TORONTO (miningweekly.com) – Royalties and metals streaming firm Callinan Royalties Corp has restarted proceedings against Hudbay Minerals, and is now seeking additional damages based on allegations that the Canadian miner had destroyed certain paperwork.

Callinan started proceedings in 2007 in the Manitoba Court of Queen's Bench, alleging that Hudbay had not properly accounted for the net profits interest (NPI) under an agreement signed on January 1, 1988.

The agreement covered past and present mining areas that included Hudbay's flagship 777 mine, in Manitoba, which is currently in production, as well as the 777 North mine, which recently started production.

The lawsuit was drawn-out owing to Callinan pursuing an application against professional services firm Deloitte & Touche - Hudbay's auditor - to produce Deloitte's working papers prepared in connection with its annual audit of the NPI and opinion that the NPI had been properly calculated.

Despite the application not initially succeeding, Callinan prevailed on appeal and the Manitoba court ordered production of the working papers.

On September 9, 2011, Callinan reported that it had executed a standstill agreement with Hudbay, which placed the lawsuit in abeyance, while Callinan conducted an independent audit.

Under the standstill agreement, Callinan initially planned to audit the NPI calculations for four selected years, namely 1993, 2003, 2004 and 2007. Callinan retained Grant Thornton to conduct the independent audit. The company said Hudbay had agreed to cooperate with the auditors and to supply all available documents reasonably requested for the audit.

In return, Callinan had agreed to hold the lawsuit in abeyance, while retaining the right at its discretion to terminate the audit and proceed with the lawsuit on 30 day’s notice in writing to Hudbay.

On February 26, Callinan reported that the Grant Thornton audit of the NPI calculations could not be completed, as much of the source material evidencing entries from the originally selected early years was not available from Hudbay. Therefore, the audit work conducted was incomplete and inconclusive in nature.

Callinan’s board subsequently undertook a review to determine the next course of action and had chosen to restart litigation against Hudbay, keeping any information from the incomplete audit under wraps.

Callinan on Friday said Hudbay had destroyed documents not only before it started the lawsuit in 2007, but also afterwards.

ANOTHER ACTION

In a precedent-setting ruling with national and international implications, Superior Court of Ontario Justice Carole Brown in July ruled that Hudbay could potentially be held legally responsible in Canada for alleged sexual assault and murder at a mining project formerly owned by its subsidiary in Guatemala. As a result of Brown’s ruling, the claims of 13 Mayan Guatemalans would proceed to trial in Canadian courts.

It was the first time that a Canadian court had ruled that a claim could be made against a Canadian parent corporation for negligently failing to prevent human rights abuses at its foreign mining project.

Members of the indigenous Mayan Q’eqchi’ population from El Estor had filed three related lawsuits in Ontario courts against Hudbay over the alleged killing of Adolfo Ich, the alleged sexual assault of 11 women from Lote Ocho, and the alleged shooting and paralysing of German Chub – abuses alleged to have been committed by mine company security personnel at Hudbay’s former Fenix nickel project, located near El Estor.

“As a result of this ruling, Canadian mining corporations can no longer hide behind their legal corporate structure to abdicate responsibility for human rights abuses that take place at foreign mines under their control at various locations throughout the world,” the lawyer for the 13 indigenous Mayans, Murray Klippenstein, said in a statement.

Hudbay argued in court that corporate head offices could never be held responsible for harms at their subsidiaries, no matter how involved they were in on-the-ground operations. Justice Brown disagreed and concluded that “the actions as against Hudbay and HMI should not be dismissed.”

“This judgment should be a wake-up call for Canadian mining companies,” co-counsel for the Mayans along with Klippenstein, Cory Wanless, added at the time.

This was the second significant legal victory for the Mayan plaintiffs this year. In February, Hudbay dropped its argument that the lawsuit against it should be heard in Guatemala, not Canada, after fighting over this issue for more than a year.

No court dates have been set.