Canadian uranium company Khan Resources has lodged an appeal against the Ontario Superior Court decision that ended the company’s proceedings of a $300 million damages lawsuit against Atomredmetzoloto JSC (ARMZ).

Khan has been attempting to effect service on ARMZ since late 2010, when they were first halted by the Russian ministry of justice which refused to serve ARMZ, citing it would infringe Russian sovereignty or security.

In October 2011 Khan obtained an order of the Ontario Superior Court of Justice validating service on ARMZ, which was subsequently appealed by ARMZ. On March 9 this year the appeal was allowed.

Khan’s president Grant Edey says, “It is grossly unfair that the Russian government has been able to shield ARMZ from having to answer to a Canadian court for harm done to Khan and its shareholders based on alleged concerns about Russian sovereignty or security. This unfairness demands an appeal and we intend to continue to vigorously defend our shareholders’ rights and interests.”

Khan and ARMZ, through their subsidiaries, became joint venture partners in 1995 to undertake exploration and development of the Dornod uranium property in northeast Mongolia. The property is one of the most significant and strategic undeveloped uranium resources of its kind in the world.

Since acquiring the mining licence in 2003 Khan has spent $21 million to develop and explore the property, establish power, build a permanent camp, conduct a definitive feasibility study and various NI 43-101 instruments, while it says ARMZ has contributed virtually nothing. The property is estimated to have an annual production rate of 3.5 million pounds of uranium oxide over a 15 year mine life.

Khan’s statement of claim cites in 2009 ARMZ began to exclude and deprive the company while in turn attempting to form an agreement with the Mongolian and Russian governments to take over and jointly develop the Dornod uranium region. Khan claims ARMZ even used tactics including temporary licence suspensions for alleged breaches of Mongolian laws through the Mineral Resources Authority to delay the development.

Khan’s lawyers say the conduct and actions of ARMZ during this time warrant substantial awards of punitive damages.

In other news, Khan has announced it will raise up to Can$2.3 million in a private placement of 13.6 million shares. The company says it will use the proceeds to advance its international arbitration case for $200 million against the Mongolian government.

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