Venus Metals (ASX: VMC) is a mining company that has recently taken legal action against a competitor, Spectrum Metals (ASX: SPX), in the West Australian Supreme Court. The company issuing its rival with regard to their conduct in acquiring the Penny West Gold project, accusing them of breach of fiduciary duty, breach of confidence and misuse of confidential information.
The company expressed confidence in their prospects following the litigation, which resulted in the company’s share price soaring 45% on the day when it peaked. This is despite the company not knowing the extent of the damages they could potentially claim. Since it is a civil action, the case will be decided on the balance of probabilities, which significantly lowers the bar required to win.
Operations of Venue Metals (Credit: Venus Metals Corp)
Spectrum however wholly denied the claims today and said that they would vigorously defend themselves in court. The statement was quire strongly worded, with Spectrum saying that they would attempt to expedite the proceedings. This is unlikely if Spectrum believed that the proceedings were likely to go against them, so investors in Venus tempered their optimism around a large payout. Additionally, since Spectrum is going to continue their exploration project while the case is being decided, they are committing more funds that they are likely to lose if they are wrong.
Venus Metals mines gold, lithium, iron, cobalt and Nickel. The business is a pre-earnings, exploration phase mining company, with very little revenue. This is not necessarily a bad thing since the business is working on finding an attractive mine site and commercialising it, which could deliver great returns if successful. Nevertheless, the high failure rate in exploration projects means that investors should view the opportunity with some degree of caution and analyse it carefully before deciding to invest.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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