Blumont Group sued by Australia-based minerals firm

PHOTO: Blumont Group sued by Australia-based minerals firm

Troubled mining company Blumont Group, one of three penny stocks that suffered price crashes in October, faces more woes.

It announced Monday to the Singapore Exchange that the company is being sued by Australia-listed minerals explorer Prospect Resources.

Prospect stated last Friday that it has begun legal proceedings in the Supreme Court in the Australian state of New South Wales.

Blumont - which also has interests in property and sterilising goods - was named as one of the parties sued, along with businessman Alexander Molyneux and financial firm Pacific Advisers.

All three are members of a consortium that declared their intention in July to buy 325 million new shares in Prospect at 1.2 Australian cents a share.

That worked out to A$3.9 million (S$4.5 million) and would have represented a 43.47 per cent stake in the enlarged share capital of the Australian firm.

Blumont said then that it was leading the consortium, taking a 60 per cent stake in the deal, which is equivalent to buying 195 million new shares.

But it added that the deal was subject to Prospect successfully getting the paperwork done in its acquisition of two gold projects in Zimbabwe.

Blumont then announced on Oct 31 that it was terminating the agreement to subscribe for the new shares with immediate effect, as it was of the view that the condition was not fulfilled.

Prospect is suing the consortium, seeking a court order to require it to abide by the terms of the subscription agreement.

Blumont, however, said on Monday that it has not heard from the Australian firm yet. It added that it has not been served with any court papers on this case.

Blumont is one of the trio of penny stocks, along with Asiasons Capital and LionGold Corp, that staged a huge rally in their stock prices earlier this year.

But their prices plummeted in October, amid a massive sell-off.

Blumont, which started the year trading at about 30 cents a share, climbed close to $2.50 in September.

Losses incurred in the trades of the penny stocks have also led to lawsuits being filed both here and in Britain.

Shares of Blumont ended 0.4 cent lower Monday at 10.7 cents.

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