Is Fairmont Resources Out of Time with Grabasa Deal?

BADAJOZ, Spain – The effort to revive Spanish stone producer Grabasa hit a rocky patch last month when a court annulled an acquisition by Mississauga, Ontario-based Fairmont Resources Inc.

The Commercial Court No. 1 in Badajoz withdrew its April 2016 order allowing Fairmont to purchase Grabasa’s assets out of bankruptcy for €4.275 miilion, noting it had only paid a small amount of the funds needed to proceed with the deal.

The May 22 decision disallowed a request by Fairmont for extra time to complete the deal. The court previously extended the deadline several times for Fairmont to deposit €2.5 million to begin the transition.

To date, the court noted that Fairmont had contributed only €150,000 on deposit.

In a May 26 statement, Fairmont said it would appeal the commercial court’s ruling, as “lawyers have identified several key points which may be considered legally inaccurate.”

Fairmont will also file a complaint, claiming that information was leaked to the media before the Canadian company received notice of the decision.

“The leak appears to be malicious and with the intent to damage the reputation of Fairmont with the local community and former employees of Grabasa in Spain,” according to the Fairmont statement.

Fairmont also stated that it is still working to find a way to complete the acquisition.

In business from 1975 to 2011, Grabasa (Granitos de Badajoz S.A.) served as a key driver of economic activity in the Extremadura region of southwest Spain. Providing premium dimension stone for commercial, retail and industrial applications throughout Europe, Grabasa averaged more than €6 million in annual sales in the last five years of its operation.

Fairmont bid for the company out of receivership in Spanish courts, aided by Madrid-based Eureka Trading and Procana Consulting of Markham, Ontario.

Under the deal, Fairmont would pay €2.7 million to Grabasa for 22 mining licenses, the 452,000 ft² processing plant, land, machinery, equipment, stock and vehicles, as well as €1 million to Gesminesa (Gestion y Estudios Mineros S.A.U) of Badajoz for the Grabasa I-B mining license.

If Fairmont’s appeal is denied, bankruptcy adminstrators would then dispose of the assets as a whole or in segments.

The original deal also stated that Eureka and Procana (under contract to Eureka) would receive €575,000 for engineering, due diligence, translation, negotiation, court fees, expenses and success fees.

However, Eureka filed suit in a Badajoz court for €575,000 last December, citing non-payment. A judicial conference on the matter is set for June 15, according to a Eureka official.

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