Ex-director slams Genco board for excessive pay

Concerns over excessive compensation and poor mine management has prompted Genco Resources‘ (GGC-T, GGCRF-O) largest shareholder to call for the replacement of three company directors.

James Anderson, who along with his spouse, holds 12.2% of Genco shares, has initiated a proxy solicitation process to replace Genco chairman Robert Gardner and directors Gordon Blankstein and Brian Smith in a shareholders vote on June 26. The board has seven members in total.

Anderson has also filed a complaint with the Toronto Stock Exchange and the British Columbia Securities Commission regarding contract backdating and disclosure matters.

Anderson was a member of the board of directors between July 2007 and May 2008. After voicing his opinion, he decided resigning from the board was the best way to take action against it.

The company operates the La Guitarra silver mine in Mexico, which has consistently failed to meet its production target of 340 tonnes per day.

Anderson blames the operational struggles on the lack of a mine plan and says he wonders how Genco will be able to expand operations to a planned 5,000 tonnes per day within the next few years (with the help of a new 3,000 tonne per day ball mill).

In addition, he says that both Gardner and Blankstein have grossly overpaid themselves awarding themselves bonuses despite the company’s production shortfalls. They determined their own pay and bonus structure when they controlled the compensation committee with one other member.

According to the 2008 management information circular, Gardner and Blankstein each receive a base pay of US$144,000 per year and a bonus of up to US$250,000 per year (including US$500,000 to be paid retroactively for 2006 and 2007), and a further bonus of 2% of Genco’s pre-tax income.

They would also receive a merger bonus of 1.5% of the increased market capitalization from Oct. 1, 2006 to the date of the merger more than $1 million at today’s stock price.

Meanwhile, the company reported revenue of $6.2 million for 2007 with an operating profit of $132,618.

Anderson hopes to replace Blankstein, Gardner and Smith with himself and two other people.

He has created a website, www.savegenco.com and is distributing information through Longview Communiations in Vancouver to alert shareholders of his plans to improve the company.

No one from Genco could be reached for comment.

Genco shares were up 3 cents to $1.91 on a trading volume of about 26,000 shares.

The company has a 52-week rolling high of $4.70 and a low of $1.71 per share.