose de Gracia Project;

to delay, stop, or otherwise impair the financing of, and further development of, the SJG Project;

numerous threats against DynaMéxico management and officers;

to properly disclose that broad powers of attorney for acting on behalf of DynaMéxico are held by an individual not

affiliated with Goldgroup.

October 5, 2016, in an appellate ruling, the Thirty Sixth Civil Court of the Superior Court of Justice of the Federal District

of México (Tribunal Superior de Justicia del Distrito Federal), file number 1120/2014 declared, among other resolutions,

AAA must “cease and desist”

from the arbitration proceeding;

AAA does not have jurisdiction to hear any conflict and/or interpretation arising from the Earn In/Option Agreement, dated

September 1, 2006;

AAA does not have jurisdiction to hear disputes arising between shareholders of DynaMéxico, which disputes do not arise

directly and immediately from the Earn In/Option Agreement, dated September 1, 2006.

Damages Award to DynaMéxico

on October 5, 2015, in an appellate ruling, DynaMéxico was awarded in excess of US $48 million in damages from Goldgroup

Resources, Inc.

by virtue of a Sentencia Definitiva (the “Definitive Sentence”) issued by the Thirty Sixth Civil Court

of the Superior Court of Justice of the Federal District of México (Tribunal Superior de Justicia del Distrito Federal),

File number 1120/2014.

The Definitive Sentence included the considerations and resolutions by the Court, and additional Resolutions

were also ordered in favor of DynaMéxico (together the damages award and the additional Resolutions are referred to as,

the “Oct.

5, 2015 Resolution”).

concise translation to English of the Oct.

5, 2015 Resolution (the resolution portion of the Definitive Sentence) is set forth

action and litigation based on commercial law filed by DynaMéxico is valid and enforceable, and where Goldgroup and

the American Arbitration Association were found to be in default, was proper.

is declared in breach of its corporate duties, for failure to refrain from claiming direct ownership of 50% of the San José

de Gracia Mining Project.

is condemned and ordered to pay to DynaMéxico the amount of USD $20,000,000 (Twenty Million Dollars) in damages caused

by Goldgroup to DynaMéxico, deriving from its breach of obligations in refraining from claiming direct ownership of

50% of the San Jose de Gracia Mining Project;

which amount should be paid within five days upon execution of this order and

is condemned and ordered to pay to DynaMéxico the amount of USD $28,280,808.34 (Twenty Eight Million Two Hundred and

Eighty Thousand Eight Hundred and Eight and 34/100 Dollars), for breach of its corporate duty and covenants with regards to

the San Jose de Gracia mining project, as a result of depriving profits from DynaMéxico which DynaMéxico could

have earned for the sale of gold produced and extracted during the years 2013 and 2014;

amounts that should be paid within

five days upon execution of this order and resolution.

is condemned and ordered to pay losses and damages to DynaMéxico, which Goldgroup continues to cause, until full payment

of the above-mentioned amounts has been made, which damages, and losses shall be calculated by an expert opinion in a corresponding

legal procedure related to this litigation.

to Article 1424 of the Commercial Code of México, the arbitration provision established under clause 8.16 of the Earn

In/Option Agreement, dated as of September 1, 2006, is ineffective and impossible to execute.

court declares that any controversy arising from the Ear In/Option Agreement must be

and resolved under Mexican Law and by competent Mexican Courts with proper jurisdiction,

in recognition of the waiver and exclusion of the arbitration clause (contained in the

Earn In/Option Agreement) by both parties.

Court declares that the American Arbitration Association must abstain from hearing arbitration procedure number 50 501 T 00226

14, or any other ongoing and/or future arbitration proceeding already filed or that may be filed by the co-defendant Goldgroup

against DynaResource.

Court declares that the American Arbitration Association does not have jurisdiction to hear any conflict and/or interpretation

arising from the Earn In/Option Agreement, dated September 1, 2006.

Court declares, that the American Arbitration Association does not have jurisdiction to hear disputes arising between shareholders

of DynaMéxico, which disputes do not arise directly and immediately from the Earn In/Option Agreement, dated September

Court declares, that the American Arbitration Association does not have jurisdiction

to hear any matters where Koy Wilber Diepholz, who is the President of the Board of Directors

of DynaMéxico, and has been personally sued in relation to the arbitration clause

established under clause 8.16 of the Earn In/Option Agreement, dated September 1, 2006,

since he signed the mentioned instrument in representation of the Company and not in

his personal capacity.

expenses and costs associated with these proceedings are hereby waived.

IT SO BE PUBLISHED.

A Copy of this order and Sentence shall be found in the corresponding records.

adjudged and decreed by the Thirty Sixth Civil Judge of the Superior Court of the Federal District, Mr.

JULIO GABRIEL IGLESIAS

October 5, 2015 Resolution constitutes a public record which may be reviewed through the Courts in México City.

México

City Court Approves Lien on Shares of DynaMéxico owned by Minority Interest Holder

October 5, 2016, the Thirty-Sixth Civil Court of the Superior Court of Justice of the Federal District of México (Tribunal

Superior de Justicia del Distrito Federal) approved a Lien (referred to by the court as an “Embargo”), in favor of

DynaMéxico, upon Stock Certificates in the name of Goldgroup Resources Inc.

(“Goldgroup”).

The Stock Certificates

subject to the Lien (“Embargo”) constitute Shares of DynaMéxico (“the Goldgroup DynaMéxico Shares”).

Goldgroup DynaMéxico Shares were seized as a partial recovery of assets by DynaMéxico after DynaMéxico was

awarded more than $48M USD (Forty-Eight Million Dollars) in damages against Goldgroup (the “Damages against Goldgroup”)

on October 05, 2015, as described in a Sentencia Definitiva (the “Definitive Sentence”) issued by the same court,

the Thirty Sixth Civil Court of the Superior Court of Justice of the Federal District of México, File number 1120/2014.

Excerpts from the Definitive Sentence appear below.

In addition to the Damages against Goldgroup, the Definitive Sentence also

included additional Resolutions ordered in favor of DynaMéxico (the Damages against Goldgroup and the additional Resolutions

are together referred to as the “Oct.

5, 2015 Resolution”).

of Amparo Appeal

August 24, 2017 a Federal Amparo Judge (“Juzgado de Distrito”) in the State of Vera Cruz, México, dismissed

Goldgroup Resources Inc’s Amparo Trial Challenge to the $48 M USD damages award previously granted in favor of DynaMéxico.

Pursuant to the dismissal ruling, the $48M USD damages award, previously granted to DynaMéxico by the Thirty-Sixth Civil

Court of the Superior Court of Justice of the Federal District of México on October 5, 2015, was effectively confirmed.

México

Circuit Court of Appeals –

Notice of Intent for Final Ruling in Favor of DynaResource de México

May 27, 2019, The Eleventh Collegiate Court in Civil Matters of the First Circuit (“México Circuit Court”,

and the Court of Final Appeal for Goldgroup Resources Inc.) issued a written notice confirming it was ruling against the Amparo

Appeal filed by Goldgroup Resources Inc.

and in Favor of DynaResource de México, S.A.

In an effort to stay

the issuance of the Ruling by the México Circuit Court, Goldgroup Resources Inc.

filed a request to The Supreme Court of

México to review the Amparo Appeal decision.

of Goldgroup Resources Inc.

request to the Supreme Court of México

July 3, 2019 an Official Ruling from The Supreme Court of México was issued to Reject the Request of Goldgroup Resources

(the “México Supreme Court Rejection to Goldgroup”).

The Justices of the First Chamber of the Supreme

Court of Justice of México issued a Rejection Notice to Goldgroup Resources Inc., “due to the lack of legitimacy

presented by Goldgroup”;

and in issuing the Rejection Notice to Goldgroup, the Supreme court thereby reverted the Amparo

Appeal back to the México Circuit Court where the Official and Final Ruling from the México Circuit Court is expected

to be issued.

direct contradiction to the October 5, 2015 Definitive Sentence issued by court in México, on August 25, 2016 the American

Arbitration Association - International Centre for Dispute Resolution, Denver office (the “AAA”) issued an Arbitration

Ruling (the “Arbitration Ruling”) in favor of Goldgroup Resources Inc.

against DynaMéxico and DynaResource,

The Arbitration Ruling was the result of a proceeding in which neither DynaMéxico nor DynaResource participated, since

the Definitive Sentence issued by the court in México effectively prohibited their participation in the Arbitration proceeding

and should have prohibited Goldgroup Resources Inc.

participation as well.

Arbitration Ruling provides the following:

(i) the Earn In/Option Agreement is still in force, and consequently Goldgroup may

appoint two directors to the DynaMéxico board, and may participate in the appointment of a fifth director;

(ii) the DynaMéxico

Management Committee is reinstated, and must approve all budgets and expenditures;

(iii) amounts expended by DynaMéxico

that were not approved by the Management Committee are subject to repayment by DynaResource;

(iv) the issuance of additional shares

by DynaMéxico (and consequent dilution of Goldgroup’s equity interest) was in violation of the Earn In/Option Agreement;

and (v) DynaResource and DynaMéxico are responsible for Goldgroup’s costs and professional fees associated with the

Arbitration Ruling.

most arbitration proceedings in the U.S., the Arbitration Ruling is not final.

Since the Arbitration Ruling is subject to international

rules, the ruling may be vacated by U.S.

courts, or simply not recognized by U.S.

courts, on several grounds.

Accordingly, both

DynaMéxico and DynaResource have timely requested relief from the United States Federal District Court in Colorado, via

the filing of a Petition for Nonrecognition of Foreign Arbitral Award and/or Motion to Vacate Arbitration Award (the “Petition

for Nonrecognition”), and a supporting brief.

The Petition for Nonrecognition relies heavily upon the Mexican court’s

Definitive Sentence, key excerpts of which appear immediately below.

Mexican court has already ruled that “any controversy arising from the Earn In/Option Agreement must be brought and resolved

under Mexican Law and by competent Mexican Courts with proper jurisdiction.”

Consequently, the monetary awards against DynaResource

which are based upon a finding that the Earn In/Option Agreement is still in force –

will not be enforceable if

the Mexican court rules that the Earn In/Option Agreement is terminated.

The Company believes that the potential for the assessment

of a material monetary judgment against DynaResource is remote.

to Article 1424 of the Commercial Code of México, the arbitration provision established under clause 8.16 of the Earn

In/Option Agreement, dated as of September 1, 2006, is ineffective and impossible to execute.

Court declares that any controversy arising from the Earn In/Option Agreement must be brought and resolved under Mexican Law

and by competent Mexican Courts with proper jurisdiction, in recognition of the waiver and exclusion of the arbitration clause

(contained in the Earn In/Option Agreement) by both parties.

Court declares that the American Arbitration Association must abstain from hearing arbitration procedure number 50 501 T 00226

14, or any other ongoing and/or future ongoing arbitration already filed or to be filed by the defendant Goldgroup, based

on the Earn In/Option Agreement dated September 1, 2006.

Court declares that the American Arbitration Association does not have jurisdiction to hear any conflict and/or interpretation

arising from the Earn In/Option Agreement, dated September 1, 2006.

Court declares, that the American Arbitration Association does not have jurisdiction to hear disputes arising between shareholders

of DynaMéxico, which disputes do not arise directly and immediately from the Earn In/Option Agreement, dated September

Court declares, that the American Arbitration Association does not have jurisdiction to hear any matters where Koy Wilber

Diepholz, who is the President of the Board of Directors of DynaMéxico, and has been personally sued in relation to

the arbitration clause established under clause 8.16 of the Earn In/Option Agreement, dated September 1, 2006, since he signed

the mentioned instrument in representation of the Company and not in represention of the Company and not in his personal capacity.

Arbitration Ruling contains an acknowledgement by the AAA that the AAA was named as a

defendant in the legal demand filed by DynaMéxico in the Thirty Sixth Civil Court

of the Superior Court of Justice of the Federal District of México (the “DynaMéxico

Legal Demand”).

The Arbitration Ruling also contains a statement that the AAA was

not properly served notice of the DynaMéxico Legal Demand;

DynaMéxico obeyed the October 5, 2015 Court Order and did not attend the Arbitration hearing;

will pursue all legal remedies in order to obtain a full dismissal of the Arbitration

(d) The October 5, 2015 Court Order and the $48 million USD award of

damages against Goldgroup Resources Inc.

remains in full force and effect as issued.

DynaMéxico

is currently pursuing all available remedies in order to collect $48 million USD in damages from Goldgroup

Resources Inc.

(See Court Approves Lien on Shares of DynaMéxico owned by Goldgroup Resources,

and DynaMéxico filed Motion to Vacate Arbitration Ruling

November 17, 2016, DynaUSA and DynaMéxico filed a Motion to Vacate the Arbitration Ruling in United States District Court,

District of Colorado.

Recommendation

to Vacate Arbitration Ruling issued by United States Magistrate Judge

February 13, 2018 a Recommendation to Vacate the Arbitration Ruling was issued by a United States Magistrate Judge of the United

States District Court, District of Colorado.

Award against DynaResource, Inc.

and DynaResource de México, S.A.

May 9, 2019, the United States district court for the district of Colorado confirmed the August 2016 Arbitration award against

DynaResource, Inc.

and DynaResource de México, S.A.

The district court’s decision overruled the

recommendation previously issued by the magistrate judge to sustain the DynaResource entities’

motion to vacate the arbitration

Each of DynaResource, Inc.

and DynaResource de México, S.A.

intends to exercise all its rights, as appropriate,

including an appeal.

filed by Goldgroup against the May 17, 2013 Shareholders’

Meeting of DynaMéxico

February 2nd, 2014, Goldgroup Resources Inc.

filed a petition with the Judge of the Tenth District Mazatlán, according

to record 08/2014, in the ordinary commercial action, against DynaResource Inc., and DynaResource de México, S.A.

(“DynaMéxico”).

In the Petition, Goldgroup complains against the results of the shareholders meeting of DynaMéxico

of May 17, 2013, and petitions for the nullification of the meeting itself and for the nullification of the additional shares

of the outstanding capital of DynaMéxico issued to DynaResource, Inc.

in satisfaction of debts owed to DynaResource.

and DynaMéxico filed a response on January 9, 2016, and the matter was.

DynaMéxico will vigorously defend against

all such complaints by Goldgroup, as there exists no legal basis for the complaint by Goldgroup against the May 17, 2013 shareholders

meeting of DynaMéxico.

October 31, 2018, the Judge of the Tenth District declared the Expiration of the Trial, due to inactivity of Goldgroup in the

process, and the Judge decreed the Trial as a concluded and filed trial.

As a result, the shareholders' meeting of May 17, 2013

remains valid.

November 16, 2018, Goldgroup appealed the declaration of Expiration of the Trial.

February 12, 2019, the Court of Appeals (Segundo Tribunal Unitario de Circuito in Mazatlán) confirmed the resolution issued

October 31, 2018 by the Judge of Tenth District and declared and confirmed the Expiration of the Trial, due to the inactivity

of Goldgroup to the process, and therefore the Court of Appeals decreed the matter as a concluded and filed trial.

the shareholders' meeting of May 17, 2013 remains valid.

has filed a writ of amparo against the resolution of the Court of Appeals that confirmed the declaration of expiration of the

This Amparo Trial is pending resolution.

Litigation(s)

in México –

Company as Plaintiff

Company, and DynaMéxico have filed several legal actions in México against Goldgroup Mining Inc.

and Goldgroup Resources

, and certain individuals retained as agents of Goldgroup Mining Inc., or Goldgroup Resources.

The Company and DynaMéxico are plaintiffs in the actions filed in México and the outcomes are pending.

Company believes that no material adverse change will occur as a result of the actions taken, and the Company further believes

that there is little to no potential for the assessment of a material monetary judgment against the Company for legal actions

it has filed in México.

For purposes of confidentiality, the Company does not provide more specific disclosure in this

2014 Arbitration Proceeding filed by Goldgroup Resources Inc.

On March 14, 2014, Goldgroup filed for arbitration in the United States with the American Arbitration Association (“ AAA ”), seeking monetary and nonmonetary relief, and citing the Earn In/Option Agreement as the basis for its filing.

On August 25, 2016, the AAA issued a ruling in favor of Goldgroup against the Company and DynaMéxico (the “ Arbitration Award ”).

On May 9, 2019, the United States District Court for the District of Colorado (the “ Colorado U.S.

District Court ”) confirmed the Arbitration Award.

On May 20, 2021, the Company and DynaMéxico agreed to release the $1.111 million bond that had been posted, and paid an additional $4,054 in interest, in full satisfaction of the monetary portion of the Arbitration Award.

Since that time, the Company has fully performed the non-monetary portion of the Arbitration Award, which included the election of a Goldgroup designee to the board of DynaMéxico, yet Goldgroup continues to challenge the Company’s actions before the Colorado U.S.

District Court.

2014 Court filing by DynaMéxico, in Mexico

On December 9, 2014, DynaMéxico filed a commercial lawsuit against Goldgroup, its parent company Goldgroup Mining Inc., and the AAA, in the Thirty Sixth Civil Court in the Federal District of México (the “ Trial Court ”), under file 1120 number / 2014 (the “ DynaMéxico Trial ”).

In the DynaMéxico Trial, DynaMéxico sought to terminate the U.S.-based arbitration proceedings, and requested that substantial damages (in the amount of US $50 million) be awarded to DynaMéxico against Goldgroup.

On October 5, 2015, the Trial Court awarded DynaMéxico damages in excess of US $48 million.

Goldgroup has appealed the $48 million damages award on multiple occasions, yet the award stands and has been affirmed by a variety of Mexican courts, including the highest court in the land.

Even in the face of multiple rejections of its arguments before Mexican courts, Goldgroup continues to raise baseless and unfounded objections to the award.

On October 5, 2016, the Trial Court (the same court which made the $48 million damages award) approved a grant to DynaMéxico of a lien (referred to by the court as an “Embargo”) upon the shares of DynaMéxico held by Goldgroup in certificate form.

On February 20, 2020 , a México City court issued a final judgment, effectively foreclosing on all shares of DynaMéxico formerly held by Goldgroup, and awarding those shares to DynaMéxico.

Those shares are now legally owned, and physically held, by DynaMéxico.

Consequently, Goldgroup currently owns no shares of DynaMéxico under Mexican law, which requires physical possession of shares to evidence ownership.

The award to DynaMéxico of the shares formerly owned by Goldgroup, does not satisfy the $48 million damages award in favor of DynaMéxico.

2020 Petition for Recognition of the $48M Damages Award

On December 5, 2020, the Company and DynaMéxico filed an Original Petition for Recognition of the $48 million damages award in favor of DynaMéxico, in US.

District Court in Dallas County, Texas (the “ Texas U.S.

District Court ”), under principles of international comity.

On May 12, 2021, The Texas U.S.

District Court issued a ruling stating the Court was not obligated to recognize the $48 million damages award in the United States.

On May 14, 2021, the Company and DynaMéxico filed a Notice of Appeal of that ruling.

MINE SAFETY DISCLOSURES

the Company has no mines located in the United States or any of its territories, the disclosure required by this Item is not applicable.

As the Company has no mines located in the United States or any of its territories, the disclosure required by this Item is not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K/A

Item 3. Legal Proceedings