Item 1. Legal Proceedings
Item 1. Legal Proceedings.
From time to time, we may become subject to various legal proceedings that are incidental to the ordinary conduct of our business. Although we cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, we make a provision for potential liabilities when we deem them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments. We believe that none of the litigation in which we are currently involved, or have been involved since the beginning of our most recently completed fiscal year, individually or in the aggregate, is material to our financial condition, cash flows or results of operations.
Two of our subsidiaries are involved in legal proceedings described below.
Our subsidiary Kaizen is currently subject to litigation in British Columbia, Canada which commenced in 2017. The proceedings relate to a claim against Kaizen in respect of its acquisition of the Pinaya Project. The trial of the action has been concluded and the trial judge agreed with Kaizen’s position that the plaintiff’s claims were without merit and dismissed the action in its entirety. The plaintiff commenced an appeal from the trial judgment which was dismissed by the British Columbia Court of Appeal on January 21, 2022. The plaintiff can only appeal with leave to appeal from the Supreme Court of Canada. The plaintiff has applied for leave to appeal and a decision is expected in September, 2022. Kaizen is entitled to recover costs of the trial and applied for an enhanced, substantial indemnity costs award which was granted against the plaintiff AM Gold Inc. and its principal. The defendants appealed this indemnity costs award to the British Columbia Court of Appeal and a hearing on the costs order was held on May 31, 2022, with a decision expected within 90 days. Kaizen has incurred approximately Cdn$3.2 million in legal fees and expenses to date in this dispute, which has occupied significant management time. If the plaintiff obtains leave to appeal and/or Kaizen is unable to make a substantial recovery of its legal costs incurred, Kaizen may be unable to advance the Pinaya Project at the rate it wishes to and may incur additional costs, which could negatively impact its financial position as well as its ability to explore and potentially develop the Pinaya Project into an operating mine.
Our subsidiary Cordoba is currently involved in two legal proceedings. The first is a criminal lawsuit filed by Cordoba in late 2018 and in January 2019 with the Colombian prosecutors against nine members of former Colombian management alleging breach of fiduciary obligations, abuse of trust, theft and fraud. This proceeding is ongoing. In the second proceeding, Cordoba (along with the National Mining Agency, Ministry of Mines and Energy, the local environmental authority, the Municipality of Puerto Libertador and the State of Cordoba) were served with a class action claim by the Alacran Community. This class action seeks (i) an injunction against Cordoba´s operations in the Alacrán area and (ii) an injunction against the prior declaration by the authorities that the Alacran Community´s mining activities were illegal. The claim was initially filed with the Administrative Court of Medellín, which remanded the case to the Administrative Court of Montería, which contested it and submitted the case to the Council of State. The Council of State determined the Administrative Court of Montería as the competent tribunal, where the process is currently being conducted. The Administrative Court of Montería admitted the commencement of the class action on September 2021. The decision was challenged by Cordoba and other defendants and, accordingly, the Court is required to adopt a decision, which is still pending. While the court matters proceed, Cordoba will incur additional costs that will negatively impact its financial position. As well, the litigation process is uncertain and it is possible that the second proceeding is resolved against Cordoba, which could have a material adverse effect on its business, results of operations, financial condition and prospects.
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