Cassidy Says Guinea Golden Suffers From Own Negligence

2006-02-17 17:10 ET - Street Wire

By Stockwatch Business Reporter

Cassidy Gold Corp., in response to a lawsuit brought by Guinea Golden Mines SARL, says GGM's own negligence is what caused it to lose its permit to explore the Kouroussa North property in Guinea, located on the west coast of Africa. GGM, which sued Cassidy on Dec. 19, 2005, says Cassidy and its president, James Gillis, conspired to cause GGM to lose the permit and then snatch it up for Cassidy.

GGM's suit
GGM said on Oct. 4, 2002, it granted Cassidy the option to buy Kouroussa property for $20,000 (U.S.) and 200,000 shares on signing plus payments of cash and shares over four years. Cassidy paid the initial $20,000 (U.S.) and the 200,000 shares, but GGM said Cassidy failed to make the second and third anniversary payments.

GGM president and shareholder Moussa Traore said he met with Mr. Gillis several times before March 12, 2004, to talk about Cassidy's work at Kouroussa. In a verbal agreement, Mr. Gillis convinced Mr. Traore to let Cassidy fulfill GGM's obligations under the permit. Because of the deal, GGM did not attempt to meet its obligations to maintain the permit and relied on Cassidy to do so. Under the deal, Cassidy had a duty not to harm GGM's rights to the project.

GGM claimed that some time between the verbal agreement and Oct. 31, 2004, Cassidy let GGM's permit lapse, then applied for another in Cassidy's name. Cassidy then signed a deal on Sept. 1, 2004, to buy a neighbouring permit, Kouroussa South, and also received a two-year permit to explore Kouroussa North that December.

GGM said Cassidy neglected to inform GGM of the Kouroussa South and Kouroussa North deals and failed to protect GGM's rights. Also, GGM claims Cassidy knew GGM intended to maintain and renew the permit and would rely on the verbal deal. Cassidy allegedly caused damage and losses to GGM out of malice and opportunism by allowing GGM's permit to lapse, then going after one of its own.

As for Mr. Gillis's part in the fight, GGM said he conspired with Cassidy before March 12, 2004, to let GGM's permit lapse and gain the Kouroussa permit for Cassidy, as well as acquire Kouroussa South.

GGM claimed it has suffered loss of the cash and shares Cassidy should have paid in the second and third years of the deal. GGM also says it has missed out on the opportunity to sign deals for more properties in the Kouroussa area. GGM asked the court to declare that Cassidy holds its permit on behalf of GGM. It also seeks judgment of $105,000 (U.S.) plus interest and 300,000 shares.

Cassidy's defence
Cassidy opens its defence by requesting the courts strike down GGM's lawsuit, claiming that GGM does not have the right to sue. Further, Cassidy claims it has no liability to GGM at all.

Cassidy's interpretation of the option agreement is as follows. On Oct. 4, 2002, Cassidy and GGM signed a deal whereby GGM would grant Cassidy an option to acquire a permit to explore Kouroussa. In 2004, they would then renew the permit for another two years in exchange for Cassidy paying $150,000 (U.S.) and issuing 600,000 shares.

Cassidy says it paid GGM $20,000 (U.S.) and filed for TSX Venture Exchange approval on Oct. 4, 2002, then paid GGM 200,000 shares on Oct. 10. The following year on Sept. 10, 2003, Cassidy issued 100,000 shares to GGM.

In March, 2004, when it was time to renew the permit, GGM failed to do so. Cassidy says renewing the permit was a condition of the agreement that preceded Cassidy's obligation to pay $105,000 (U.S.) and 300,000 more shares by Oct. 10, 2006. Because GGM did not renew the permit, Cassidy was not obliged to make these payments.

Cassidy says about Jan. 11, 2004, GGM ended Mr. Traore's services as its chief executive officer and told Cassidy Mr. Traore no longer represented GGM. Mr. Traore then met with Mr. Gillis in March, 2004, attempting to have Mr. Gillis divert future payments under the option agreement to Mr. Traore.

Mr. Gillis said Cassidy would honour its obligations to GGM. Cassidy therefore claims it made no verbal deal with Mr. Traore, who in any case did not have the authority to enter such a deal on GGM's behalf. Cassidy further claims it did not amend the option agreement in writing, which would have been the only valid way to amend it.

As for GGM's accusations of breach of duty, Cassidy says it owed no duty at all to GGM -- but even if Cassidy did, the company did not breach said duty in its actions. Cassidy asserts it did not act out of malice or bad faith, but even if it had, GGM suffered no losses or damages.

Addressing GGM's request that the court declare Cassidy holds the permit on GGM's behalf, Cassidy denies holding property for GGM, and denies any conspiracy to injure GGM. In fact, it says, any damages spring from GGM's own negligence or misconduct, not Cassidy's.

Cassidy closes its defence by asking that the courts dismiss the lawsuit with special costs.

Vancouver lawyer Winton Derby of McCarthy Tetrault LLP filed Cassidy's statement of defence on Jan. 24, 2006. Cassidy also filed its notice of appearance two weeks earlier on Jan. 10, 2006.

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