SULLIDEN EXPLORATION INC.
TSX : SUE

SULLIDEN EXPLORATION INC.

March 31, 2006 10:36 ET

Sulliden Exploration Inc.: Update on Arbitration and Litigation on Shahuindo Property Constitutional Tribunal Reaffirms Autonomy of Arbitration Process

MONTREAL, QUEBEC--(CCNMatthews - March 31, 2006) - In order to keep informed its shareholders, Sulliden Exploration inc (TSX:SUE) releases the following update on the legal and Arbitration processes about its Shahuindo gold-silver property in Peru.

Background

The Transfer Agreement between the Company and "Compania Minera Algamarca S.A." and "Compania Exploraciones Algamarca S.A." ("Algamarca") for the purchase by the Company of the Shahuindo gold-silver property in Peru provides that any disputes shall be resolved by arbitration. In order to eliminate Atimmsa, Algamarca's new shareholder, allegations regarding the validity of the Transfer Agreement , an Arbitration Tribunal was established in January 2004 and had completed its evidentiary stage by May 2005. Algamarca had objected to the Arbitration process and, although it is actively participating in the Arbitration, has attempted in various Courts in different locations and in different jurisdictions to have the Arbitration Proceedings suspended.

In May 2005, Algamarca obtained an injunction from the First Mixed Court of the Villa Maria del Triunfo ordering the suspension of the arbitration proceedings pending a court hearing on Algamarca's objection. Following the injunction, the Arbitration Tribunal resolved (by a majority decision) dated May 31, 2005, to suspend the proceedings. This suspension order was appealed by Sulliden, and by the tribunal itself, to the Superior Court of Lima.

In September 2005 the Superior Court of Lima unanimously rendered its judgment dated September 2, 2005 to revoke the precautionary measure (injunction) that had temporarily suspended the Arbitration Process. Following the Superior Court decision to revoke the injunction, the Arbitration Tribunal unanimously resolved to continue with the remaining stages of the Arbitration Process and called upon the parties for closing arguments to be held in October 2005.

Subsequently Algamarca again attempted to suspend the Arbitration Process. In October 2005, Algamarca initiated two new "acciones de amparo" from the 41st and the 53rd Circuit Court of Lima seeking a Court Order to suspend the Arbitration Process but this application was not successful.

On 18 October a new Court Order was obtained by Algamarca from the 64th Civil Court of Lima, where an action had earlier been filed by Algamarga in November 2004 arguing that the Transfer Agreement was not properly executed on behalf of Algamarca, requesting that the Arbitration Process be suspended pending a determination by the 64th Civil Court as to the proper execution of the agreement by Algamarca. By resolution #191 dated 15 November 2005 the Arbitration Tribunal rejected the request and resolved to hear the closing arguments in early December 2005.

Injunction to Suspend Arbitration

Following the rejection by the Arbitration Tribunal of Algamarca's request for suspension, Algamarca sought and obtained from the 64th Civil Court of Lima a precautionary measure (injunction) ordering the suspension of the Arbitration Process pending the Court's decision on the principal matter of the valid execution of the Transfer Agreement and threatening to impose penal criminal charges against the Tribunal Arbitrators if the Order of the Court was not respected.

In addition, on December 1, 2005 Algamarca sought and obtained another precautionary measure (injunction) against the Arbitrators from the Third Civil Court of Cajamarca, where an action had earlier been filed by Algamarca in 2005 challenging the ownership of surface lands, prohibiting the Arbitration Tribunal from entering Final Judgment until the matter of the ownership of the surface lands at Shahuindo is resolved by the Third Civil Court.

Arbitration Temporarily Suspended

Upon the resumption of the Arbitration Tribunal on December 5, 2005, and faced with the demands by Algamarca that the Tribunal be suspended and in light of the two Court Orders, the Arbitration Tribunal resolved by Resolution No. 199 dated December 5, 2005 not to proceed with the final arguments and gave the parties (Sulliden and Algamarca) five days to make submissions on the Court Orders and the suspension request from Algamarca. Following such submissions by Resolution 201 dated December 15, 2005 (notified December 20) the Arbitration Tribunal resolved rejecting the order of suspension ordered by the 64th Civil Court but temporarily suspending the arbitration closing arguments hearing to protect the procedural legal terms to issue the arbitration award and to avoid any damage by the injunction issued by the Third Civil Court of Cajamarca.

Appeal by Sulliden

Sulliden initiated the appropriate legal action to have the latest injunction revoked and the Arbitration finalized On January 26th. 2006, Minera Sulliden Shahuindo SAC in written form, filed before Lima's Thirty Fifth Civil Judge a competence lawsuit against Cajamarca's Third Civil Judge. On January 31st. 2006, Lima's Judge declared himself competent to deal with the judgment of the Cajamarca's Third Civil Judge. The Third Judge of Cajamarca has suspended the procedure and sent the file to the Supreme Court, in order to decide the competence (jurisdiction) between them.

Sulliden has made submissions that the Tribunal is fully authorized to continue with the Closing Arguments Hearing and that all of the arguments and alleged grounds of dispute are properly to be determined by the Arbitrators and not by the Courts. Sulliden has also filed an Appeal to the Superior Court in Lima against the Order of the 64th Civil Court and a competence dispute against Lima's Sixty Fourth Civil Judge. The file has been sent to the Superior Court in order to determine the competent judge. The appeal process will be suspended until the competence matter is resolved.

Constitutional Tribunal reaffirms Arbitration autonomy

Meanwhile, in an habeas corpus procedure , which had previously been filed to the Constitutional Tribunal by one of the members of the Arbitration Tribunal on the matter of the competence of that particular member of the Tribunal, a written judgment was issued on March 10, 2006 in which the Constitutional Tribunal determined that the Arbitration Institution (process) has jurisdictional independence. The Court reaffirmed the full validity of Article 39 of the General Law of Arbitration which empowers Arbitrators to decide regarding matters of their own business and Article 44 which guarantees the entitlement of the Arbitrators to judge and decide any controversial matters brought forward during the Arbitration Process, including claims related to the validity and efficacy of the underlying agreement. The Constitutional Tribunal recognized the Arbitration Institution and its full and absolute competence to investigate and resolve the controversies referred to Arbitration with jurisdictional independence and without the intervention of any administrative or ordinary judicial authority.

Sulliden Requests Resumption of Arbitration

Following the decision of the Constitutional Tribunal on March 10, Sulliden requested the Arbitration Tribunal to resume the Aribtration Process based on the judgment of the Constitutional Tribunal which establishes the autonomy of the Arbitration Jurisdiction, as well as the autonomy and legal capacity of the Arbitrators.

By Resolution No. 202 notified by the Arbitration Tribunal on March 21, 2006, the Tribunal required Algamarca to deliver their opinion with regard to Sulliden's request for renewal and required both Sulliden and Algamarca to deliver a legal opinion with regard to the decision of the Judge of the 64th Civil Court which had ordered the sealing of the Arbitration File.

In the meantime Sulliden is proceeding with its appeal of the decision of the 64th Judge and has applied for an injunction to obtain the revocation of the Order issued by the 64th Civil Court Judge.

Comment

The recent steps and Court actions by Algamarca mark the numerous occasions in which Algamarca has resorted to judicial injunctions and procedures in an attempt to suspend the closing arguments in the Arbitration Process and to prevent the Arbitrators from rendering a Final Decision. This strategy is consistent with their previous attempts to have the Arbitration Process declared inapplicable and of no judicial effect. The Arbitration Process has been conducted in accordance with all the Rules of Arbitration and Sulliden believes, in all cases, that its appeals of these latest court orders and injunctions will be successful and that the Arbitration Process will ultimately be concluded.

In the opinion of management, the claims of Atimmsa and Algamarca are made in bad faith and without merit and will be defended. The Company has paid the full purchase price of US $4.13 million, including US$10,000 accepted by the shareholders of Algamarca upon signing the Final Letter of Intent on August 15, 2002, as well as $320,000 paid to Algamarca upon execution of the Transfer Agreement on November 11, 2002. Of this latter amount and in fulfillment of Algamarca's instructions, US $107,244 was in favour of Compania de Minas Buenaventura S.A.A. to release Algamarca from a previous option obligation, with the remaining US $212,756 having been accepted by the Algamarca shareholders. The balance of the total purchase price plus the interest was paid to the Court.

The Company will seek by every means possible to have its ownership of the Shahuindo property confirmed and the claims registered in its name. Sulliden has filed the appropriate appeals, review requests and nullity applications against all the interceding injunctions and will continue where appropriate to seek whatever legal redress is necessary to ensure that the Arbitration Process is completed. In view of its strong legal position Sulliden remains confident that the outcome of all the legal actions and the Arbitration Process will be favourable to Sulliden and is of the view that the recent actions by Algamarca represent attempts to try to prevent the Arbitration Tribunal from issuing its Final Judgment.

About Sulliden

Sulliden Exploration Inc. is a mineral exploration company focused on the development of its 100% interest in the Shahuindo gold-silver project located 25 km north of Alto Chicama and 70 km south of Yanacocha in northern Peru. An option interest to acquire 66% of an adjacent 1,900 hectares known as the Vikingo concessions brings the Company's land holdings in this exciting gold district to almost 10,000 hectares. In addition, Sulliden through a subsidiary has entered into an option agreement to earn a 50% interest in the Torrine gold project with Aruntani SAC and affiliates in southern Peru.

Contact Information

  • Sulliden Exploration Inc.
    Jacques Trottier, Ph.D.
    President and CEO
    (514) 861-1953
    sulliden@colba.net