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High Court derails mining firm’s hopes

By Tendai Kamhungira

Mbada Diamonds’ principals, Mauritius-registered Grandwell Holdings (Grandwell)’s hope of resuming mining operations in Marange were derailed yesterday after the High Court dismissed its application in which it sought to compel Marange Resources (Marange) to pay renewal fees for its special mining grants. 

High Court of Zimbabwe
High Court of Zimbabwe

Grandwell had dragged the Zimbabwe Mining Development Corporation (ZMDC), Mbada Diamonds (Mbada) and Marange to the High Court, accusing the latter of failing to honour its obligations.

However, High Court judge Lavender Makoni yesterday handed down the ruling stating that, “the application is dismissed with costs”.

The litigation emerged after Mines minister, Walter Chidakwa, cancelled operations of all companies that were conducting operations under the Special Grants in the Marange diamond fields in February.

Narrating the background of the matter in their court affidavit, Grandwell’s chairman, David Kassel, said his firm entered into a joint venture and shareholders’ agreement with Marange and Mbada in 2009.

According to clause 6,3 of the joint venture agreement, “Marange undertakes that it shall forthwith after the signature date and thereafter for the duration of this agreement, pay all necessary fees and make application for the renewal and/or continued existence and do all that may be necessary so as to ensure that the Special Grants and rights there under are in good standing and remain valid for the duration of this agreement allowing Marange to mine and prospect the concession areas in perpetuity.”

The agreement further stated that Grandwell and Marange Resources would be equally represented on the board of directors.

In terms of the contract, Marange undertook to pay renewal fees in respect of the special mining grants.

However, Kassel said, “In breach of its contractual obligations, the second respondent (Marange Resources) did not pay renewal fees in respect of the special mining grants. It sought instead an exemption from payment of the renewal fees without knowledge or approval of the applicant (Grandwell Holdings) and the third respondent (Mbada Diamonds).”

He claims that the exemption application was turned down, but Marange did not pay the renewal fees.

The firm said it took the derivative action in a bid to force ZMDC and Marange to meet its contractual obligations.

 

A derivative action is a lawsuit brought by a shareholder of a corporation on its behalf to enforce or defend a legal right or claim, which the corporation has failed to do.

Kassel said the firm was being prejudiced as it has to pay wages and other business costs at a time when it is not mining adding that its property was depreciating in value arising from being non-functional, derelict and lacking in care and maintenance.

He said the government completely ignored its obligation and pursued a consolidation agenda, which sought compulsory merging of all seven diamond mining firms in the country into one, with the State owning 50 percent of the merged entity — Zimbabwe Consolidated Diamond Company.

However, in response Marange’s chief executive, Mark Mabhudhu, said the application was premature, further arguing that Grandwell did not follow the agreed procedures prior to approaching the court.

“Clause 17 of the shareholders agreement also addresses deadlocks between shareholders when the prerequisite majority to approve a resolution cannot be obtained. It provides that in such an event, a mediation notice shall be given to all directors to meet and attempt to negotiate an amicable settlement.”

“If they fail to resolve it then the secretary of the company shall then give notice of the deadlock to the chairpersons of both the applicant and second respondent to mediate on the deadlock and if that fails the dispute is referred to a panel of experts. No attempt has been made by the applicant to utilise this procedure or even explain why it considers it inadequate or unsuitable,” Mabhudhu said, adding that the firm never breached any of the contractual obligations. Daily News