A Canadian Superior Court justice has upheld an appeal by Atomredmetzoloto JSC (ARMZ) of the 2011 court decision that validated service of a statement of claim from Canadian uranium company Khan Resources. This decision means Khan cannot proceed in Ontario with its $300 million damages lawsuit against ARMZ and JSC PIMCU.

Khan’s president Grant Edey says, “This decision is obviously disappointing. It raises the perturbing question as to how a company like ourselves can achieve adequate recourse for its shareholders given the inability to even serve ARMZ with our claim.”

Khan and ARMZ, through their subsidiaries, became joint venture partners in 1995 to undertake exploration and development of the Dornod uranium property in northeast Mongolia. The property is one of the most significant and strategic undeveloped uranium resources of its kind in the world.

Since acquiring the mining licence in 2003 Khan has spent $21 million to develop and explore the property, establish power, build a permanent camp, conduct a definitive feasibility study and various NI 43-101 instruments, while it says ARMZ has contributed virtually nothing.

The property is estimated to have an annual production rate of 3.5 million pounds of uranium oxide over a 15 year mine life.

Khan’s statement of claim cites in 2009 ARMZ began to exclude and deprive the company while in turn attempting to form an agreement with the Mongolian and Russian governments to take over and jointly develop the Dornod uranium region. Khan claims ARMZ even used tactics including temporary licence suspensions for alleged breaches of Mongolian laws through the Mineral Resources Authority to delay the development.

Khan’s lawyers say the conduct and actions of ARMZ during this time warrant substantial awards of punitive damages. The company says it will continue to review the decision and is considering its rights of appeal.


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