Maputo — The share price of Pathfinder Minerals at the opening of trading on Friday morning fell by almost eighty per cent following its relisting on AIM, the London Stock Exchange's international market for small companies.
Shares had been suspended in November following the resignation of board member General Jacinto Veloso, who accused the company of breach of contract and having "persistent questions raised about corporate governance issues".
Central to the dispute is who owns the licence to mine the heavy mineral sands in Naburi and Moebase, in the central Mozambican province of Zambezia. The two areas cover 32,780 hectares of land.
Results of a scoping study, released in May last year, showed that between them Moebase and Naburi could be expected to produce 1.245 million tonnes of ilmenite (iron titanium oxide), 24,000 tonnes of rutile (the most common form of titanium dioxide) and 65,000 tonnes of zircon (zirconium silicate) a year. These are the same minerals currently being produced by the Irish company Kenmare Resources at its dredge mine in Moma district, in the neighbouring province of Nampula.
The scoping study put estimated annual revenue from Moebase-Naburi at 246.5 million US dollars. This was based on prices of 125 dollars per tonne of ilmenite, 677 dollars per tonne of rutile, and 1,148 dollars a tonne of zircon.
The capital cost of developing the mine was put at 533 million dollars. The study gave the mine an estimated life of 30 years and put the Internal Rate of Return at 18.8 per cent.
On 26 March in a letter to Pathfinder shareholders, Veloso argued that Pathfinder Minerals, through IM Minerals, had failed to take up the option of buying an eighty per cent share in Companhia Mineira de Naburi (CMdN), which owned the licence to the sands. He stated that out of the ten million US dollars agreed for the purchase of the shares, only twenty thousand dollars has been paid. (CMdN was owned by General Veloso and his business partner Diogo Cavaco.)
However, on 30 March, Pathfinder Minerals accused General Veloso of having "diverted the Company's sole assets, namely the mining licences over the Moebase and Naburi sites". It argued that the 9.9 million dollars owed is "not payable until six months after signature of a construction agreement in respect to the Naburi site".
On 28 June, the company explained that multiple legal proceedings are underway in both English and Mozambican courts and a line of communication has been established between Pathfinder and General Veloso.
According to Pathfinder, British Prime Minister David Cameron and Foreign Secretary William Hague "specifically raised the issue of Pathfinder Minerals at a meeting at 10 Downing Street on 9 May 2012 with the President of Mozambique, Armando Guebuza"
In addition, "the Company has been further assured that the Minister of State at the Foreign and Commonwealth Office with responsibility for relations with Mozambique, Henry Bellingham MP, will continue to take a close personal interest in the issue.
The issue of ownership is now due to be heard in the English High Court on 29 October.