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Gold/Mining/Energy : SPECIAL SITUATIONS
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To: Ciao who wrote (18)5/27/1999 7:28:00 AM
From: M. Merriam  Read Replies (1) of 59
 
Here's what the circular says:

Based on the Corporation's prior experience with GSRGC there is a risk that the Corporation will not receive the full $10 million U.S. from GSRGC as described by the terms of the proposed sale.

My reading of the situation is that the sale is not forfeited. The sale will close when the shareholders approve and the Chinese parent company returns its SGC shares to the company for cancelation. When the shares are returned, the substantial debt owed by the parent company to SGC will also be cancelled. If the Chinese parent doesn't pay the remainder of the $10 million by a certain time period, SGC supposedly has the right to seize certain assets and sell them to recover the amount. The risk is that SGC will not be given access to the assets. After all, SGC has owned 80% of this factory for years, but has never been given management control over it and can't even access its books. So we think that now they will be allowed to seize the property and sell it...

As far as the parent company honouring its obligations, they've not lived up to the terms of their debt repayment agreement with SGC. Why should we expect them to be honourable now?

After reading the background information in the circular and in SGC's annual information form, I'm beginning to develop the opinion that certain parties have been negligent or worse and could probably be held accountable for their past actions.

Mike
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