Information Circular - Cusac Gold Mines Ltd.
November 8, 1998
To: The Shareholders
From: Tidewater Management Corp.
Re: Extraordinary General Meeting
In accordance to the applicable regulations and as per guidelines specified, this document can be circulated to the public.
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Cusac Gold at 15 cents (Canadian)! Gold in the doldrums or the timely demise of accountablity?
Guilford Brett and his management team have succeeded in perfecting a near total erosion in shareholder value. Today, you have a choice. Vote them out and vote in the only strategy appropriate for your company.
We are proposing a strategy for Cusac; you will, admittedly, be constrained to establish comparisons since Guilford Brett has proclaimed no adequate strategy whatsoever. We are proposing substantive reductions in management compensation; as you will see, personal cutbacks are not on the current management's agenda. We are proposing a departure from the indulgence in reckless "exploration plays"; incidentally, we have not heard about the Mexican escapade for many weeks now. Finally, we are proposing transparency; juggling problematic properties amongst related companies does not equate to value enhancement.
The undersigned, through various vehicles, supported Cusac (and, yes, Demand Gold) when the market appeared to be viewing the Bretts with neglect, albeit at a benign level in deference to Howe Street's self-imposed boundaries demarcating a "private" domain..
It was assumed that an infusion of capital would assist in bringing to Cusac (also,"company") fundamental changes essentially designed to approach the market's gyrations with prudence and foresight. Mainly, it was envisaged that the fresh funds would be directed to prove up reserves, improving productivity, and most importantly, securing value through the acquisition of underpriced assets.
Key Facts:
1. On March 10, 1998, Guilford Brett reported the purchase of a 50% interest in silver-lead-zinc properties in Mexico. In the process, Cusac agreed to pay a total of US$1.75 Million over a "three stage period". How did Cusac plan to raise the money required? What is the current status of the Letter of Agreement with the Mexican counter party? (Tidewater Management, through its affiliates, is now conducting an investigation in Mexico and information, as available, will be circulated to shareholders).
2. On March 4,1998, David Brett, while reporting Cusac's financials for the three months ended December 31, 1997, confirmed a remarkable decrease in revenues for the past year 1997. Besides siting lower gold prices, Mr. Brett admitted the company's poor performance could be attributed to a "significant decrease in ore grades" and "lower recovery rates". Obviously, Cusac had failed in its endevours to adequately define its reserves, something which was called for in the financing concluded with the undersigned.
3. In that same report, Mr. Brett did not expect Cusac "to resume mining operations at its Table Mountain property during 1998". A few months later, Guilford Brett gave instructions to begin limited operations at Table Mountain!
4. In a press release dated July 10 1998, announcing the placement of 2.5 million special warrants at $0.60 CAD per unit, David Brett stated that the "gross proceeds of CAD 1.5 million will be applied to primary exploration of the company's Table Mountain property with the goal of significantly increasing gold reserves". However, Cusac's shareholders still await the honest assessment of the reserves which Cusac's management has been promising to delineate.
5. The confusion surrounding Cusac's relationship with Pacific Bay Minerals, Demand Gold, International Taurus Inc. and Alaskagold Mines Inc. continues; the confusion serves the sole and undiluted purpose of clouding an investor's perspective on Cusac itself. A comprehensive review of the numerous announcements, mainly designed to indicate "profitable partnerships", must lead any analyst to recommend a termination of all links with corporations related, in some form or another, with the Bretts.
6. On August 20 1998, to the dismay of all shareholders, the Nasdaq Stock Market decided to 'demote' Cusac to the OTC Bulletin Board. The Company now has a serious obligation to comply with stringent regulations set forth by the Toronto Stock Exchange. Will the current management succeed in retaining a listing on the "third largest stock exchange in North America"?
7. With scant regard to the stakes involved, the very survival of Cusac as a listed entity, on January 1, 1998 Guilford Brett entered into a 5-year "employment agreement" with the company whereby he would receive an annual salary of CAD $90,000 with other related benefits (see Information Circular dated May 8 1998). The terms of the subject employment agreement, a Vancouver version of the "golden parachute", allow for extraordinary benefits in the event of a "change of control" in the management of Cusac. (The status of such an agreement, and other similar agreements, is now being reviewed by legal counsel).
The Alternative:
Where is Cusac going in the year 2000?
Management's lack of vision is evident by the absence of a strategic focus. We, as shareholders, must not allow Guilford Brett to buy time in the hope that his hidden bet (higher gold prices)leads to enhanced value. In the interm, he is prejudicing shareholders interests by ensuring, month after month, a depletion in shareholder worth and risking ongoing dilution.
What Cusac now needs is a committed management team which is rewarded only on identifiable performance - no salary packages, no cars, no medical insurance at the expense of small shareholders. A renewed program to assess the reserves at Table Mountain is a necessity for 1999; pursuant to such an assessment, a number of innovative applications (gold swaps, hedge programs) can be presented to shareholders. Furthermore, Cusac must proceed to acquire low cost, undervalued properties which do not require "exploration" funds and which provide reasonable upside over 2-3 years.
A more detailed strategy paper will be circulated within 2 weeks. This will also contain recommendations on new Directors and will outline the functions of a newly instituted management within the context of the proposed strategy.
Tidewater Management Corporation.
(This letter is being disseminated for shareholder and interested parties information. There is no intent to propose bias or impose influence to alter the judgement of any readers.) |
