MGold Responds to Dissident Shareholder
MONTREAL, QUEBEC--(Marketwire - June 21, 2012) - MGold Resources Inc. ("MGold" or the "Corporation") (TSX VENTURE:MNI) was made aware of a dissident proxy circular (the "Dissident Circular") filed on SEDAR on June 14, 2012 on behalf of Mr. Martin Ellis (the "Dissident Shareholder"). The Dissident Shareholder concurrently issued a news release (the "Dissident Release"). MGold wishes to respond to the allegations and incorrect information contained in the Dissident Circular and the Dissident Release.
As disclosed by way of news release on March 23, 2012, terminating the option agreement entered into with Silver Reserve Corp. in respect of the Silver Queen and Klondyke properties (the "Option Agreement") was a decision motivated by the protection of shareholders' interest. The exploration results from the Silver Queen property did not warrant further option payments nor incurring additional exploration expenditures and the prudent decision at that stage was to preserve MGold's cash position by terminating the Option Agreement.
Since the termination of the Option Agreement, MGold's management has actively and diligently been investigating potential precious metal projects in order to create value for its shareholders. MGold's management is currently pursuing more advanced opportunities in North America.
The Dissident Circular states that administrative expenses and, in particular, compensation paid to a company controlled by Mr. Joel Scodnick, MGold's Chief Executive Officer, are not justified in the context of the Corporation's activity level. MGold management vehemently disagrees with this assessment. During 2011 MGold completed private placements which generated cash proceeds of $2,297,923. The subscription funds raised exceed the total raised in the previous three years combined and required considerable time and effort by MGold's CEO. The proceeds of these placements were used to fund exploration activities on MGold's properties. The private placements and subsequent exploration activities also resulted in increased administrative expenses to support these activities in the third and fourth quarters of 2011 and the first quarter of 2012. Management also points out that administrative expenses included investor relations costs of $47,500 for the year ended December 31, 2011 and $8,468 for the first quarter ended March 31, 2012. These costs were incurred in an effort to increase public awareness of MGold's activities and its new management and technical team and management continues to believe these expenses were incurred in the best interest of shareholders.
Also included in the Corporation's general and administrative expenses is stock-based compensation that totaled $55,033 for the year ended December 31, 2011 and $37,594 for the three months ended March 31, 2012. Share-based compensation costs are non-cash expenses and do not deplete the resources available to MGold to pursue further exploration activities. In summary, management does agree that general and administrative expenses increased in 2011 and the first quarter of 2012, however, these increases are justified in the context of MGold's increased activity level, the transition to International Financial Reporting Standards, increased investor relations activities and non-cash expenses. Management would direct shareholders to the management's discussion and analysis and related financial statements for the periods ended December 31, 2011 and March 31, 2012 for further details.
With regard to the specific assertion that compensation paid to a company controlled by Mr. Scodnick is excessive, the board of directors would like to remind shareholders that Mr. Scodnick did not receive any compensation in 2010. In that year, when cash resources were not available, Mr. Scodnick continued to work diligently on behalf of MGold's shareholders without remuneration. The board of directors would like to further point out that the fees paid during the period referred to by the Dissident Shareholder are consistent with fees paid in previous years and approved by previous boards of directors and shareholders. The board of directors believes that these fees are commensurate with industry norms. Mr. Scodnick and his board/management team are dedicated to MGold's shareholders and want to see the Corporation succeed and plan to increase shareholder value significantly by acquiring additional highly prospective and advanced precious metal properties and by working the Burchell Lake Property to bring it to a more advanced stage.
The Dissident Shareholder also stated there is a lack of viable mineral exploration projects being carried by management. This is incorrect as MGold holds a 100% interest in the Burchell Lake Property ("Burchell") in Northwestern Ontario. There are significant gold and base metal deposits being developed in the immediate area surrounding Burchell. Burchell is a prospective exploration property and the Corporation intends to raise money in the near future to further explore the potential of this property. Moss Lake Gold Deposit is located only a few kilometers west of Burchell where a 1.6 million ounce gold deposit (43-101 compliant, 1.1 million ounces of gold indicated category and 525,000 ounces of gold in the inferred category) has been identified. Tied on to Burchell's northern boundary is Foundation Resources Inc.'s Coldstream Property where there is a 43-101 resource estimate of 860,000 ounces of gold (723,276 ounces gold inferred and 96,400 ounces gold indicated). The major structure identified which hosts the Moss Lake deposit and Foundations Coldstream or more recently referred to as the Osmani deposit traverses the northwest portion of Burchell, an area that has not yet been investigated.
Management wishes to emphasize that the Dissident Shareholder intends to change MGold into an oil and gas exploration corporation which is a drastic shift and a denial of the fact that other shareholders invested in a corporation focused on mineral exploration. Management also wishes to underline that such a change in the activities of the Corporation will eventually require the approval of the TSX Venture Exchange and of the Corporation's shareholders thus involving significant additional costs.
"The Dissident Shareholder has not produced one shred of evidence that he could build shareholder value," Joel Scodnick, MGold's President and Chief Executive Officer, said.
MGold believes that the plans of the Dissident Shareholder are contrary to the interest of MGold and its shareholders as a shift in MGold's focus towards oil and gas exploration would void MGold's efforts and resources invested in identifying potential mining exploration opportunities.
The Corporation's proxy materials, which include a notice of meeting, management proxy circular and form of proxy, have been mailed to shareholders of record as of May 24, 2012 and have also been publicly filed on SEDAR at www.sedar.com.
MGold urges shareholders to carefully read the management proxy circular and execute the proxy by voting as recommended by the Board. Voting is a very quick and easy process that empowers shareholders to state their position and protect their investment.
Joel Scodnick, P.Geo., the Corporation's President and Chief Executive Officer and a qualified person under NI 43-101, has approved the scientific and technical information contained in this news release.
MGold is engaged in mineral exploration for precious and base metals. MGold holds a 100% interest in the Burchell Lake Property which is prospective for gold, copper, and molybdenum, in the Shebandowan area of Northwestern Ontario. MGold has 36,144,024 issued and outstanding common shares, and 49,094,296 on a fully diluted basis.Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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