Brazilian state firm contests sale of Equinox Gold asset to CMOC

A Brazilian state-run company is taking legal action to try to block the sale of a precious metals asset by Equinox Gold Corp. to one of China’s biggest miners.

Companhia Baiana de Produção Mineral, or CBPM, is seeking an emergency injunction for the immediate repossession of a lease area in Bahia, a state in Brazil’s Northeast Region, according to a document seen by Bloomberg News. It argues that Canada-based Equinox was a leaseholder – not the owner – of the concession and therefore was not entitled to sell it.

Equinox agreed to sell its Brazilian operations to CMOC Group, one of China’s biggest mining companies, in a $1 billion deal that is expected to be completed in the current quarter. The transaction — announced in December — includes several mines and deposits, in different Brazilian states, under Equinox’s entities in the South American nation.

CBPM’s allegations relate to only one of these assets, known as the Bahia Complex. No other properties were listed in the document filed with the court. The company had previously signaled its opposition to the transaction in a statement.

Equinox Gold has not received notice of any lawsuit, Ryan King, the company’s executive vice president for capital markets, said in an emailed response to a request for comment. Equinox “is confident that the sale of its operations in Brazil was fully compliant with Brazilian law and all contractual obligations,” he said on Thursday.

“While Equinox Gold is prepared to defend its position in court if required, the company remains open to engaging in constructive discussions with the State to seek a mutually agreeable resolution,” King said.

CMOC Group, the Chinese company, did not immediately respond to requests for comment. Many Chinese businesses are closed this week for the Lunar New Year holiday.

CBPM alleged that the transaction was agreed without its express consent, which it said was a condition of the agreement governing the mining area. The company has asked the Bahia State Court of Justice to terminate the lease agreement, and is also seeking damages.

“The Canadian company sold a mining right that does not belong to it,” CBPM president Henrique Carballal said by telephone.

(By Mariana Durao)