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To: Greg Cummings who wrote (1331)	7/15/1998 12:00:00 PM
From: Sir Auric Goldfinger	Read Replies (1) \| Respond to of 3383

The other New Mexico Company: "Solv-Ex hits pivotal point `Negative news' on federal probe expected as the firm resurrects itself. By Diane Velasco NMBW Staff nmbw.nmsource.com The Securities and Exchange Commission is expected to make an announcement this week regarding its ongoing investigation of Albuquerque-based Solv-Ex Corp. "News from our office will be somewhat negative for the company," says Kathryn Addleman of the Denver SEC office. The announcement comes just as the beleaguered Solv-Ex is moving itself out of bankruptcy. The company processes, extracts and recovers minerals from oil sands, but has been unable to make a profit since its inception in 1980. During the past five years, it has been embroiled in controversy. Senior Vice President Herb Campbell says the company would welcome specific announcements by the SEC. "From our perspective, we have tried to get specific allegations for almost two years from these people," he said. "Our position has shifted toward they should bring the complaint if they are going to... We would welcome the commission bringing the complaint and the opportunity to respond to it." The SEC investigation began in March 1996. The Wall Street Journal in May 1997 reported the commission alleged that Solv-Ex chairman John Rendall illegally pledged restricted stock as collateral for a $1 million loan. Restricted shares are those that are not registered with the SEC. Other allegations include failing to disclose or misrepresenting important information to investors. The SEC also wanted to discuss Solv-Ex and its technology with the company's competitors. Solv-Ex won an injunction against the move. A motion was filed two months ago by the SEC to have the injunction lifted. The court has not yet ruled on that. "Obviously, this company would like to not be the subject of an ongoing investigation because there's a certain percentage of people out there who will think there must be some monkey business or something is wrong," said Campbell. "Those suspicions will linger while the investigation is going on. That's not within our control. The company does not believe it has made any false or misleading statements." In its most recent effort to move out of the Chapter 11 bankruptcy filed Aug. 1 of last year, the company won court approval of its disclosure statement. The statement was sent two weeks ago to creditors and shareholders, along with the company's reorganization plan. Shareholders have until July 24 to vote on the plan. A confirmation hearing is set for July 29. "We don't expect problems on the vote because creditors are being paid," Campbell said. "And there's no other realistic option for shareholders. They certainly wouldn't benefit by the company being liquidated. We are on track to come out of this, and I think the light at the end of the tunnel is not a train coming at us." The company has made some changes during the past year in the hopes of making itself more financially viable. It sold off the troublesome plant in Alberta, Canada, that had cost the company $110 million to build. The company also sold two oil-sand leases. The sale of the plant and leases raised enough capital to take care of creditors and to provide some capital for commercialization, Campbell said. The company retained rights to its technology and the right to develop minerals on all of its previously-owned oil sand sites, under certain conditions. "A lot of progress has been made even while we have been in bankruptcy," Campbell said. "We are staying on track with technology to develop minerals and metals. But we have not been able to commercialize the technology." The latest product the company wants to get to market is a synthetic mineral product that can be used as a coating agent or filler for paper. Solv-Ex has produced four rolls of paper using the product at an industry pilot plant. "It appears to have some tremendous potential in the paper industry compared to other products now being used for the same purpose that cost a lot more," Campbell said. The company has signed memorandums of understanding with two foreign companies interested in producing and marketing the product. "We can't do anything binding in nature until we have court approval or are out of bankruptcy," he said. "But the memorandums set forth the basis upon which we plan to move forward to commercialize the process and the product." A Venezuelan firm, Acidos y Minerales de Venezuela, has the available natural resources and infrastructure needed for production, he said. Raisio Chemicals Canada Ltd., a Canadian subsidiary of a Finnish firm, would do the marketing. "They are enthusiastic about it," he said. "If the marketing people are convinced Solv-Ex can produce the product on a consistent basis, then the production part of it is easy. As soon as we are out of Chapter 11, we will produce the product in Albuquerque in bulk for testing." The company's current production site is in a plant at 2127 Menaul Blvd. NE. Campbell's hope is that the memorandums of understanding can be turned into contracts that will move production forward. But no other moves are possible at this point, he said. "You can't do much when you are an R&D company in Chapter 11," he said. "Everything comes to a screeching halt. We have done as much as we can without funds released to complete additional work at the pilot plant. It's very unusual for a company like ours to come out of a Chapter 11 because we don't have any earnings. Our ability financially to continue depends on achieving commercialization of the technology, and that is the job at hand. "In the final analysis, the measure of a company is how it performs. Our objective is to perform. Ultimately, if you don't perform, you disappear." An overview of Solv-Ex's recent rocky road: January 1996 - A federal grand jury in California looks into possible manipulation of Solv-Ex stock because the price jumped although the company had not been profitable. Two international stock swindlers become the focus of the investigation. Solv-Ex officials are not shown to be involved. March 1996 - Solv-Ex stock plummets after news of the federal investigation breaks. October 1996 - Solv-Ex has, in fact, become the unwitting victim in a British stock scandal involving a mutual fund manager with Deutsche Morgan Grenfell, a British unit of Deutsche Bank AG of Germany. November 1996 - The company raises $13 million through an overseas stock offering despite the October debacle. February 1997 - The company takes heat after laying off 240 workers in Alberta, Canada, two days after they apply for union certification. The contractor in charge of construction on the plant site files a lien against the company for $3.5 million. April 1997 - Solv-Ex raises $22 million in an overseas sale of debentures that can be turned into common stock. Debentures function like corporate bonds, a promise to pay that's backed only by the issuer's credit. The funds were to complete the plant in Alberta. Fired workers picket daily outside the plant. June 1997 - Company stock loses 70 percent of its value. The chief financial officer could not explain why. August 1997 - Solv-Ex files Chapter 11 bankruptcy. November 1997 - Bankruptcy court approves the sale of the Alberta plant and other assets to Koch Exploration of Calgary, Canada. December 1997 - Bankruptcy hearing sets a precedent in New Mexico as the first to involve both U.S. and Canadian judges. April 1998 - Solv-Ex enters into memorandum of understanding with Raisio Chemicals Canada Ltd. regarding the Canadian company's interest in doing future marketing of a new Solv-Ex product. May 1998 - Another memorandum of understanding is reached with Acidos y Minerales de Venezuela regarding production of the new product. July 1998 - The company wins court approval of its disclosure statement and mails it, along with its reorganization plan, to creditors and shareholders.