RX EXPLORATION INC. ("RXE" or the "Company") (TSX VENTURE:
RXE)(OTCQX: RXEXF) announced today that it has issued a letter to
shareholders in response to a group of dissidents attempting to
seize control of the company.
"Our campaign to renew RXE is gaining momentum," said John F.
O'Donnell, Chairman, in the letter. "Ever since June 12, 2011, when
we issued our amended circular, shareholders have been looking with
fresh eyes at the opportunities and challenges ahead. They believe,
as we do, that our new team of experienced mining and corporate
executives can create tremendous value for the company in the years
to come."
In its letter to shareholders, RXE said that the dissidents are
refusing to address 11 important matters raised in RXE's amended
circular. RXE listed the 11 matters, and provided details that the
dissidents need to explain.
Also in its letter to shareholders, RXE said the dissidents
attempted to distort the truth on certain other matters that they
did address. RXE's letter corrects the record accordingly.
Voting Instructions
RXE recommends that shareholders vote only the BLUE proxy FOR
the RXE nominees as the primary step towards real value creation. A
completed BLUE proxy will replace any previously voted proxy -
dissident or the original Management proxy mailed in May.
In order to be counted at the Annual and Special Meeting of
Shareholders, the BLUE proxy should be voted well in advance of the
proxy voting deadline of July 4, 2011 at 4:30 p.m. (Toronto time).
Please do not attempt to mail your proxy unless you have no other
alternative. Shareholders who require assistance voting the BLUE
proxy should please contact Laurel Hill Advisory Group at
1-877-304-0211 or by e-mail at assistance@laurelhill.com.
The vote will take place at the adjourned Annual and Special
Meeting of Shareholders on July 6, 2011 at 4:30 p.m. (Toronto time)
at the Ontario Bar Association Conference Centre, Salon 3, 20
Toronto Street, Toronto, Ontario M5C 2B8.
The complete Chairman's letter to shareholders follows:
WE'RE GAINING MOMENTUM
June 20, 2011
Fellow Shareholders of RX Exploration Inc.,
Our campaign to renew RX Exploration Inc. is gaining momentum.
Ever since June 12, 2011, when we issued our amended circular,
shareholders have been looking with fresh eyes at the opportunities
and challenges ahead. They believe, as we do, that our new team of
experienced mining and corporate executives can create tremendous
value for the company in the years to come.
The biggest example of our momentum was the decision of RXE's
largest shareholder, Sprott Asset Management LP, to vote its shares
in support of our RXE nominees. Sprott is not alone. Many other
shareholders have changed their minds, now that they are aware of
all the facts, and have submitted their BLUE proxies to us.
While we are now developing momentum, the fight won't be over
until the annual meeting on July 6, and we still need your vote.
The vote of every single shareholder, large or small, will count.
Please do your part, and vote the BLUE proxy now.
RX Exploration's Future is in Your Hands
You are voting on the future of your company and the value
creation potential of your investment. On the one hand, you have
the dissidents and their associated history of excessive
compensation demands, nepotism and safety infractions.
On the other hand, you have our superior slate of nominees, who
have done it all before and can do it again, this time for you. In
the end, we trust that shareholders will make the right choice and
vote for the BLUE slate. We are committed to building RXE into a
world-class mining company.
The Dissidents' Response to Serious Allegations
In our amended circular we presented some very disturbing facts
regarding the dissident executives' past actions and provided the
missing information explaining why and how this fight seemingly
came out of nowhere. The dissidents have had plenty of time to
consider the facts and to provide valid explanations or at the very
least, an apology to the shareholders whose interests they failed
to represent. Instead, the dissidents have ignored the evidence.
Ignoring facts does not make them go away.
With so many critical issues, we have provided a score sheet on
the next page to help you keep track before you vote. The score
sheet lists 11 items that the dissidents should have addressed, but
did not. Under the score sheet we provide, in numerical order, the
crucial details that the dissidents need to explain.
11 Items the Dissidents Did Not Address
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Item Topic Addressed?
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1 Nepotism No
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2 Expenses that the dissidents plan to recover from RXE for No
the proxy contest: maybe $1 million
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3 Polinsky-to-Polinsky cheque for $60,000 No
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4 Loan to G3 (a company whose major shareholders are No
Messrs. Nye and Polinsky) for $50,000
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5 The Scooptram sale for just $18,250 to Mike Gunsinger No
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6 Unexplained $288,000 advance to Mike Gunsinger No
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7 Unexplained $186,000 retainer to Mike Gunsinger No
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8 IIROC criticism of Murray Nye No
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9 The billion dollar lawsuit No
----------------------------------------------------------------------------
10 Reasons for removal of Max Polinsky as CFO No
----------------------------------------------------------------------------
11 Dissident "independent directors" are not independent No
----------------------------------------------------------------------------
1. It was Harold (Mike) Gunsinger's son, Ben Gunsinger who was at the helm
of Drumlummon contractor New Millennium Mining and Contracting, the
recipient of $10.9 million between May 2008 and April 2011.
2. The dissidents will seek reimbursement from RXE for their massive proxy
contest expenditures that include $500,000 in proxy solicitation
expenses as well as ongoing legal expenses, which may equal or even
exceed the proxy solicitation expenses.
3. A $60,000 cheque issued by Mr. Polinsky to himself, without Board
knowledge or approval.
4. A $50,000 loan by RXE management, in 2009, to G3 Mineral Corporation (a
company whose major shareholders are Messrs. Nye and Polinsky) without
Board knowledge or approval. This loan is unrelated to RXE's business
and is still on RXE's books.
5. In May, 2010 RXE sold a scooptram to Mike Gunsinger for $18,250. The
Board was never notified of this transaction.
6. RXE advanced Mike Gunsinger $288,000 in April 2010 in two payments of
$128,000 and $160,000. The funds were subsequently used by Mr. Gunsinger
to exercise 900,000 stock options at $0.32 per share. The Board was
never notified of this transaction.
7. RXE's subsidiary, Drumlummon Ltd., paid Mike Gunsinger a retainer of
$186,000, which was not disclosed to the Board, and for which there is
no obvious explanation considering that Mr. Gunsinger was paid
separately for consulting, including $98,250 in June 2010 and $189,000
in April 2011.
8. In response to RXE President Murray Nye's January 2011 Letter to
Shareholders, IIROC said that it was "not appropriate" for RXE's
President to project future production "without support of a feasibility
study or a reasonable period of profitable production." This criticism
was not disclosed in the dissidents' circular.
9. Last year a billion dollar claim was filed against Gold Reef
International, Inc. while dissident Max Polinsky was the President, CEO,
CFO, director and sole member of the audit committee, and while
dissident executive Murray Nye was a director. This claim was not
disclosed in the dissidents' circular.
10. In April 2011, the Board removed Max Polinsky from the CFO position for
failing to perform and offered him another executive position that would
have been a better fit. We listed Mr. Polinsky's failings. The
dissidents have ignored them, and they hope you will too.
11. In our amended circular, we warned you that their independent directors
are not independent, because most of them are currently consultants to
the company. The dissidents have ignored this important fact, and for
good reason. If elected they are counting on this compromised
independence when compensation negotiations next come around,
notwithstanding their promise to behave themselves for a while (see "The
dissidents' compensation commitment" on the next page).
These are the facts. The actions described above are incongruent
with individuals who claim to have the interests of shareholders
top-of-mind.
Items the Dissidents Hope You Will be Confused By
While ignoring some serious questions, the dissidents have
attempted to distort the truth regarding other serious allegations.
I remind shareholders of the facts:
Compensation agreements
The dissidents now claim that the draft compensation contracts
they presented in January "did not represent the actual positions
of management." Given the names on each draft employment agreement,
it's not clear to me who else's position they could possibly
represent.
The golden handshake they demanded was far beyond industry
standards. And their demand for a guaranteed bonus misses the whole
point of a bonus, which is to reward performance. Do RXE's
shareholders really want executives who don't believe in their own
abilities to deliver results? I would think not. And yet, when we
tried to reach a compromise, they said the contracts were
"non-negotiable." True to their word, the dissident executives then
ambushed your company with a proxy fight, when their
"non-negotiable" demands were rejected.
Compensation vs. salaries
The dissident communication emphasizes "Murray Nye and Max
Polinsky worked for the company for years without any salary." This
is a great distortion. Instead of salaries, they received
consulting fees dating back to fiscal 2008 through their company,
Venbanc Investment and Management Group Inc.
The dissident executives claimed (three times) in their latest
letter that their collective salaries were less than the legal fees
I received, but that's a ridiculous comparison. The three dissident
executives collectively received total compensation of more than
$1.5 million for fiscal 2010, as disclosed on page 7 of RXE's
original Management Information Circular, dated May 9, 2011. That's
more than double (in just one year) what the dissidents claim I
billed for legal fees (over a period of more than four years).
Moreover, their claims about my billings are exaggerated (as we
explained in our amended circular on page 15). By using salary to
diminish the amount of their actual compensation, and by using an
exaggerated measure for my legal fees, the dissidents are
manipulating reality to mislead you.
The dissidents' compensation commitment
In their latest letter, and after we had revealed the truth, the
dissidents made a commitment to behave themselves on compensation
demands. If the commitment was meaningful, it might have been a
step forward, even if it was just a gesture intended to win votes
from angry shareholders. But this is no step forward, and here is
why.
The measureable part of their commitment is only for the current
fiscal year. The wording cleverly avoids mentioning that the fiscal
year ends on June 30th - less than two weeks from now. In the new
fiscal year, which starts before the shareholder vote, the
dissident executives will be free to demand guaranteed bonuses and
fat golden handshakes all over again. If they are elected, that's
exactly what they will get from the friends they picked to sit on
the Board.
Safety at Drumlummon
In our amended circular we told you that former contract miner
New Millennium Mining LLC received $67,000 in fines for safety
violations and 111 safety citations in 2010, an awful record by any
measure. The dissidents responded that New Millennium won a safety
award in 2009, and the issue raised with respect to the safety
record in 2010 was "nonsense." Unfortunately, 2010 was not
nonsense. It was a near catastrophic decline in standards, while
the dissident executives looked the other way and kept the Board in
the dark.
Dissident qualifications vs. RXE nominees' qualifications
While the RXE nominees represent a superior slate of nominees,
this didn't stop the dissidents from trying to attack them or their
plan to create value for shareholders. The dissidents claim in
writing that RXE's nominees plan to spend millions of dollars
putting five large-core drills underground, and they are whispering
to investors that we will shut down test mining. There is no
disclosure by RXE to support either the claim or the whisper. RXE's
plan to create value was clearly laid out in the amendment to the
circular and can be viewed at www.rxexploration.com. The plan
includes a continuation of test mining.
The dissidents also claim to have superior knowledge of Montana,
and that this should be a decisive factor. Don't be misled:
-- The dissident executives have grossly exaggerated the importance of
their knowledge and have understated the value of RXE's nominees, who
have been involved with mines in 20 countries on five continents. RXE's
nominees have experience in all kinds of mining and regulatory
conditions, most of them significantly more complicated than those in
Montana. For example, RXE nominee Louis Dionne is a mining engineer and
was Senior Vice-President of Underground Operations for Barrick Gold. He
has many years of experience with narrow vein mines that are similar to
the geology and structure at Drumlummon.
-- A number of RXE's nominees, including designated President and CEO
Darren Blasutti, are very familiar with Montana's geology, its politics,
and its regulators. This is in part because Golden Sunlight, one of the
largest gold mines in Montana, is owned by Barrick Gold, for which Mr.
Blasutti served as a senior executive for 13 years. Golden Sunlight is
just 120 kilometres from RXE's Drumlummon project.
-- The three-dozen RXE employees at Drumlummon would not be affected by the
outcome of the proxy contest. Nor would relationships with regulators,
with the possible exception that safety inspectors might be relieved to
know that more safety-conscious leaders were in charge. For the record,
the RXE nominees look forward to working with all stakeholders
associated with the company.
The dissidents: taking pride in deception
We have to give the dissidents credit: They are really good at
deception. They claim that the Board had its head in the sand, and
should not have been surprised by the proxy contest ambush. But we
were surprised, because their deceit was very effective. When the
dissidents put their names on RXE's slate, we trusted that they had
made a commitment to resolve issues together as we had for several
years. Six days later they broke their word, sprung their trap and
launched their proxy fight against RXE.
Now the dissidents claim they are being straight with
shareholders. Notwithstanding the evidence of their "so-called"
draft compensation contracts, they expect you to believe that they
will behave next time, if only they get your vote. Notwithstanding
their nepotism and unsafe practices, they claim to be superior
leaders and miners. Notwithstanding IIROC's criticism of their
disclosure and all the omissions in their circular, they expect you
to take them at their word. We won't fall for it this time. Neither
should you.
RXE's Superior Nominees
RXE's nominees are clearly superior to the dissident slate in
terms of mining and corporate experience. This superiority is based
on a comparison of their track records as executives in the gold
mining industry and elsewhere.
If elected, we believe RXE's nominees will add significant
value. From developing and executing the right strategy, to forging
relationships with key government officials, to world-class
operations management, the new RXE nominees have been involved in
transactions whose value is in the billions of dollars. Please join
us. Vote the BLUE proxy, the most direct path to value creation for
RXE.
On behalf of my fellow RXE nominees,
John F. O'Donnell, Chairman of the Board
About RX Exploration Inc.
RX Exploration Inc. is a gold exploration company whose strategy
is to re-examine gold and silver projects within North America that
have previously reached advanced exploration, underground
development or past gold or silver production. The Company is
currently focused on re-starting production from its Drumlummon
Mine, a past producing high-grade, bonanza-type, epithermal
underground gold and silver mine in Montana.
The Company's shares are listed on TSX-V (Symbol: RXE) and on
the OTCQX (Symbol: RXEXF). There are 160,438,980 common shares
issued and outstanding.
Cautionary Statement Regarding Forward Looking Information
This press release contains "forward-looking information" within
the meaning of applicable securities laws. Forward-looking
information includes, but is not limited to, the Company's
expectations, intentions, plans and beliefs with respect to, among
other things, the Drumlummon property. Often, but not always,
forward-looking information can be identified by forward-looking
words such as "anticipate", "believe", "expect", "goal", "plan",
"intend", "estimate", "may" and "will" or similar words suggesting
future outcomes, or other expectations, beliefs, plans, objectives,
assumptions, intentions or statements about future events or
performance. Forward-looking information is based on the opinions
and estimates of the Company as of the date such information is
provided and is subject to known and unknown risks, uncertainties
and other factors that may cause the actual results, level of
activity, performance or achievements of the Company to be
materially different from those expressed or implied by such
forward-looking information, including the ability to develop and
operate the Drumlummon property, risks associated with the mining
industry such as economic factors (including future commodity
prices, currency fluctuations and energy prices), failure of plant,
equipment, processes and transportation services to operate as
anticipated, environmental risks, government regulation, actual
results of current exploration activities, possible variations in
ore grade or recovery rates, permitting timelines, capital
expenditures, reclamation activities, social and political
developments and other risks of the mining industry. Although RXE
has attempted to identify important factors that could cause actual
results to differ materially from those contained in
forward-looking information, there may be other factors that cause
results not to be as anticipated, estimated or intended. Readers
should be aware that this forward-looking information is subject to
known and unknown risks, uncertainties and other factors that could
cause actual results to differ materially from those suggested by
such information and are cautioned not to place undue reliance on
such information. By its nature, forward-looking information
involves numerous assumptions, inherent risks and uncertainties,
both general and specific, that contribute to the possibility that
the predictions, forecasts, projections and various future events
will not occur. The Company undertakes no obligation to update
publicly or otherwise revise any forward-looking information
whether as a result of new information, future events or other such
factors which affect this information, except as required by
law.
On Behalf of the Board
John F. O'Donnell, Chairman of the Board
John A. Ryan, Chief Financial Officer
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.
Contacts: Shareholders: Laurel Hill Advisory Group Toll-free:
877-304-0211 Collect: 416-304-0211 Media: Longview Communications
Inc. Joel Shaffer 416.649.8006 jshaffer@longviewcomms.ca Longview
Communications Inc. Alan Bayless 604.694.6035
abayless@longviewcomms.ca
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