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Minera IRL: A Peruvian shareholder writes to Frank O’Kelly and the IRL board

What follows is a translation of a letter sent to Frank O’Kelly and the board of Minera IRL, yesterday November 20th, by a large shareholder of the company (he has over a million shares personally and is closely connected to other Peruvian shareholders with many millions more). His name is omitted from this translation, but both I and Mr. O’Kelly are fully aware of his identity. He has given me permission to reproduce this translated version here on the open blog. Here we go.


Lima, November 20th 2016,
Mr Frank O’Kelly, board members, ladies and gentlemen,
I write in order to make clear my concerns regarding the following matters:
Last week I was made aware that a new Annual General Meeting (AGM) has been called by the company for November 30th 2016, without having received any information on the AGM via mail or other media. The only information came in a hidden form on the Minera IRL website and I do not know when it appeared. The lack of transparency on a subject as important for IRL shareholders surprised us. It’s like trying to get an elephant through a door without anyone seeing*, which demonstrates a total lack of respect towards us the shareholders.
In the November 30th AGM has very important agenda matters, apart from that of the directorate. One point that surprised us is the petition for the modification of corporate by-laws so that the board of directors (whose current members do not hold a single share) can award all the shares they want without anyone knowing and award them to whoever they prefer. This is even worse than the petition that Daryl Hodges, Doug Jones and Robin Fryer tried to push through in the AGM of August 27th 2015. Here is a reminder:
8. To authorise the directors in
accordance with Article 6.4 of the Articles of Association of the Company to
allot up to a maximum of 115,567,514 ordinary shares (on a pre-consolidation
basis), being 50% of the ordinary shares issued by the Company as at the date
of the Notice of Meeting.

Special Resolution 9. To authorise
the directors in accordance with Article 6.4 of the Articles of Association of
the Company to allot up to a maximum of 115,567,514 ordinary shares (on a pre-consolidation
basis) for cash, being 50% of the ordinary shares issued by the Company as at
the date of the Notice of Meeting.
Your petition for the November 30th AGM goes further:
Special Resolutions 8. That the
Articles of Association in the form attached as Schedule 1 to the Company’s
Information Circular dated October 25, 2016 (the “New Articles”) be and are
hereby adopted as the Articles of Association of the Company to replace the
existing Articles of Association of the Company (the “Existing Articles”).
9. If the New Articles are not
adopted, that the Board of Directors be authorized, in accordance with Article
5.1 and 6.4 of the Existing Articles, to allot up to 115,567,514 ordinary
shares, for cash and free of the pre-emptive rights provided for in Article 6.1
of the Existing Articles.

Not only do you want to emit up to 50% of the current share count, but what’s more it appears you want to do so without consulting shareholders. Is this the reason why you have been so non-transparent on informing us about the AGM?
In the meeting we had with you and Mr. Bavin last year, we were offered other proposals for the future of Minera IRL. I now understand why you have kept on Mr. Robin Fryer as counsel to the board (at a salary of U$7,000 per month), one of the brains behind this type of proposal. I recall the interview he gave to Global Mining Observer in November 2015 when he put forward this scheme:
“Step one, which Daryl Hodges had
started to work on, but was blocked, was to have an equity raising in all three
markets, maybe a rights issue,” Fryer says. “It’s a pretty small enterprise in
the London market, even in the AIM side, but in Peru, it’s a big deal
Regarding the listing of Minera IRL shares in the various stock markets, you do indeed mention in the news release of November 16th that the re-listing process continues in Lima and Canada. But what cannot be denied is your comment regarding the AIM listing in London. This from the 2016 Management Information Circular regarding the agenda for the upcoming AGM
The Existing Articles were tailored
to conform to the requirements of two trading markets – the AIM market of the
London Stock Exchange and the Canadian Toronto Stock Exchange (or TSX) – but
the Company is no longer listed on the AIM market and has no intention of seeking
to renew that listing.
In our same meeting last year you and/or Mr. Bavin stated that it was important to list in the AIM so that certain investment funds are not forced to sell under pressure. At the meeting you also committed to listing as soon as possible in the Lima and Canada markets.
Regarding Rio Tinto and its 44,126,780 shares, emitted at a price of C$0.179. We all know that RioTinto is the largest shareholder of Minera IRL, with 19.09% of shares at present. In the AGM of August 25th 2015 it decided to abstain from voting, as logically a dilution of its share holding did not favour its corporate interests. In the EGM of November 26th 2014 Rio Tinto did exercise its voting rights selectively towards the current board (e.g. Julian Bavin), which of course is its right to vote as it seems fit.
However, what we do not understand is whether in the next AGM of November 30th 2016, Rio Tinto will support the emission of 50% of the current share count and also support the current board.
1) Because its holding would drop from 19.09% to 12.73%
2) Because it would vote for a board that wants to dilute its participation in Minera IRL
We do not know what is happening, perhaps you or Mr Bavin can explain to us whether there is some sort of deal with Rio Tinto that the rest of us shareholders do not know about. After what has happened in Guinea (according to Global Mining Observer), the position of Rio Tinto should be the most transparent possible.
Finally the “million dollar question”, as we say in Peru. Why do you want to go ahead with this share dilution before the results of the drilling campaign at Ollachea are published (December 2016), a place that the board of directors visited just a few weeks ago. I will refresh your memory on what you told Lawrence Williams (Lawrie On Gold) on October 21st, 2016:
But its
flagship project is a major advanced new gold mine development, Ollachea,
located in Puno in the South of Peru. This project is fully funded by a
Peruvian State Development Bank ($240 million facility of which $70 million has
been advanced). The mine is fully permitted and has subscribed a 30 year social
license with the local community. The mineral resource exceeds 2.40 million
ounces Au and M+I reserves of 1 million ounces, which will sustain a production
of 100,000 ounces of gold per annum for a decade. The company is presently
drilling off an already constructed 1.2 km access tunnel with a target of
adding an additional 600,000 ounces to the resource. The down dip extension
which is currently being drilled reports intersections up to 20 m with grades
from the only 3 holes for which so far have assays reporting 5 g/t Au, some 40%
better grade than the main ore body which was delineated with 82,000 m of
AMEC has
filed a NI 43-101 compliant feasibility study.
I need not remind a person such as yourself or your board of directors, made up of important people in the mining and business world, that you are handling important and privileged information regarding the results of the drilling campaign in Ollachea. And that any transaction of shares you may undertake would be examined closely by regulators. You have already given a glimpse of the results in the interview.
If resolutions eight or nine of the 2016 proxy are approved, you the board of directors could sell 115,567,514 shares immediately, at the last sales price, $0.047 per share, which would raise $5,431,673. What a bargain! And in both resolutions the phrase “preference for current shareholders” has been forgotten. However in the news release of November 16th, which this time arrived in my mailbox on the same day (unlike the AGM announcement that never arrived), it says:
On a final note regarding information
appearing on social media stating that the Directors do not own any stock in
the Company, I would like to clarify that the new members of the Board,
including me, were appointed during the period of the CTO and as a consequence
were and currently remain unable to buy shares in Minera IRL. Please be assured
that the Board members are dedicated to restore the fortunes of the Company and
I have no doubt that they will confirm that sentiment by purchase of stock once
trading resumes.”
Mr. O’Kelly, I once again remind you of your words of October 21st 2016:
goes on to note that companies like Dalradian command a market cap ten times
that of MIRL, whilst possessing comparable resources but still have permitting
and financing challenges ahead. Meanwhile MIRL has a producing gold mine, a
fully funded project with all the permits in place, a 1.2 km access tunnel, an
EPC fixed price contract with Peru’s largest mine construction company and a 30
year social license for the local community. One can count on one hand, he
says, the number of gold projects as advanced as Ollachea.  His short term
target is to get the stock price over CAD $0.30.
The question is obvious: At what price do you and the board of directors want to sell these 115,567,514 ordinary shares, at $0.047 or at the 30c of your forecast?
For the good of the company, I ask you for a clear explanation as to why you have made these decisions. My intention is to vote against the current board and against the majority of the agenda points because they do not represent the interests of Minera IRL shareholders.
Yours sincerely, (name supplied)

*A Spanish expression. I decided to translate it literally.

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