Minority shareholders fear misappropriation

A group of seven shareholders representing 21.7% or about 1.3 million shares of Seven Mile High Group (VSE) have obtained a court order calling for an inspection of the company’s books. The order was obtained primarily on the basis of allegations by the shareholders that the company had misappropriated corporate funds. In addition, the holders charge that the company has been mismanaging funds.

It is alleged that Seven Mile High received cheques for up to $600,000 at the end of each fiscal quarter from a holding company owned by Maurice Hamelin, president of Seven Mile High. On the first of the following month, Seven Mile High would issue a cheque for an identical amount back to the holding company, M.G. Hamelin & Associates.

Although management of the company appealed the court order, it was upheld and the minority holders have appointed Rupert Bullock, former British Columbia Superintendent of Brokers, to inspect the company’s books.

Bullock, who operates as a securities consultant under the name Bullock Consulting, estimated that it would take about a month to complete the inspection at which time he would report back to the court.

As a result of the charges, the Vancouver Stock Exchange halted trading in the shares, last trading at $1.45.

The group of shareholders include two Swedish companies which each purchased 500,000 share private placements in Seven Mile High at a price of $3 per share.

In addition to the allegations of misappropriation and mismanagement of funds, Seven Mile High appears to be at odds with its joint venture partner Inco Gold, a unit of Inco Ltd. (TSE).

The two companies are developing the Vault property, near Okanagan Falls, B.C., and disagree over this season’s work program.

Inco Gold, the operator and 60% owner of the project, has proposed a $1.1-million program, including surface trenching, sampling and further drilling on the property.

However, Seven Mile High says further exploration work is not necessary and that steps should be taken to bring the North vein into production.

Drilling to date on the North vein has indicated a geological resource of 160,000 tons grading 0.4 oz. per gold per ton. A mineralized width of 1.9 ft. was used to calculate the reserve.

In a press release, Maurice Hamelin says he believes Inco is recommending unnecessary work and is stalling on a production decision for reasons not related to the Vault property.

The company noted a proposed work program in excess of $1 million requires the unanimous consent of all parties before implementation.

As a result, Seven Mile High it intended to recommend changes to the program directed at bringing the property into production.