By Joe Schneider

May 14 (Bloomberg) -- Inspiration Mining Corp. sued a Liberty Mines Inc. executive for defamation in a lawsuit seeking C$12 million ($11.9 million) in damages over an Internet posting about the potential returns from one of its properties.

The suit may threaten a joint venture of the firms, a Liberty executive said today. Liberty owns a nickel mine near Timmins, Ontario, next to an Inspiration site. The alleged comments by Vice President William Randall, made anonymously on an investor Web site, helped spur a 57 percent drop in its share price, Inspiration said in court papers filed April 25.

``The corporation will lose, and has now continued to lose, since Oct. 25, in excess of a market capitalization value of over C$100 million,'' Inspiration said in the Ontario Superior Court filing in Toronto. The company obtained a court order forcing disclosure of the author. The suit threatens a partnership of the firms, Liberty President Gary Nash said.

``If Inspiration wants to push this, they're going to open up a can of worms that they wish they hadn't,'' Nash said, declining to provide details on the venture. Inspiration President Randy Miller didn't return a call seeking comment.

Liberty fell 11 percent on news of the lawsuit, while Inspiration rose one percent.

Randall, who didn't return a call for comment, wrote the Web post in reaction to an Inspiration report about an estimate on the amount of nickel on Inspiration's property, Nash said. Randall apologized ``profusely'' to Liberty's management for the Nov. 11 posting and will remain in his job, Nash said.

`It's a Mess'

``He shouldn't have done it,'' Nash added, saying he was confident the matter will be settled. ``It's a mess.''

Inspiration, based Vancouver, sued three other individuals for alleged defamatory postings, seeking C$12 million in damages from each defendant, said Leo Klug, a lawyer for the company.

Inspiration closed down 5 percent, or 11 cents, to C$2.12 at 4 p.m. in trading on the Toronto Stock Exchange. Liberty, based in Edmonton, Alberta, closed down 8.4 percent, or 7 cents, to 76 cents. Its shares have fallen 79 percent in the past year.

The case is Between Inspiration Mining Corp. and Stockhouse Media Inc. File No. 07-cv-345122. Ontario Superior Court of Justice (Toronto).

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