Snowfield sues Dyno under drilling, blasting agreement

2010-08-16 16:38 ET - News Release

Mr. Robert Paterson reports

COMPANY INITIATES LEGAL ACTION

On June 7, 2010, Snowfield Development Corp., as plaintiff, filed a writ of summons and a statement of claim in the Supreme Court of British Columbia naming Dyno Nobel Canada Inc., a company incorporated under the laws of Canada, naming Dyno as the defendant. The action was initiated with respect to a drilling and blasting agreement entered into with NWT Rock Services of Yellowknife, Northwest Territories, on Oct. 16, 2006, with respect to a 500-tonne bulk sample of kimberlite being undertaken by the company to be completed by March 31, 2007. NWT Rock was amalgamated with Dyno on Jan. 1, 2007.

Snowfield alleges that Dyno breached the blasting and drilling agreement by failing to follow the specifications of the pit plan design; failing to draw up a blasting plan and execute the work in compliance with the pit plan design, industry standards and accepted practices for drilling and blasting for kimberlite as well as applicable mine safety regulations; failing to carry out the drilling and blasting in a workmanlike manner; failing to observe and follow the industry practice of preshearing to facilitate the creation of walls and benches as required in the pit plan design; failing to create the walls and benches as required by the pit plan design; failing to exercise reasonable care in supplying the drilling and blasting services, in particular taking reasonable care to avoid damage to the kimberlite; and, failing to complete the drilling and blasting on or before March 31, 2007.

Snowfield further alleges that Dyno's actions delayed the completion of the drilling and blasting work for several months after the contracted completion date of March 31, 2007; the defendant blasted the pit in a manner that created blasted rock fragments too large to transport and as such required further (secondary) blasting; the defendant blasted the pit in manner that destroyed the diamonds in the kimberlite; the defendant blasted an open pit that made it impossible for the plaintiff's transportation contractors to access the kimberlite until many months after the contracted due date for completion of the work. Snowfield and Dyno were ordered, on or about April 10, 2007, by the Mine Safety Branch to stop operations "until proper sized benches have been established" as a result of the narrow bench widths blasted by Dyno that were a violations of the previously accepted pit plan design and the Mine Health and Safety Regulations, N.W.T. Reg. 125-95, Section 1.137 (1) (a).

Snowfield was compelled to engage an independent engineering firm to draw up a remediation plan involving a new pit design plan which required the company to move over 100,000 cubic metres of rock to access the kimberlite, rather than the contracted amount of 40,000 cubic metres of rock. Dyno was involved in the remedial drilling and blasting in accordance with the revised pit plan prepared by the independent engineering firm.

As a result of Dyno's alleged breach of contract, Snowfield has suffered and continues to suffer substantial costs and expenses, damage, losses and harm, including: expenses thrown away by the company as a result of hiring replacement contractors to carry out the work that it contracted with the Dyno to complete; expenses thrown away by the company as a result of delays caused by the defendant; incremental expenses involved in excavating 100,000 cubic metres of rock, rather than 40,000 cubic metres; future expenses involved in moving additional material, approximately 60,000 cubic metres of rock, in undertaking environmental restoration of the Mud Lake bulk sample project site as prescribed in the company's MacKenzie Valley Land & Water Board's land use permit; loss of reputation and goodwill and shareholder value, both within Canada and beyond, associated with representing the company's mining exploration projects; and, such other damages and losses, particulars of which will be provided before trial.

Snowfield is claiming against Dyno: judgment for breach of contract in favour of the company; general damages for breach of contract; special damages for breach of contract; prejudgement and postjudgment interest pursuant to the Court Order Interest Act, R.S.B.C. 1996, c. 79; costs on a solicitor and client scale or as the court orders; and such further and other relief as the court may permit