Toronto, May 28, 2014 – Scorpio Mining Corporation (TSX:
SPM) (“Scorpio” or the “Company”) today issued a letter to
shareholders. With the June 10, 2014 proxy deadline fast approaching,
shareholders are urged to vote the Company’s WHITE proxy today.
The letter to shareholders follows:
May 28, 2014
Dear Fellow Shareholders,
Our 2014 annual meeting of shareholders is scheduled for
Thursday, June 12, 2014. This year your vote is of even more importance as a
U.S. investment firm, Tocqueville Asset Management, L.P. (together with The
Tocqueville Gold Fund), is seeking to take control of a majority of the board
of directors and disrupt the recent progress we have made at our mining
operations. Your vote is crucial to show your support for the management
director nominees and the positive momentum that is building at the Company.
Protect your investment by voting the WHITE proxy FOR the election of the
management nominees prior to the deadline on June 10, 2014.
On May 12, 2014, Tocqueville delivered to the Company a
notice of its intention to nominate three new individuals for election to the
Company’s Board in addition to its current nominee, Thomas Weng, who is already
on the Company’s Board, to give Tocqueville four nominees on Scorpio’s
seven-member Board. We believe that Tocqueville’s notice does not comply with
the advance notice provisions of the Company’s by-laws respecting the
nomination of directors and is therefore invalid. These advance notice
provisions were approved at last year’s annual meeting by a resolution
supported by approximately 99% of the shareholders who voted. The Company is
now taking steps to obtain a declaration from the Ontario Superior Court of Justice
to confirm our belief that Tocqueville’s notice is invalid. Despite our belief
that Tocqueville’s director nominations are invalid, the Company and its
shareholders cannot ignore Tocqueville’s efforts to take over the Board. It is
tantamount to taking over the Company through stealth and the Company will not
allow Tocqeuville to use such tactics to gain control. If control is what
Tocqueville seeks, it should make a proper offer to all of Scorpio’s
shareholders. Your vote is of paramount importance to show your support for the
Company and your opposition to Tocqueville’s self-interested actions.
Your Board and management are working to enhance value for
ALL Scorpio shareholders
Scorpio has overcome significant operational challenges,
implemented cost saving programs and capital preservation initiatives to
de-risk its business in the face of recent industry-wide uncertainties, and
charted a course to continue to grow its Mexican production pipeline. At the
same time, we have remained focused on developing the El Cajón and San Rafael
Projects and continuing to operate the nearby Nuestra Señora Mine and
processing plant. In April 2013, we appointed Pierre Lacombe as our Chief Executive
Officer. Mr. Lacombe’s appointment was met with approval from Tocqueville,
which did not indicate to the Board at any time during the past year that
Tocqueville was dissatisfied with the Company’s strategic direction or progress
on any operational front. Mr. Lacombe has over 28 years of experience in mining
and mineral processing including working in Latin America. The Company
continues to enhance its talent base and we have extensive in-house operational
expertise to achieve our goals.
We have a strong management team that is executing on our
Board approved plan and is delivering results. In our most recent quarter ended
March 31, 2014, we recorded our highest quarterly throughput at our Nuestra
Señora processing plant since its start-up in 2008. In addition, our most
recent quarterly payable silver ounces was 272,110 ounces — our highest level
since Q2 2011, when a higher silver head grade was processed. We have been
developing the El Cajon mine with internal funds and have a strong balance
sheet. At the end of our most recent quarter, the Company had over $17 million
in its treasury, over $35 million in working capital and no debt.
We have also recently updated our reserve estimate for
Nuestra Señora and have obtained a Preliminary Economic Assessment involving
Nuestra Señora and our El Cajón and San Rafael deposits; received environmental
permits for construction of our El Cajón underground mine; filed for a combined
permit for exploration over San Rafael and El Cajón; and started ramp sinking
for access to the El Cajón deposit.
At a time when the entire sector is suffering from depressed
commodity prices, we are making significant progress while many of our peer
group’s assets are on a care and maintenance program or, in some cases, the
companies themselves are on the brink of insolvency. The Company’s momentum is
substantial and we are concerned with the disruption and distraction that
Tocqueville now seeks to create.
Our Company has a strong track record of governance and
responding to shareholder concerns. Most recently, Peter Hawley, a director and
our former Chief Executive Officer, resigned as a director of Castle Peak
Mining Ltd. and as a member of our Compensation Committee in order to allay
certain concerns about his available time commitments and independence. We have
had active board renewal and are proposing an additional director, Bradley
Kipp, who we are confident will further strengthen our Board.
We are open to engaging with our shareholders in respect of
all aspects of our operations and governance. Unfortunately, Tocqueville’s
recent actions to take control of your Board without putting forward any
specific plan or rationale for doing so poses a serious risk to the Company and
the value of your investment.
Tocqueville is seeking to take over Scorpio’s Board with the
election of its hand-picked nominees and an undisclosed plan for your company
Tocqueville’s history as a significant shareholder in the
Company dates back to 2010. Since that time, we have actively engaged with
Tocqueville and responded to requests for representation on our Board. In
January 2011, one of Tocqueville’s nominees, Jonathan Berg, was added to the
Board. In June 2013, a second Tocqueville nominee, Thomas Weng, was added to
the Board. Then, in April of 2014, Tocqueville asked us to consider adding two
additional nominees to the Board, which at that time consisted of only six
directors, and replacing Mr. Berg as well as myself as Chairman. And now,
Tocqueville is seeking to add three new nominees (in addition to Mr. Weng) to
the Company’s Board, which, if successful, would give Tocqueville control over
the Board.
The Company considered Toqueville’s views and postponed our
annual meeting from May 13, 2014 to June 12, 2014 to allow for further
dialogue. However, once it became clear that Tocqueville was seeking control
over the Board, the Board formed a Special Committee to supervise our response
to Tocqueville’s actions. The Special Committee is comprised of myself (as
Chairman), Peter J. Hawley, Jonathan A. Berg and Thomas McGrail.
After careful consideration, the Special Committee concluded
that it was not in the best interests of the Company or its stakeholders to
allow Tocqueville to take control of the Board. In particular, the Special
Committee has become exceedingly concerned with Tocqueville’s motives and
intentions for the Company. Tocqueville has not indicated any specific plans or
proposals for the Company going forward, nor has Tocqueville indicated any
specific concerns or issues that it has with the Company’s operations or its
strategic direction.
The Special Committee is concerned that Tocqueville and its
hand-picked nominees have an undisclosed agenda for the Company, including a
possible significant merger, business combination or other transaction
involving one or more other companies in which Tocqueville has an interest and
that would serve Tocqueville’s interests over those of the Company and all its
stakeholders. Tocqueville is attempting to take advantage of the down cycle for
junior resource companies to gain control of the Company in furtherance of
their undisclosed agenda.
In addition to the lack of disclosure of Tocqueville’s
plans, the Special Committee has also become concerned with Tocqueville’s
compliance with applicable Canadian securities requirements relating to insider
reporting and early warning filings. We made these concerns known to
Tocqueville in a letter dated May 25, 2014 in which we asked Tocqueville to
make the filings it is required by law to make to allow the Company and our
shareholders to more fully assess Tocqueville’s actions and intentions. As of
the time of this letter, no such filings have been made by Tocqueville.
The Special Committee believes Tocqueville’s hand-picked
nominees are an instrumentality for Tocqueville to achieve its undisclosed
agenda. Tocqueville’s proposed director nominees bring no added value to the
Company’s Board. We also believe that Tocqueville’s nominees would be a
downgrade to the qualifications of the Company’s current slate of director
nominees. Mark Tashkovich has no mining experience and no public company board
experience — something he admitted earlier this year when our Nomination and
Corporate Governance Committee interviewed Mr. Tashkovich at the behest of
Tocqueville. What he does have is a close working relationship with
Tocqueville’s current Board nominee, Thomas Weng, as both individuals hold
senior positions with the same New York investment banking firm. Another
Tocqueville nominee, John Ellis, serves together with Mr. Weng on the Board of
International Tower Hill Mines Ltd., another company in which Tocqueville has a
significant investment. Mr. Ellis has also been a director of public companies
where he has overseen significant destruction of shareholder value and which have
been the subject of cease trade orders for failing to file audited financial
statements in the required time. Joseph Keane has also overseen substantial
shareholder value destruction, including share price declines of over 90%
during his tenure as a director of Rochester Resource Ltd. and Mercator
Minerals Ltd.
We can only conclude that Tocqueville’s hand-picked nominees
were selected in furtherance of Tocqueville’s undisclosed agenda. With no
stated plan and no added value, the simple answer is no thank-you.
Protect your investment – vote your WHITE proxy to ensure
the Company stays on track
Regardless of the outcome of the court proceeding to confirm
that Tocqueville’s nomination of its director nominees is invalid, your vote is
important in order to send a message to Tocqueville that you support the
current Board and the positive momentum at the Company. Defend your investment,
support your current Board and allow for continued progress at the Company by
VOTING the Company’s WHITE proxy before the June 10, 2014 deadline.
The Company has retained Kingsdale Shareholder Services to
assist with the solicitation of proxies. If you have any questions or require
assistance in voting your WHITE proxy, please contact Kingsdale Shareholder
Services at 1-855-682-9644 (toll-free in North America) 1 416 867-2272 (collect
outside of North America) or by email at [email protected].
Agents are standing by to assist you with voting your proxy.
We thank you for your continued support.
Sincerely,
/signed/
Ewan D. Mason
Chairman
Scorpio Mining Corporation
For further information contact:
Victoria Vargas, Vice President Investor Relations and
Corporate Communications +1 416-585-2200
Email: [email protected]
Kingsdale Shareholder Services; 1-855-682-9644 (toll-free in
North America); 1 416 867-2272 (collect outside of North America); email:
[email protected]
Website: www.scorpiomining.com
This news release includes certain statements that may be
deemed “forward-looking statements” within the meaning of the United
States Private Securities Litigation Reform Act of 1995 and applicable Canadian
securities legislation. Forward-looking statements include, but are not limited
to, statements with respect to the Company’s operations, exploration and
development plans, expansion plans, estimates, expectations, forecasts,
objectives, predictions and projections of the future. Generally, these
forward-looking statements can be identified by the forward-looking terminology
such as “plans”, “expects” or “does not expect”,
“is expected”, “budget”, “scheduled”,
“estimates”, “projects”, “intends”,
“anticipates”, or “does not anticipate”, or
“believes”, or variations of such words and phrases or state that
certain actions, events or results “may”, “can”,
“could”, “would”, “might”, or “will”
“be taken”, “occur” or “be achieved”.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause the actual results, level of
activity, performance or achievements of Scorpio Mining Corporation to be
materially different from those expressed or implied by such forward-looking
statements, including but not limited to: risks related to the exploration and
development and operation of the Company’s projects in Mexico, risks related to
international operations, construction delays and cost overruns, the actual
results of current exploration, development and construction activities,
conclusions of economic evaluations, changes in project parameters as plans
continue to be refined, future prices of silver, zinc, copper, lead and gold,
risks relating to completing acquisition transactions as well as those factors
discussed in the sections relating to risk factors of our business filed in
Scorpio Mining Corporation’s required securities filings on SEDAR, including
its Annual Information Form dated March 13, 2014. Although Scorpio Mining
Corporation has attempted to identify important factors that could cause
results to differ materially from those contained in forward-looking
statements, there may be other factors that cause results to be materially
different from those anticipated, described, estimated, assessed or intended.
There can be no assurance that any forward-looking
statements will prove accurate, as actual results and future events could
differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements. Scorpio
Mining Corporation does not undertake to update any forward-looking statements
that are incorporated by reference herein, except in accordance with applicable
securities laws.
