Everyone Check your email....... still reading Financial...

Everyone Check your email....... still reading

Financial Assurance Legal Process

As investors would be aware, the Company has been in talks with and in legal proceedings against the Department of Environment and Science upon the required Financial Assurance for the Granite Belt Project. These matters have been ongoing since 2017 and continue to be ongoing, and as such have significantly hampered and impacted the ability for MRV Metals to effectively and efficiently operate the Granite Belt Project. To that end, it is important that the background and circumstances to these issues are apparent to our investors, so that the market is fully informed of these issues. By way of process, the Company under the legislative provisions existing in 2017, were required to put forward what is called a Plan of Operations. The Plan of Operations outlines the intended activities to be undertaken upon the site. Consequently, the amount of harm those activities would or were likely to cause is then required to be calculated by the Company in a Financial Assurance calculator. This calculator is the basis for the actual Financial Assurance, where the State would take and hold in trust, to ensure the Company restored or rehabilitated the areas back to the prior condition. The Company in early 2017 formed a view, that given the significant harm that was already in existence, and the very clear and prescriptive legislative powers of the Mineral Resources Act 1989, it capped the Departments ability to take or hold a Financial Assurance that does not exceed the harm or potential harm caused by the activities. That is, the activities undertaken in the plan of operations and/or allowable in the Environmental Authority that are directly related to the activities of MRV Metals and not the prior harm. It is the delta between the two that the Company is liable for and hence has to place in bond for operating the site. The Department at this time in 2017, flagged they had the view that despite MRV Metals view of the very unambiguous legislative requirements, being laws binding both the State and MRV Metals, they believed the Company was required to be liable for the total harm caused and present at the site, being any prior operators and any additional harm caused by the State, whilst the site was in the States care as freehold land, outside of the Mining Act and obligations.

The parties at this stage clearly had a significant issue moving forward and this placed significant concerns over the Company’s go forward position in mid-2017, as it awaited the granting of the Granite Belt Project. In an effort to advance this issue, the Company formed the opinion it was in the interest of the State and MRV Metals, that we offer a Voluntary Bond to the State whilst we work through the issues and concerns, as the Company was exceptionally comfortable, as it still is today, that the law is unambiguous and clear upon the requirements at law of MRV Metals Pty Ltd. To this end the Company entered into several agreements with the State to move things forward. They were: In 2017 to allow the Department of Natural Resources and Mines assurances that they were not going to be in a worse position, by granting the Mining Lease to MRV Metals Pty Ltd we would seek to offer a $500,000 bond against a Compensation Agreement. That would be used to give the State and Abandoned Mines, comfort that the site would be maintained and operated, and should the site fail, the State would have a bond to call upon for any changes or impacts MRV Metals had undertaken since the hand over from Abandon Mines. Of note, this agreement was undertaken, the bond was given, and the Department of Natural Resources, Mines and Energy upheld their commitments and agreements, as did the Company and the bond was returned in approx. May of 2019 to the Company as per the arrangements in place. At the same time, despite the legislative provisions and the view the Company had and still holds today, that any genuine bond above the actual already quantified harm prior to MRV Metals, was in the hundreds of thousands or at a maximum, taking into account that delta, close to $2,000,000. The Company however offered a $4,5000,000 bond to the Department of Environment and Heritage Protection for the opportunity to move the activities forward, being full site operations and continue through the disputes process and/or legal process once the Department had finalised its view and negotiations upon the final Financial Assurance for the Operations (this is even though the Company was already privy to the Departments September 2013 Assessment of Financial Assurance for the total site at $2,445,377). At the time of that agreement, the Managing Director of Moreton Resources Limited, sought assurance from the Department of Environment and Heritage Protection, that once the bond was paid and we commenced operations, we would not be stopped and we would not be asked to pay a significant bond over this amount that we could not afford, until the matter was resolved either via negotiation or running its full course of determination, which included the Land Court. It was therefore agreed and outlined that the Department would not seek to stop our operations or request such a bond, before it was resolved, irrelevant of the figure they had determined. That meeting took place in August of 2017 with a Senior Department of Environment and Science representative and was clear and unambiguous in the agreement.

The Company therefore with both matters resolved for the time being, lodged its formal plan of operations, post the grant of a Mining Lease in early October 2017 and made the subsequent announcements and advanced its position. The reason for the above process, which is outside of the legislative process, was that despite in late 2013 the FA being determined by the Department, we were aware the Department now had a view it was over $12,000,000 which was a large part of the argument to push through the Chain of Responsibility Legislation in Queensland around that time. Still to date we can not reconcile how the department has apparently formed the view, that the site in a 2015/2016 assessment, prior to MRV Metals entering the site was now 500% above their own assessment only 18 months prior with no substantive additional activity on the site. However, as the market is aware, in early 2018 the Department then determined the Financial Assurance was in the order of $12,000,000 for MRV Metals Pty Ltd. This significantly impacted MRV Metals Pty Ltd as through our interpretation of the legislation, if the Department purport to be meeting their legislative obligation the following is required to be considered; 295 (4) ……..the administering authority can not require financial assurance of an amount more than the amount, that in the authorities opinion, represents the total or likely costs and expenses that may be incurred taking action to rehabilitation or restore and protect the environment because of environmental harm that may be caused by the activity. Either the Department has failed in its obligation to apply the legislation as it is written or the Department when making this decision in early 2018, is purporting the claim for the Texas Site, with no additional footprint or areas of defined harm by MRV Metals is $24-25 Million, which is now 10 times the Departments own assessment for an identical Plan of Operations as MRV Metals, presented by Alcyone in 2013. Irrelevant of this irreconcilable position, the Company had assurances from a Senior Department Official upon the 18th of August 2017, that if the FA was determined higher than the voluntary bond we set in place, we were guaranteed no matter what the amount of the financial assurance was, it would not be required until the dispute was resolved. However, upon application to defer the required $12 Million for this dispute to be heard, the Department sought fit in early 2018 to reject that request and sought almost immediate payment, in total contradiction by the CEO of the Departments Delegate. This therefore immediately forced the Company to cease its drilling campaign, reduce its operations, terminate newly employed staff and suffer significant limitations and impacts upon the site, whilst it pursued a new agreement with the Department, given their clear breach of their prior agreement with the Company. Since that time, the Company has been significantly constrained in its operations, and given the decision by the Department the Company could no longer continue with its total site plan. As the Department was fully aware when they determined the Financial Assurance in early 2018, with an almost immediate payment requirement, the legal position requires that the Company must put up 75% of the bond that is payable at the time of the Land Court lodgement, to have the right to advance its position through the Legal System. That is, if that determination had allowed the 12 months sought for payment whilst the matter was heard, the Company would have been in full operations and mining to date, with a full plan of operations before us and no restraints. What is clear to the Company, is the Department had no intention to honour the commitments made by that Senior Department Officer, whom was the same delegate of the Departments Chief Executive Officer for the purpose of the Act who signed off upon the Environmental Authority, and hence in our view obviously has the right to make the representations upon behalf of the Department he did. What was also clear to MRV Metals was the Financial Assurance Calculations and Plan of Operations put forward by MRV Metals were not assessed under the Act, in fact, the Department had already formed the view the figure was approx. $12,000,000 based upon an assessment undertaken by the Department in late 2015 prior to any involvement by MRV Metals Pty Ltd. Which is still totally irreconcilable to the attachment to this announcement by the Department outlining the total being $2,445,377.

Again the legislation in MRV Metals Pty Ltd view is quiet clear and it is a requirement upon the Department not to seek more than what is required, for the harm that is caused by our operations and activities and in no way, are we liable for the harm caused by prior operators or the State upon the site. Such a position does not pass the common-sense test, nor any legal view of the legislation. However, the now newly named Department of Environment and Science continue to hold this position irrelevant of the multiple contradictions that are apparent. Although there is a counter argument, that if the Department does have integrity in its application of the FA process, and was diligent in its FA calculation process, what happened from the $2,445,377 when in the operations of Alcyone, to that prior to MRV taking on the site, where the Department, whilst in custody of the site had a calculation done of $12,000,000. Our view is irrelevant of who is responsible for the harm, be it the smaller number under Alcyone or the greater number whilst in the care of the State, the legislative provisions are quite simple, in our view, that the State of Queensland cannot simply pass on their liability via the FA mechanism. In an effort therefore to bring down the bond requirement, to meet the bond we had already put in place, the Company had to reduce its operational footprint and significantly constrain its activities until this matter is resolved through the Courts. The Company had through its prior Legal Representation had assurances that the matters would be before the Courts late 2018 and since that time we have suffered considerable delays and impacts with an on again, off again negotiation process with the Department, in what seems like a simple stalling of the process and effort to negate our rights to have this matter determined by the Courts. As you will see, the Company has sought to release material to inform the market, which it believes is material in nature to this case; specifically given our obligation to keep an informed market. We believe the documents are so compelling to the position of MRV Metals Pty Ltd, they should be released to market, hence the attached letter from the Departments legal advisors late on the 28th of August 2019. We are however now pleased to announce that the first phase of our action, being the determination of preliminary legal points, will be undertaken in October 2019, in which we believe the common sense and rightful reading of the Act will be upheld and determined by the Land Court. At this time it will be up to the Department if they are then going to be bound by the letter of the law and review their decision and remake the Financial Assurance calculation or in fact continue to then move to argue additional matters and points, in an effort to frustrate MRV Metals rights. The Company has already suffered considerable impact operationally and financially due to this situation and given the legal obligation of the Department to not hold or request more than for the restoration or rehabilitation of the harm caused by MRV Metals Pty Ltd, we are assessing our rights as to what action may be available for the significant harm caused, should the Department have breached that obligation. It must be pointed out however, whilst all legal action is speculative in nature, it is in the legal opinion of MRV Metals legal representatives, since early 2017 that the Company interpretation is correct, however, what is more compelling and equally absurd, is that the Department of Environment and Science in multiple quarters are also of the same opinion, having had the benefit of legal advice. That is, it is the agreement of multiple Senior Officers that the position taken by MRV Metals Pty Ltd is correct and the only liability MRV Metals Pty Ltd faces is the delta between the historic harm and any additional harm we may or could likely cause.

Yet despite this, we still continue down this path, were the Department are seemingly ignoring totally that advice. It is of note, the Company to date has spent $595,000 on legal costs pertaining to this matter. We are now however, in a situation operationally whereby we have proven our leaching capability, the commissioning of equipment and operational outcomes of the processing at the Granite Belt Operations, this should be an advancement decision point for the Company. However whilst we are ready to now move to mining operations, we are limited as we cannot step outside of the footprint we have in our present plan of operations (reduced to allow the legal action to proceed) as it will trigger a new assessment of our required Financial Assurance and also negate the legal action process to date, as the matter would have to be relisted and start again. This is now about to have operational impacts upon the Company and limit our ability to move into crushing and mining stages at the Granite Belt site, which again affect our regional employment commitment, our support of the regional community via our vendors, community supporters and the impact we make day to day, in the region through our existing families and support services residing locally. Our plans and activities moving forward however, will be released in a subsequent strategy later today.