Stans Energy’s rare earths assets acknowledged by Russian court

By Antonio Torrisi
Published: Tuesday, 27 May 2014

Kyrgyz government ordered to pay damages; Stans to restart production at Kashka

The International Arbitration Court in Moscow ruled in May that TSX-listed rare earths junior Stans Energy Corp. legally acquired the Kutessay II rare earths project in Kyrgyzstan.

The court found that the company, which claimed its rights to develop the project following its acquisition in 2009, is lawfully entitled to continue work at the past-producing mine.

The acquisition was disputed by the State Prosecutor Officer (SPO) of the state of Kyrgyzstan, which started legal proceedings against the company in April 2013.

“This ruling validates our position as open and honest business partners for the Kyrgyz Republic,” Rodney Irwin, Stans’ CEO, said.

Stans, defending its acquisition, appealed to the International Arbitration Court, accusing the government of Kyrgyzstan of expropriation and seeking a $1.18bn compensation for losses and damage.

“The ruling sets up a circumstance where there are direct repercussions for the Kyrgyz government for not following international norms and safeguarding investment,” David Vinokurov, Stans’ vice president of corporate development, told IM.

“This should provide an impetus for the government to co-operate with Stans so that they can demonstrate to the international investment community that the rule of law is respected and that they are indeed, open for business,” he added.

Irwin said that Stans intends to continue negotiating a settlement with the inter-departmental working group of the government.

Vinokurov told IM that Stans is looking to secure a mutually beneficial licencing agreement with the Kyrgyz authorities that would allow the company to restart the development of Kutessay II and eliminate a huge liability for the government.

The International Arbitration Court will prepare a written ruling in the next three months, which will provide details about the final damages amount to be paid to Stans.

Appeal against Inter-District Court’s ruling

The company has recently filed an appeal against the Inter-District Court of Bishkek, which ruled in favour of the SPO on the acquisition of its 20-year licence for Kutessay II, in 2009.

“It is our hope that we will receive a fair and impartial trial based on the evidence at hand. Should we win, we would be glad to continue working in Kyrgyzstan, although in a strictly regimented relationship with the authorities,” Vinokurov told IM.

He explained that Stans wants to be guaranteed a stable environment, free from third party agitation and without unnecessary delays to continue the development of the project.

“We need to ensure these criteria in order to safeguard our shareholders’ investments,” Vinokurov said.

“If we should lose the appeal, and the further supreme court appeal if necessary, then we would be forced to seek restitution that we are entitled to by the International Arbitration ruling,” he added.

Stans’ plans at Kutessay II

Vinokurov told IM that Stans is planning to resume pilot testing of new milling, cracking and separation technologies that the company has been able to develop with the assistance of VNIIHT, the Russian Research Institute of Chemical Technology division of ROSATOM.

“The tests would form the basis of the feasibility study that has been delayed due to the present court cases,” Vinokurov said.

Stans completed the purchase of the Kashka rare earths processing plant in May 2011.

“Kashka requires feedstock, and that is dependent on the opening of the mine. We have conducted operational tests at the plant and have been able to produce various oxides and metals during the summer of 2012,” Vinokurov told IM.

He added that the plant is currently 90% operational and can process concentrates for third parties, providing they are free from radioactive by-products.

“Stans is focused on the production of rare earth oxides, metals and alloys as they determine higher sales volumes compared with concentrates,” Vinokurov explained.

“Restarting of operations would be dependent on reaching an agreement with Kyrgyz authorities on a new licence agreement,” Vinokurov added.

The distribution of rare earth elements at Kutessay II consists of 52% light rare earths (LREE), including 16.6% lanthanum, 19.7% cerium and 8.2% neodymium, and 46.1% heavy rare earths (HREE), of which 26.7% is yttrium, 6.1% dysprosium, 3.6% gadolinium and 3.2% erbium.