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Mountainstar Gold Inc
Symbol	MSX
Shares Issued	60,415,928
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Mountainstar clarifies Chilean litigation disclosure

2015-07-30 14:12 ET - News Release

Finlayson Subject: Mountainstar Gold Inc. - News Release - Please Issue Please issue the attached news release which is both attached in PDF format and embedded below in Word format. Please issue the full news release. MOUNTAINSTAR GOLD INC. Suite 1500, PO Box 10127 701 West Georgia Street Vancouver, BC V7Y 1C6 (MSX-CSE) July 30, 2015 CLARIFYING NEWS RELEASE CHILE LEGAL PROCEEDINGS - TITLE TO PASCUA LAMA PROJECT As a result of a review by the British Columbia Securities Commission, Mountainstar Gold Inc. ("Mountainstar") is issuing the following press release to clarify its disclosure regarding the ongoing litigation in Chile between the Company's property optionor, Jorge Rodrigo Lopehandia Cortes (more commonly known as "Jorge Lopehandia"), and Barrick Gold Corporation ("Barrick"), including some of Barrick's Chile subsidiaries. Litigation in Chile Jorge Lopehandia is involved in legal proceedings in the Country of Chile relating to the issue of who is the rightful owner of the Chile portion of the Pascua Lama Project. The Pascua Lama Project is currently under the control of Barrick and is currently under care and maintenance. Jorge Lopehandia's position is that he is the rightful owner and Barrick's position is that it is the rightful owner. The initial legal proceedings, which are also the main legal proceedings (the "March 2001 Main Legal Proceedings") commenced in March 2001 (approximately 14 years ago). A hearing in the March 2001 Main Legal Proceedings was recently held in the Chile Supreme Court. The parties are awaiting a decision -see below regarding the proposed further application to the Chile Supreme Court by Jorge Lopehandia. Information as to the March 2001 Mail Legal Proceedings has been provided to Mountainstar by Jorge Lopehandia and his Chile legal counsel, who have reviewed and approved this Clarifying News Release. Mountainstar does not have independent legal counsel in Chile and, as a result, Mountainstar has not had the benefit of a review of the Chile legal proceedings by an independent lawyer - see Risk Factors below. The Property Option Agreement As background, the Company initially entered into a written property option agreement dated May 20, 2011 with Jorge Lopehandia pursuant to which the Company acquired the right to acquire up to a 50% interest in the Chile portion of the project commonly called the Pascua Lama Project (the "Property Option Agreement"). The Property Option Agreement by mutual agreement of the parties remains valid and binding upon both parties, despite the existence of mutually acknowledged option payment arrears at this time, which parties agree, to be directly related to and the product of Mountainstar's loss of its stock exchange trading status. Note carefully that the value of Mountainstar's interests under the Property Option Agreement are directly dependent upon whether Jorge Lopehandia will be successful in the March 2001 Main Legal Proceedings in Chile. In other words, if Jorge Lopehandia is not successful in the March 2001 Main Legal Proceedings in Chile, the rights of Mountainstar under the Property Option Agreement will have no value - see Risk Factors below. The Proposed Application to the Chile Supreme Court to Review the Two Legal Proceedings As stated above there was a hearing recently held before Chile Supreme Court in the March 2001 Main Legal Proceedings. Also, there was another hearing recently held before the Supreme Court in a related set of legal proceedings. No decision has been issued by the Chile Supreme Court in that legal proceeding also. Jorge Lopehandia advises that he will be applying to the Chile Supreme Court to have the Chile Supreme Court delay a decision in each of the above described two legal proceedings and to ask the Chile Supreme Court to review both legal proceedings at the same time. Further Developments Mountainstar will continue to disclose developments in the ongoing litigation in Chile. Risk Factors Readers of this news release, and investors in particular, should consider the following risk factors: 1. Mountainstar has not retained independent legal counsel in Chile. 2. Accordingly, (a) Mountainstar has not independently determined the status of the legal proceedings in Chile; and (b) Mountainstar has not independently determined the status of the mining claims in Chile, including the ownership and the rights and encumbrances relating thereto. 3. The value of Mountainstar's interests under the Property Option Agreement are directly dependent upon whether Jorge Lopehandia will be successful in the March 2001 Main Legal Proceedings in Chile. There is no guarantee that Jorge Lopehandia will be successful in the March 2001 Main Legal Proceedings. 4. If Jorge Lopehandia is not successful in the March 2001 Main Legal Proceedings in Chile, the rights of Mountainstar under the Property Option Agreement will have no value. 5. Mountainstar has not retained an independent professional to determine the location of the various mining claims being the subject of the legal proceedings in Chile. 6. Mountainstar has not retained an independent professional to locate the Pascua Lama deposit located in Chile. 7. Many of the documents provided by Jorge Lopehandia to Mountainstar are in the Spanish language. None of the directors and officers of Mountainstar speaks or reads the Spanish language. 8. Jorge Lopehandia claims to be the rightful owner of Pascua Lama because, amongst other things, he is the registered owner of mining claims of at least 8,600 hectares. But Barrick claims that the Pascua Lama Project area is much larger than that. Barrick also claims that there was a relatively small mineral reserve at the time of acquisition. For example, at page 42 of the Barrick Annual Information Form filed in SEDAR on April 6, 1999 Barrick stated the following: "Discovered originally in 1987, the Project has been significantly expanded since its acquisition by Barrick. At the time of acquisition, reserves in the Esperanza ore body were 1.8 million ounces. Through extensive exploration in 1995, the Company discovered the adjacent Quebrada de Pascua deposit. Exploration efforts since then have significantly increased reserves and mineralization in that deposit. At December 31, 1998 total reserves at Pascua were 14 million ounces of gold and 440 million ounces of silver". So, there is risk that even if Jorge Lopehandia succeeds in his claim to ownership of certain mining claims, those mining claims may not form a significant portion of the Pascua Lama deposit and may be of limited value. 9. The matters relating to the Pascua Lama mineral deposit and mining claims forming Pascua Lama and the rights and attributes of those mining claims are very complex. 10. Mountainstar has not retained any independent professionals in Chile to deal with the complex matters. 11. Mountainstar currently does not have funds to further make payments to Jorge Lopehandia. 12. Mountainstar currently does not have funds to finance the ongoing business of Mountainstar. 13. Any future equity financing may lead to significant dilution. 14. Mountainstar may be unable to raise sufficient funds to exercise the options contained in the Property Option Agreement with Jorge Lopehandia. 15. Mountainstar has advanced a large sum of money (the unaudited amount as of May 31, 2015 is USD$4,488,534) to Jorge Lopehandia towards the exercise of an option with Jorge Lopehandia without obtaining any security for those advances and without any restriction as to how those funds are to be used by Jorge Lopehandia. If Mountainstar fails to exercise the option contained in the Property Option Agreement, all payments made by Mountainstar are non-refundable. 16. Mountainstar currently has a large amount of current liabilities. As of January 31, 2015 those current liabilities totaled $3,421,558. The amount as of April 30, 2015 is expected to be larger and the amount as of the date of this news release is expected to be yet larger. 17. There is no assurance that Mountainstar can continue to obtain necessary equity or debt financings to meet its obligations and fund its ongoing business. 18. As a very senior mining company, Barrick should have ample resources and personnel in Chile to ensure that Barrick has proper title to its mining properties. 19. As a very senior mining company, Barrick should be considered to have well informed itself of all litigation risks and yet has not disclosed the litigation of Jorge Lopehandia as being a material risk. 20. Barrick has claimed in a letter dated March 29, 2011 that the March 2, 2011 news release of Mountainstar was defamatory and threatened legal proceedings. Although Mountainstar is not aware of Barrick commencing any legal proceedings, Barrick may commence such legal proceedings in the future or other legal proceedings claiming that it has been defamed. If Barrick does commence legal proceedings claiming defamation, it may take years to revolve. Any such litigation could be extremely expensive for Mountainstar to defend and Mountainstar currently has no funds. 21. Barrick has far greater financial resources than does Mountainstar. Mountainstar has provided this news release to Jorge Lopehandia and his Chile legal counsel who have reviewed and approved the terms of this news release. The Board of Directors of Mountainstar has met and has approved the content of this news release. On behalf of the Board of Directors, "Brent Johnson" Brent Johnson, President & CEO For further information, please contact Mr. Steve Holt, Director of Mountainstar Gold Inc., at steveholt@telus.net .. Neither the Canadian Securities Exchange nor the Investment Industry Regulatory Organization of Canada (IIROC) accepts responsibility for the adequacy or accuracy of this release. Alan Finlayson Northwest Law Group Suite 704-595 Howe Street Box 35 Vancouver, BC, Canada V6C 2T5 604-687-5792 Reception 604-787-6910 Cell 604-687-6650 Fax alan_finlayson@telus.net This e-mail message (including attachments, if any) is confidential and is intended only for the addressee. Any unauthorized use or disclosure is strictly prohibited. Disclosure of this e-mail to anyone other than the intended addressee does not constitute waiver of privilege. If you have received this communication in error, please notify us immediately and delete this. Thank you for your cooperation.