Atalaya Mining, known until recently as EMED Mining, has been sued in the High Court by Astor Management AG, a vehicle owned by former director Ashwath Mehra.
Astor has issued a claim to take Atalaya to court, claiming 15.9m plus damages for funds owed from a deal agreed earlier this year over the ownership of the Riotinto copper project in Andalucia, Spain.
In May, EMED noted that as part of a 2008 agreement to take full ownership of Spanish subsidiary EMED Tartessus, the company issued 39.1m shares
and certain deferred considerations of up to 53m in instalments payable over six years to Marc Rich & Co Investment AG (MRI).
MRI later novated its right to be paid the deferred consideration to Astor, a vehicle owned by former MRI chief executive Mehra, who joined EMED's board as a non-executive director in 2008.
The payment, EMED said in May, would be made "approximately six years following the date on which: (a) the authorisation from the Junta de Andalucia to restart mining activities in the Rio Tinto copper project has been granted; and (b) EMED Tartessus or another company in the EMED Group has secured senior debt finance and guarantee facilities for a sum sufficient for the acquisition and re-start of mining operations at the project". As well as the deferred cash settlement of 53m EMED agreed a further 15.9m payment depending upon the price of copper.
While the mining permit approval had gained, Atalaya stressed that as it has not entered into arrangements in connection with a senior debt facility and, in the absence of drawdown of funds by the group pursuant to a senior debt facility, "there is significant doubt concerning the legal obligation on the company to pay any of the deferred consideration".
Astor has claimed that the conditions have been satisfied and the first instalment of the deferred consideration is due.
But Atalaya is disputing this and said it "intends to vigorously defend the proceedings".
Shares in Atalaya fell 14.3% to 84p by the close on Monday.