Tuesday April 8, 2014, 4:15am PDT
By Vivien Diniz - Exclusive to Rare Earth Investing News
Rare earth investors who have been following the market for a few years are likely familiar with Stans Energy (TSXV:HRE), a Canadian junior resource company that wholly owns the Kutessay II heavy rare earths project in Kyrgyzstan.
However, investors might have noticed that since 2013, Stans has been a little quieter. That is due to legal proceedings set forth by the General Prosecutor’s Office of the Kyrgyz Republic in April 2013. At that time, the General Prosecutor’s Office launched a suit against the State Agency for Geology and Mineral Resources of the Kyrgyz Republic to invalidate the process by which the 20-year mining licence for Kutessay II was acquired. Stans’ subsidiary was a third party to this case and was the subject of a subsequent stop work order that restricted the company from carrying out any work at the mine site.
Since October 30, 2013, Stans Energy and its subsidiaries have been in international arbitration with the Government of Kyrgyzstan under the Convention for the Protection of Investors’ Rights in the Moscow Chamber of Commerce and Industry.
Stans claims that certain actions by agencies or representatives acting on behalf of the Kyrgyz government aimed to impede the company from executing its responsibilities under its license and have created conditions for termination of the operation of Kutissay Mining LLC, the company’s wholly owned subsidiary, that amount to expropriation.
To learn more about the international arbitration and what the company hopes to accomplish, Rare Earth Investing News (REIN) spoke with Stans Energy COO Boris Aryev.
REIN: Why is this an important process for the company to go through? What do you aim to accomplish via the arbitration?
BA: This is an important process for the company because it gives us the opportunity to recoup hard dollars we have invested in the property. Most importantly, it provides us the opportunity to seek recourse for potential lost profits for the company and its shareholders.
Once we have a decision from the arbitration hearings in hand we intend to continue negotiations with an interdepartmental government working group that was put together by a decree from the Prime Minister’s office in early February 2014. It is a stated aim of this working group to reach an out-of-court settlement with the company.
REIN: When are you expecting the proceedings to come to an end?
BA: We expect that we will have a final binding decision from the International Chamber of Commerce sometime in April 2014. I cannot comment on a time frame yet for the successful conclusion of government negotiations.
REIN: As far as the project goes, Stans is focused on developing the past-producing Kutessay II rare earth mine in Kyrgyzstan. Can you describe the aims/goals of this project?
BA: The aim of this project is to resume production at Kutessay II and resume production at the Kashka Rare Earth Processing Facility. These are both past-producing assets controlled by Stans Energy that at one time produced 500 tonnes of finished rare earth products, including 120 types of different oxides, metals and alloys. The company’s intention is to scale that production rate up to 1,500 tonnes a year of finished oxides and further downstream products.
REIN: Why is the development of this project important to the market? To Kyrgyzstan?
BA: This project is important to the rare earth market because it is the only hard-rock, heavy rare earth property that was ever put into production outside of China. There is a known metallurgy to produce oxides and metals, and Kutessay II can be an excellent source of these products for near-term production.
This project is of significant importance to Kyrgyzstan because it provides the Kyrgyz government an opportunity to demonstrate to the international investment community that it respects the rights of investors and has clear policies and checks and balances in place to safeguard those investments. Most importantly, the development of Kutessay II would provide for significant capital investment in the country and employment for the local communities.
REIN: Recently, the Inter-district Court ruled in favor of the General Prosecutor. What is the advantage of the recent ruling to the arbitration case?
BA: The recent ruling by the Inter-district Court of Bishkek in favor of the General Prosecutor further demonstrates the Kyrgyz government’s interference with our day-to-day operations, specifically that it is refuting a previously secured license. This is an act of expropriation and is the exact reason why we filed for International Arbitration in the first place.
REIN: What is the company planning as its next steps when it has finished with legal proceedings?
BA: We intend to negotiate a settlement with the Kyrgyz authorities that would allow the company to resume development at Kutessay II and the Kashka Rare Earth Processing Facility.
REIN: Well thank you very much Boris for keeping us up to date.
BA: Thank you.
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Interviews conducted by the Investing News Network are edited for clarity. The Investing News Network does not guarantee the accuracy or thoroughness of the information reported. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.