Local law firm hits junior miner with $1 million lawsuit
Petaquilla Minerals facing a litany of financial woes
Vancouver’s Petaquilla Minerals Ltd. (OTCBB:PTQMF) continues to stockpile financial troubles – the latest being a $1 million lawsuit from a local law firm over unpaid legal bills.
Petaquilla’s flagship property, the Molejon, is a gold mine in Panama, where regulators have given the company until summer to turn its troubles around.
Recently delisted from the Toronto Stock Exchange for failing to meet its listing requirement, Petaquilla’s shares are trading at $0.02 on the Over the Counter Bulletin Board and the company is facing a $1 million lawsuit at home, and sanctions in Panama for failing to pay its royalties and social security benefits to workers.
On March 12, Blake, Cassels & Graydon LLP filed a civil claim against Petaquilla over $1.2 million in unpaid legal fees. The law firm declined to comment on the suit.
Petaquilla has not yet responded to the lawsuit. The allegations have not been tested or proven in court.
The bulk of the bill is for legal services related to a failed hostile takeover bid in 2012 by Inmet Mining, which was acquired in 2013 by First Quantum Minerals Ltd. (TSX:FM) for $5.1 billion.
In a management discussion and analysis report from May 2014, Petaquilla blamed the attempted takeover for jeopardizing a $210 million loan it needed for new equipment to increase production.
The BC Securities Commission halted trading in Petaquilla shares in 2012 in the midst of the hostile takeover bid from Inmet, and told the company to hold off on its debt raising efforts until shareholders had a chance to vote on the Inmet bid, which was ultimately rejected.
According to the company, that delay in securing debt financing led to a 62% drop in gold production in the nine-month reporting period ending March 31, 2014, and a failure to meet its delivery obligations to Deutsch Bank.
Petaquilla reported a net loss of US$24.7 million for the fiscal year of 2014, compared with a loss of US$4.6 million in the same period of 2013.
A spokesperson from Petaquilla could not be reached for comment, but according to a December 30, 2014 story in La Prensa, the mine was idle for at least a portion of 2014, which could explain such a dramatic income loss.
In May 2014, Petaquilla and Minera Panama, S.A. – a subsidiary of First Quantum Minerals Ltd. – announced an agreement in which the subsidiary would pay Petaquilla up to $60 million for a transfer of a range of assets and property rights.
On November 20, 2014, Petaquilla announced it had failed to secure an $18 million bridge loan on time.
On December 30, 2014, the BCSC issued a cease trade order on Petaquilla’s shares for failing to file required financial statements on time, and on March 1, Petaquilla was delisted from the TSX.
According to the Ministry of Labor and Workforce Development in Panama, the company has failed to pay $3.8 million in employee benefits.
According to La Estrella de Panama newspaper, the company restarted gold extraction in early February, after securing $10 million from Baseline Financial Group.
On January 20, the Panamanian Ministry of Trade and Investment gave Petaquilla 180 days to gets its house in order or face losing its mining concession. It cited unpaid royalties and failure to pay employee social security payments among the issues the company needs to resolve.