Battle brewing over control of Valerie Gold

Vancouver — As was the case with many junior explorers, 1996 was a stellar year for Valerie Gold (VLG-V). With $20 million in the kitty and with the drill rig set to turn on the prospective Mamatla massive sulphide project in Mexico, Valerie’s stock soared to $28.90 that eventful season. However, there has been a lot of water under the bridge since those heady days, and now, with its stock trading around 25 per share, a major shareholder has set its sights on removing the current board of directors.

Atna Resources (ATN-T), which holds 750,000, or 6%, of Valerie’s shares, has formed a limited partnership called Valerie Good Corporate Governance and tabled an alternative slate of directors to stand on Valerie Gold’s board at the company’s annual general meeting, slated for Jan. 30.

The current management plans to put up a vigorous fight.

“All they want is our cash,” Valerie Gold’s executive vice-president, William Witte, tells The Northern Miner. “Atna put $150,000 into the partnership to effectively take over Valerie and grab control of the working capital.”

According to Witte, Atna has been pursuing Valerie Gold for the past seven months.

“Atna approached Frank Lang [Valerie Gold’s president] in late July about acquiring his shares in an attempt to take over the company, but Frank turned it down,” says Witte.

Atna’s next move was to discuss a possible merger of the two companies with the individual board members.

“Touting their flagship Barreal Seco copper project, down in Chile, we considered it,” says Witte. “but internal and outside due diligence concluded that the project was too small and sub-economic.”

Atna denies that it is taking a run at Valerie Gold.

“We had some discussions with Valerie last year, but we have not talked to them for several months,” says Atna’s current president, David Watkins, one of the partnership’s nominees for Valerie Gold’s board. “As shareholders, we were concerned about what was happening to the company and decided to take action.”

The dissident proxy circular which the newly formed partnership sent to shareholders describes the deterioration of Valerie Gold’s balance sheet, which has seen $22 million in losses and $17 million in property writedowns over the past five years.

“The record of Valerie’s board over the past five years has been one of consistently destroying shareholder value through poor management judgment and dubious corporate governance practices,” says the partnership’s spokesman, Gaylord Virden.

The partnership’s main points of contention have to do with the high administration/management charge to Valerie, as well as the conflict of interest in Valerie’s investments in related junior explorers.

Valerie Gold forms part of the Lang Mining group, which includes fellow juniors Sultan Minerals (SUL-V), Emgold Mining (EMR-V) and Cream Minerals (CMA-V). Of particular concern to Atna is the conflict of interest among these entities. Valerie’s current president, Frank Lang, is also the largest shareholder of the three sister companies. Over the past few years, Valerie has invested in 5.3 million shares (or 30.5%) of Sultan Minerals, 5.1 million shares (or 33%) of Emgold Mining, and 3.2 million shares (or 42.6%) of Cream Minerals.

Lang Mining, the private management company headed by Frank Lang, has charged Valerie some $5 million in management fees to oversee day-to-day operations during the past five years.

“For a company the size of Valerie, management fees of $200,000 per year would be high,” adds Watkins. “Management has been run for the benefit of Lang Mining and not the shareholders of Valerie.”

Loans

Interest-free loans to Lang Mining by Valerie have also raised the eyebrows of the partnership. The proxy alleges that loans of up to $600,000 have been made to management without interest charges, without a repayment schedule and without security as collateral.

The alternate slate of six directors proposed by the partnership for Valerie Gold includes several well-respected mining men. Among the nominees are Mario Caron, vice-president of operations for Geomaque Explorations (GEO-T), David Watkins, president and chief executive officer of Atna, and Frank Wheatly, general counsel for Gabriel Resources (GBU-T).

Atna does not rule out the possibility of a future merger between the companies, though, as Watkins states, “we might look at it and think about it, but I am doubtful we would do it — our primary objective is to put in an independent board that will take care of Valerie shareholders.”

The junior is currently working several early-stage platinum-palladium properties in northern Ontario, while, at the same time, preparing to drill-test the Crystal Lake diamond property in Manitoba. Valerie also holds the Walker Lane gold property in Nevada’s Mineral Cty. and an original $1.5-million equity stake, now valued at $500,000, in Northern Orion Explorations (NNO-T).

Valerie Gold has $5 million in cash and securities, plus 14.5 million shares fully diluted. At the end of September, Atna had $8.6 million in cash and 25.2 million fully diluted shares.

Valerie Gold insiders hold only about 14% of the stock, making the battle for control of the company a heated one.