info on luzon republic second battle

Luzon Minerals sued again by Republic Gold

5/12/2008 1:33:00 PM | Related symbols: V.LZN | Stockwatch
by Mike Caswell

Australian-listed Republic Gold Ltd. has filed another lawsuit against ., the TSX Venture Exchange company that it is already suing over an alleged $2.2-million (Australian) debt. Republic now alleges that Luzon improperly ended an asset sale agreement that would have combined the two companies.

According to the suit, which was filed in B.C. Supreme Court on April 28, 2008, Republic and Luzon entered into a combination agreement on Nov. 17, 2006. (Its terms, as disclosed in Republic's first lawsuit dated Feb. 21, 2008, called for Republic shareholders to receive one Luzon share for every three shares they held and Republic's assets to be transferred to Luzon.)

The terms of the agreement also included a three-week period of due diligence into 'certain assets,' the lawsuit notes. (Again, the reader must delve into Republic's earlier lawsuit to determine that one of these 'certain assets' was the Amayapampa property in Bolivia.) On Dec. 5, 2006, before that period had elapsed, Republic says it received a letter giving notice that Luzon was not satisfied with its due diligence into the 'underlying nature and value of the assets.' The letter also terminated the agreement.

The problem, according to the lawsuit, is that Luzon did not perform any due diligence which would have entitled it to conclude that the assets were not satisfactory. 'At no time did Luzon travel to Australia, or cause technical consultants, to formally conduct due diligence on any of Republic's projects,' the suit reads. Republic says Luzon has breached the agreement, and that it failed to use its best efforts to satisfy its terms. 'Alternatively, there was no reasonable basis for considering that the underlying nature and value of the Republic assets were such as to entitle Luzon to terminate the Agreement,' says the suit. As well, the suit claims that Luzon owed Republic an implied duty of good faith to reveal any material issue which would cause a reasonable person to withdraw from the agreement.

Republic is asking for a break fee of 5 per cent of Luzon's issued shares as of Dec. 5, 2006, or damages for breach of agreement. The company is represented by Vancouver lawyer John Hunter of Hunter Litigation Chambers.