IPJ and Java Gold - REVELATIONS 1
Time for everyone to look at the details of Java Gold and IPJ. Some shocking revelations.
PART 1 OF: The rise and fall of Java Gold Corporation (Ontario)
BY: Robin Grayson MSc General Director of Eco-Minex International emiweb@magicnet.mn
ABSTRACT
Java Gold Corporation (JVAG on CDN) was created as an Ontario registered corporation in 1996 with financial support from International Pursuit Corporation (IPJ on Toronto Stock Exchange). This paper outlines the meteoric rise of Java Gold and reasons for its catastrophic collapse. JVAG began as a Canadian stock market 'bubble' to attract in cash from investors to build up a strong portfolio of hard-rock gold licenses in Indonesia, the home of prospector Armand Beaudoin. Sensing a major opportunity, JVAG came to Mongolia, pulling along International Pursuit. Together they amassed a huge portfolio of hard-rock exploration licenses, but the collapse of the gold price and 10% Sales Tax on gold exports burst the speculative bubble. JVAG re-launched Barmash JSC (listed on the Mongolian Stock Exchange) as 'the Minerals House of Mongolia' creating a hub for other minex companies. JVAG attempted to become the world's biggest independent producer of placer gold, narrowly failing in late 1996 to raise 15m US$ for a Krupp Bucket Wheel Excavator for dry mining on the Toson Terrace at Zaamar, and in mid 1998 failing to raise 22m US$ for a Rohr Dredge on the adjacent Toson Alluvials of the Tuul River. Evidence is presented of ill-timed removal of cash by Armand Beaudoin (President and CEO) contributing to Java Gold's paralysis by NEGATIVE working capital. Examples are presented of serious breaches of the Canada Business Corporations Act and the Securities Act of Ontario, and systematic circumventing of Mongolian regulations controlling the award of licenses. Many News Releases are shown to be incorrect, misleading shareholders and investors, and erroneous official filings have misled the Canadian regulators. When Armand Beaudoin passed away in 1999, Java Gold was left with no directors and no officers. Currently the company has debts of up to 1m US$, no cash, but a major asset is a 40% stake in the Toson Alluvial Gold License at Zaamar, estimated to be worth 4m US$. Recommendations are presented for changes in Mongolian and Canadian laws and regulations, and the paper is intended to assist shareholders in the revival of Java Gold Corporation.
Introduction
The stimulus to writing this paper was the realisation, in the months after the President and CEO of Java Gold, Armand Beaudoin, passed away, and investor interest had evaporated and Java Gold shares were worth less than wallpaper, that a subsidiary of Java Gold in Mongolia - Zaamar Goldfields Ltd. - were busy producing gold by placer mining. The shareholders of Java Gold knew nothing about this gold mine being active until the writer informed them. This paper is a history of a company that failed and yet somehow still had a gold mine!
There are two theories of history - cock-up and conspiracy. This study shows that few, if any, of the players knew what was really happening. Some were simply trying to extract as much cash as possible - by trading in shares (insider knowledge and "pump-and-dump") and milking enormous fees for salaries, bonuses and - on a massive scale - by setting-up private companies specifically to get control of exploration licenses and then sell these to Java Gold Corporation for substantial cash and shares. Milking and manipulation of the public company was on such a scale that management of the actual exploration and mining was rendered weak and distracted, and, once starved of the vital flow of fresh funds from investors, failed to cut back in time on extravagant costs and literally ran out of cash. The management misled the market in an attempt to shore up the share price and to attract more investors. The scale of deception was staggering.
It is hoped that this paper will help shareholders of Java Gold Corporation - mostly Canadian and US citizens - to discover the fate of their money.
1st Stage - Java Gold's Origins as a Private Corporation
The history of Java Gold Corporation is remarkable and short. As recently as 14th February 1996, it came into existence registered under the laws of Ontario as a private corporation (No.1169132). On 18th March 1996 a Reorganisation Agreement was entered into between three parties:
a) Java Gold Corporation (private Ontario corporation);
b) International Pursuit Corporation (public corporation trading as IPJ on the Toronto Stock Exchange);
c) Armand Beaudoin (private citizen - a Canadian passport holder but resident in Indonesia).
The Reorganisation Agreement had two main elements:
a) Java Gold Corporation acquired a 100% interest in Java Gold Inc. of the British Virgin Islands from the owner, Armand Beaudoin, in return for 3,000,000 common shares in Java Gold Corporation at an issue price of 0.25 CDN$ per share, and a payment of 500,000 US$ may also have been made to Armand Beaudoin.
b) Java Gold Corporation issued 3,125,000 shares to International Pursuit Corporation in return for 2 million US$ of equity finance. By this means, Java Gold Corporation gained cash, Armand Beaudoin gained both shares and cash and International Pursuit gained shares.
The original vision of the founders was for Java Gold Corporation to explore for gold in Java and neighbouring islands, based on the huge knowledge of Indonesia by Armand Beaudoin and International Pursuit Corporation. Up to this point, Armand had never even been to Mongolia.
2nd Stage - Java Gold Changes into Public Corporation
On 2nd April 1996, by Articles of Amendment Java Gold Corporation had its private company restrictions deleted. On 1st June 1996, Java Gold Corporation amalgamated with CPX Industries Inc, a dormant Ontario-registered public company (corporation number 846951), to form Java Gold Corporation as an Ontario-registered public corporation (corporation number 1182521). Shareholders of CPX Industries received 495,911 shares of Java Gold Corporation at an issue price of 1CDN$ per share. By this means, Java Gold became a public corporation with its shares traded on the Canadian Dealing Network (CDN), with the code of 'JVAG'.
On 1st June 1996, Java Gold Corporation commenced trading on the Canadian Dealing Network (CDN), part of the system developed for trading in the over-the-counter market, known as the Canadian Over-the-counter Automated Trading System (COAT).
3rd Stage - Java Gold comes to Mongolia
The author was Chief Adviser of the Mongolian Business Development Agency (MBDA) from April 1995 to November 1997, and witnessed the rapid growth of placer gold mining. The MBDA played an important role, with two MBDA staff - Mrs. Choijliin Khajidsuren and Mrs. N. Oyundari trained in this field. Khajidsuren assisted in the rapid development of Golden Tiger Corporation, Mongolian Goldfields Corporation, Java Gold Corporation, Zaamar Goldfields Ltd. and Barmash JSC. Oyundari was to play a key role in establishing the British-Mongolian joint venture Ochir Leasing Co. Ltd. that introduced high % gold recovery systems. The author observed that the placer mines were losing a lot of gold, and requested help of specialists via Herman Hulsinga, the Country Manager for senior volunteers from Netherlands Management Co-operation Programme (NMCP). As a result, Gerrit Bazuin, then of IHC Holland based in Beijing, came to the MBDA on a mission in autumn 1995 and, assisted by Khajidsuren and Oyundari, delivered highly successful seminars to local SME mining companies and Government officials.
Recognising the need for a 'demonstration effect' by an international miner, Gerrit Bazuin alerted Armand Beaudoin to the huge placer potential of Mongolia. As a direct result Armand Beaudoin arrived in Mongolia in 1996 bringing with him shortly afterwards Golden Tiger Corporation (BVI), Mongolian Goldfields Corporation (Ontario), Zaamar Goldfields Ltd. (BVI), Java Gold Corporation (Ontario, JVAG on CDN), Dyak Goldfields Corporation (DYAK on CDN), International Pursuit Corporation (IPJ on TSE) and Condor Resources Ltd. - amongst others.
4th Stage - Armand Beaudoin creates Business Empire
Armand Beaudoin swiftly set up an business empire of extraordinary size and complexity, with Java Gold Corporation at the core. Many of the linkages were concealed from Java Gold shareholders, Canadian regulators and the Minerals Resources Authority of Mongolia. The chart (downloadable from www.placersoftheworld.bizland.com) shows the main elements of his empire, but a further 20% known to the author is not shown. Currently the edge of the business empire has not been found and is still being mapped.
Two techniques of concealment are apparent. Firstly the creation of offshore companies (British Virgin Islands and Bahamas) as a barrier to investigation by Canadian regulators working downward and Mongolian authorities working upwards. Secondly, creation of a web of Mongolian companies in order to gain the maximum number of exploration and mining licenses without the Mongolian authorities - nor indeed the Mongolian companies - being aware of the full picture.
5th Stage - Strategic Vision of Java Gold
Armand Beaudoin and his team had a 3-pronged strategic vision that was very ambitious (see website for details). The strategic vision was achievable, but crashed utterly for reasons explained in this paper.
6th Stage - Java Gold Served with Current Cease Trading Order
The first interruption of Java Gold's CDN status occurred on 16th September 1998 when the Ontario Securities Commission used its powers under the Securities Act of Ontario (Section 127 subsection 2) and issued a Temporary Cease Trading Order (CTO) against Java Gold. This prevented its shares from being traded on CDN, the reason given being that Java Gold was behind in its filings. Fast corrective action by Java Gold caused the rescinding of the Cease Trading Order (CTO) a few days later on 24th September 1998.
The Ontario Securities Commission again issued a Temporary Cease Trading Order (CTO) against Java Gold Corporation on 17th August 1999, which prevents shares being traded on the Canadian Dealing Network (CDN). The reasons given by the Ontario Securities Commission being: "…failure to file annual financial statements for
the year ended December 31, 1998 and interim financial statements for the 3 month period ending March 31, 1999." This CTO is still in force. The imposition of the Cease Trading Order refers only to the trading of shares on the Canadian Dealing Network (CDN) and does not mean that Java Gold Corporation has ceased to be active as a company: "…the issuance of a CTO does not prevent the Corporation from conducting its normal course of business."
7th Stage - Current Status of Java Gold
The status of Java Gold is ACTIVE according to the Certificate of Status issued on 26th April 2000 by the Companies Branch of the Ministry of Consumer and Commercial Relations of the Province of Ontario, Canada, which states: "This is to certify that according to the records of the Companies Branch JAVA GOLD CORPORATION Ontario Corporation No. 001182521 is a corporation incorporated, amalgamated or continued under the laws of the Province of Ontario. The corporation came into existence on JUNE 01, 1996 and has not been dissolved."
Registered Office of Java Gold
The Registered Office Address of Java Gold declared in the official Corporation Profile Report, filed with the Companies Branch of the Province of Ontario, issued 26th April 2000 is: Ross Francis, Royal Trust Tower P.O. Box 95, Suite No.4400, Toronto, Ontario, Canada M5K 1GB. Ross Francis remains the Registered Office but is
in an invidious position. There is no Board, Directors or Officers to give instruction or make filings or answer queries from the Companies Branch of Ontario Province, or Ontario Securities Commission: "We have advised them that we do not have instructions or information necessary to file any such documents."
Shareholders of Java Gold
An impressive array of shareholders acquired shares in Java Gold Corporation, not only by buying shares via the Canadian Dealing Network CDN (e.g. Rothschild), but also by private placement (e.g. Barrick Gold of Canada) and by share swaps upon amalgamations (shareholders of CPX Industries Inc in 1996, and of Mongolian Goldfields Corporation in 1997), as well as via take-up of share options by some Java directors and officers.
Armand Beaudoin, at various times and in various documents is stated to be "the major shareholder of Java Gold Corporation". Usually this claim was made in documents, which he himself wrote or edited. Armand Beaudoin was indeed the major shareholder of Java Gold but NOT majority shareholder (i.e. holding more than 50%). He simply owned more shares in Java Gold than any other shareholder. No single entity, directly or indirectly, controlled Java Gold and at no time did Armand Beaudoin own more than 20% of the shares. As at 20th May 1998, Armand Beaudoin had direct ownership of 4,900,000 common shares of Java Gold, approximately 16.9%, barely changed from the 17.5% he held in August 1996.
International Pursuit Corporation was the second largest shareholder of Java Gold. International Pursuit is an Ontario-registered public corporation traded on the Toronto Stock Exchange (IPJ on TSE), and instrumental in the start-up of Java Gold Corporation.
On 14th March 1996, International Pursuit pushed ahead with its strategy of increasing investment in Indonesia by entering into two Acquisition Agreements to develop additional property interests owned by Java Gold Corporation and Dyak Goldfields Corporation in Kalimantan, Java and other islands of Indonesia. As part of the deal, International Pursuit provided 2m US$ of seed venture capital finance to Java Gold, in return for 3,125,000 common shares, and a further 2m US$ to Dyak Goldfields, again in return for 3,125,000 common shares. This occurred when Java Gold was still a private corporation; 2½ months before it became a public corporation with its shares traded on the Canadian Dealing Network (CDN).
Before the end of 1996, International Pursuit purchased an additional 316,536 common shares in Java Gold for 498,979 US$ bringing the total of its equity interest in Java Gold to 19.5% - about the same as that held by Armand Beaudoin.
In 1997, International Pursuit purchased a further 524,000 common shares in Java Gold for the sum of 208,447 US$, averaging 39.78 cents per share. However in the same year International Pursuit sold 500,000 common shares in Java Gold for the sum of 227,945 US$, sustaining a loss of 206,501 US$. International Pursuit was now unloading its shares in Java Gold as fast as possible. At year-end 1997, International Pursuit recorded in its audited Annual Financial Statement a write-down of 2,144,795 US$ evaluation of its holdings of 3,465,536 common shares of Java Gold at an estimated market value of 0.25 CDN$ per share.
In 1998, International Pursuit sold another 1,020,000 common shares in Java Gold for 35,977 US$, an average selling price of only 0.035$ share, incurring a loss of 830,407 US$. At year-end 1998, International Pursuit wrote off its investment in the remaining 2,445,536 shares in Java Gold (8.4% equity interest) to ZERO because of "…the Company's belief that there had been a permanent decline in the value of the investment".
Rothschild (the bank group) bought shares in Java Gold early in its history, on behalf of 5 funds that Rothschild managed on behalf of clients, disclosed in a News Release by Bruce Gille of Rothschild Emerging Markets: "Rothschild Emerging Markets L.L.C. ("Rothschild") announced that funds over which it exercises control of direction have acquired 793,200 shares of Java Gold Corporation ("Java") through market transactions .As a result of these acquisitions, the funds own, in aggregate, 2,638,456 common shares in Java. Rothschild directed the purchase of these shares on behalf of Croesus Emerging Markets Resources Fund L.P., Croesus Emerging Market Resources Fund L.P., Croesus Emerging Markets Resources Fund L.L.C., Croseus Fund L.P., and Croseus-EMTR Fund S.A." It is probable that these shares were subsequently disposed of.
Barrick Gold is one of the world's largest gold mining companies. At the end of 1997, Barrick bought 2,200,000 common shares in Java Gold by private placement: "Java Gold Corporation announced today that Barrick Gold Corporation had acquired 2,200,000 common shares of Java Gold for an aggregate purchase price of Canadian $1,100,000 or 0.50$ per share by private placement." Given the date of purchase of the shares, and the interest in Barrick in Java Gold's hard rock licenses in Mongolia until early 1999, Barrick may still be a shareholder of Java Gold.
Barrick intended the finance to be focussed on hard-rock gold exploration: "Java Gold and Barrick have agreed that 80 percent of the placement of $1,100,000 will be used by Java Gold for exploration of properties in Mongolia." "In addition, prior to the abandonment or disposition of any of its Mongolian properties, Java Gold will grant Barrick a right of first refusal to acquire such properties." "In the event that Java Gold discovers or identifies one or more gold resources on its properties in Mongolia containing at least 250,000 ounces of gold during the three year period following the private placement, Barrick shall have the right to elect to enter into an option agreement to acquire a 60% interest in the identified resource and the areas reasonable contiguous thereto, at which time Barrick will be responsible for 100% of the costs necessary to determine the commercial viability of the resource." "Until a positive decision is made by Barrick whether to proceed with the development and mining of the resource, Barrick has the right to withdraw from the project at which time 100% of Barrick's rights in the properties would be reconveyed to Java Gold."
Number of Shares Issued by Java Gold
Prior to trading on Canadian Dealing Network (CDN), the following share issues by Java Gold Corporation took place, from inception to May 1996: 6,350,000 shares at $0.25 for 1,587,500$, 5,275,000 shares at $1.00 for 5,057,000$ and 2,500,000 shares at $2.00 for 4,719,180$. By 30th June 1996, Java had issued 17,620,911 "outstanding on an undiluted basis."
On 15th August 1996, Java Gold issued 100,000 common shares valued at 88,000 US$ to Golden Sundra Mining Corporation (an Indonesian company in which Armand Beaudoin held a controlling interest) in connection with an option to acquire a 100% beneficial interest in the Kendeng project in West Java.
On 28th February 1997, Java Gold had 17,620,920 common shares issued on an outstanding on an undiluted basis, rising to 24,045,911 shares by 30th May, 24,190,000 shares by 16th September, 24,540,911 shares by 27th November, and by year-end 1997 had risen to 26,740,912 shares. This included the issuing of 2,200,000 shares to Barrick Gold Corporation for an aggregate purchase price of CDN $1,100,000 or $0.50 per share by private placement, (618,000 US$) as part of the 'Barricks Agreement'.
The next significant event was on 15th April 1998 when Java Gold successfully issued 2,253,571 common shares for 788,750 US$, each unit being a common share of Java Gold plus one half warrant entitling the holder to subscribe for one common share at 0.50 $CDN per share up to close of business on 30th June 1999. Thus by 15th April 1998, Java Gold had 28,994,483 common shares issued. By 30th September 1998 the figure had risen to 28,994,483 common shares outstanding on an undiluted basis. No records have been published by Java Gold since.
Current Directors & Officers - Java Gold Corporation
The Board of Java Gold Corporation is currently in chronic disarray, with NO members of the board, NO directors, and NO officers. The sequence of events whereby this deplorable and illegal situation came about is dealt with in the next part of the paper.
PLEASE POST COMMENT IF YOU WANT TO READ THE SEQUEL - IT GETS MUCH WORSE....
Robin Grayson
General Director
Eco-Minex International Ltd
emiweb@magicnet.mn |
