Sattva Capital Corp.

Sattva Capital Corp.

August 22, 2011 09:00 ET

Sattva Capital Corrects Omissions by Mercator Minerals

RICHMOND, BRITISH COLUMBIA--(Marketwire - Aug. 22, 2011) - Public companies have an obligation to shareholders and other stakeholders to provide complete, truthful and accurate information. These are self-evident principles, the bedrock of any securities market.

Today Sattva Capital Corp. ("Sattva") is pleased to shed some light on omissions by Mercator Minerals Ltd. ("Mercator") regarding the fee dispute as revealed in Mercator's latest financial statements.

"When something false or misleading concerning us is floating out there, we have an obligation to our clients to set the record straight," said Hai Van Lê, Sattva's Managing Director.

As disclosed in Note 8 – Contingent Liability in the consolidated financial statements, Mercator asserts that (1) the fee is payable at the option of the finder in shares or cash; (2) the TSX Venture determined a price of $0.70 to be used in determining shares to be issued; and (3) the arbitrator awarded $4.14 million plus costs in favour of the finder.

This contingent liability appears on Mercator's balance sheet as a result of its recent acquisition of Creston Moly Corp. ("Creston").

As small as the remaining liability maybe ($2.6 million by Mercator's own disclosure), this amount is hardly life-threatening for a copper and molybdenum producer with a market value of over half a billion dollars and annual sales of over $200 million. Nonetheless, the principle matters: Investors are entitled to a full and complete account of what actually transpired and what the consequences are.

Mercator could have done its shareholders a favour by providing a clearer picture of the circumstances regarding this dispute. What have been omitted are several key concepts: Market Price, Breach of Contract, and Damages as a result of the breach of the contract with Sattva. If included in the disclosure, investors would have a full, complete picture of what transpired.

Mercator's silence on these details speaks volumes given how detailed and extensive the company's disclosure on its production and financial obligations is.

Sattva's agreement with Creston specifies that finder's fee at our option is to be payable in shares at Market Price. Market Price was defined in the contract as the closing price of Creston prior to the acquisition announcement. This Market Price is consistent with the definition found in the TSX Venture Exchange's Corporate Finance Manual.

The TSX Venture Exchange did rule a price of $0.70 is to be used in determining shares to be paid. What Mercator has failed to disclose is that a) this ruling came about six months after the acquisition of the world-class Creston molybdenum deposit had closed; b) prior to the closing, Creston had misled not only the Exchange, but also shareholders, investors and underwriter, about the nature of the fee; and c) in the months after the closing, Creston continued to feed the Exchange misleading information about the intentions of Sattva.

"At one point prior to the closing of the Creston molybdenum deposit, we offered to take 50% of the fee in shares at Market Price," said Mr. Lê. "Management at the time instead chose to ignore our offer and instead misled all the stakeholders involved."

These are the facts as determined by the arbitrator in his award. Not surprisingly, on three separate occasions, both the arbitrator and the Supreme Court of BC did not give much weight to this decision by the Exchange.

Merely mentioning the amount awarded by the arbitrator gives the impression that was the finder's fee, when in reality, the $4.1 million assessed by the arbitrator is the damages, a consequence of breach of contract. Creston was found by the arbitrator to have intentionally and unilaterally breached the terms of the agreement and damages were assessed accordingly.

"Taking legal action against Creston was the first in our history. It was one of the toughest decisions that we have ever made," said Mr. Lê.

For access to all legal rulings to date, visit


In the business world, it's important for companies to carefully weigh their legal and contractual obligations before entering into an agreement. Once an agreement has been reached, and the services have been rendered, there's no escaping responsibility.

"We are not responsible for other parties' behaviour," said Mr. Lê. "But one thing I can say with no hesitation is our word is our bond."

Canada is not a third-world country where the rule of law can be flouted with impunity by the rich and powerful. Our judicial system is not perfect, but it's independent and impartial.

In that context, the arbitrator's award is a just and welcome ruling.

It was Creston who chose the arbitrator. It took about one year from the start of arbitration to the time an award was made. During that period, hundreds and hundreds of pages of confidential corporate minutes, emails, transcripts of examination for discovery sessions, statements of facts and other material were examined by both sides and the arbitrator.

"The losing side is supposed to accept and respect the award. Continuing to appeal the arbitration award year-after-year makes a mockery of the arbitration principles," said Mr. Lê. "We encourage Mercator to do the right thing and live up to the legal and contractual obligations. There are far more important matters to take care of than continuing to appeal unfavourable court decisions year-after-year."

Chronology of Events

January 12, 2007 – Sattva Capital and Georgia Ventures, Creston's predecessor, signed a fee agreement concerning the availability of Mexico's biggest molybdenum deposit. Georgia's market cap at the time was $6 million.

May 15, 2007 – Creston Moly closed the acquisition of Mexico's biggest molybdenum deposit.

December 23, 2008 – Arbitrator Leon Getz awarded damages of $4.1 million against Creston for breach of contract.

August 7, 2009 – Supreme Court of British Columbia denied Creston Leave to Appeal.

May 14, 2010 – The Court of Appeal of British Columbia granted Creston Leave to Appeal.

May 6, 2011 – The Supreme Court of British Columbia dismissed Creston's appeal with costs. The verdict came a few weeks after Creston agreed to be bought by Mercator in a transaction valued at $195 million.

About Sattva Capital Corp.:

Sattva Capital is a boutique investment bank specializing in cross-border M&A and corporate finance in the mining industry. We pride ourselves on the quality of our advice, ideas and a vast network of contacts around the world to bring clients a steady flow of deals. For more information, visit

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