I have just had the pleasure (NOT) of reading more than 150 posts in one sitting. I last posted on Thursday morning. Soon after that post, I was called to the courthouse to assist in a trial which two of my partners were trying. One of my partners had a death in the family, and she had to leave town. I became immersed in the trial and the related legal research, and worked non-stop (except for 3 hours sleep on Thursday night) until the trial ended, with a jury verdict, at 10:30 Friday night. At 5:00 Friday afternoon, during a break in the trial, I called Fidelity and got a stock quote on Naxos and was, obviously, quite shocked and upset, not only with the price, but with the huge volume. I called Larry Macklin, who read the release to me. Having now read all the posts, I have some thoughts and concerns.
1. There is a significant problem with the language of the release. The issue has been raised, but seemingly not resolved: "Upon inquiry by the company as to why Alfred H. Knight and Rocky Mountain Geochemical are not able to confirm their results, Ledoux & Company stated that they determined that a problem with their assaying of the Naxos material existed, but Ledoux & Co. have (sic) not elaborated as to the nature and extent of the problem."-----Who does their refer to??? The consensus on the thread is that Ledoux has the problem, but it is absurd that the release is so vague on such an important point. Ed Lamb posted (post 14358) that the release was clear, concise and well written. I have to disagree with regard to "well written." I agree, however, that it is "clear." Clear, that is, that we are screwed...(or have been screwed.)
(2) Al C. posted again (post # 14322). He did not apologize for his prior misstatements of fact. He did, however, rely on "the gossip mill" for his assertions regarding the purported burying of the South African results. Once again, I want to know who this "Al C" person is, what his source of info is, and whether "gossip" is, indeed gossip, or whether "gossip" is a euphimism for illegal inside information.
(3) Stoopid, a Naxos shareholder whom I respect, said (in post 14406) that we should get rid of Kemp (I am paraphrasing, he actually wrote "NO KEMP"). I would like to ask Chris if his sentiments are based simply on the fact that the stock price is so low, or whether there is another basis for his opinion. My understanding is that Paul Blumberg told management and the Advisory Board that Naxos had a mine and that it could be proven with SFA. If my understanding is correct, then it seems to me that it was reasonable for Sid, and Naxos, to rely on that information, as well as CPM's advice to seek conventional proof, and to pursue a conventional mine.
(4) In post number 14349, Mark raised the issue of litigation against Ledoux. I will give some thoughts on that, but first a few caveats: I am not familiar with Canadian law; I do not know the substance of communications between Ledoux and Naxos management; I do not know the terms of the contract between Ledoux and Naxos (assuming there is a written contract). Having said that, and further adding that I am not giving anyone on this thread legal advice, here goes (skip to paragraph 5 if you are easily bored): Fraud is generally defined as a material misstatement of fact which is relied upon to one's detriment. Translated, that means that someone suing for fraud must prove that the defendant lied, knew he was lying, knew, or reasonably should have known that the information would be relied on, that the information was relied on, and that such reliance caused damaged. That raises questions: Did Blumberg lie to management when he said (IF he said) that Naxos had a mine and it could be proven by SFA? Surely Blumberg knew that Naxos management would be relying on him. Did Blumberg pump up management in order to lock in a lucrative assaying contract? Did Blumberg engage in any dishonesty with regard to his certified assays? Besides fraud, other claims, such as negligence or breach of contract, also may exist. We simply do not have enough information to know whether those claims exist. For instance, we do not know what the terms of the contract are. We do not know if Blumberg followed proper protocol with his tests. We do not know if Blumberg is ultimately going to stand by his results. Finally, with regard to litigation, there is one other issue which I want to raise. Blumberg had a contract with Naxos (we assume). Generally, in order to sue an individual (or entity) for breach of contract, one must be in "privity of contract." That means that only those in the contractual relationship can sue. Naxos had the agreement. The shareholders did not. Occasionally, courts allow those who are not in privity of contract to sue, based on a "third party beneficiary" theory...ie: if a party to a contract knows that individuals (or entities) other than parties to the contract will be relying on performance of the contract, then those third parties also can sue for a subsequent breach of contract. This theory also applies to a negligence claim. Negligence basically is a claim for breach of duty. The duty does not arise as a result of a contract, but instead arises from a theory that one should be responsible for their actions if they cause forseeable harm. As with fraud, I am not certain whether the shareholders would fall within the category of those to whom a duty was owed and thus could sue, or whether only the company could sue. I will try to get more information on that issue, and if I do, I will post it here. I hope that was not too confusing or boring. If anyone has any follow-up questions, I will be happy to try to answer them. John Allen: I would welcome your thoughts, additions, contradictions, etc.
(5) Soxan mentioned that Sid cannot reach Blumberg. That is utterly inexcusable. Is Blumberg hiding? Has he fallen out of a helicopter? I cannot believe that Naxos is in crisis, and the man upon whom we have most relied is now incommunicado. Blumberg better issue a statement, and soon.
(6) I share the concerns that others have mentioned about the timing and substance of the release. Who is running the show? It seems clear to me that those who favor JL over SFA have it in their interest to discredit Blumberg's previous results, to try to make it seem (particularly this close to the AGM) that crisis is afoot and to create an environment of discontent. Why did the release not mention the other results Blumberg had from additional holes (which results I understand Naxos had, but did not want to release prior to confirmation)?
(7) Like others, I would like to know who has a financial interest in JL. Larry, Austin Lett and I were chatting on AOL one night a week or so ago, and I asked Mr. Lett if Carl Campbell had a financial interest in JL. Immediately after I asked the question, Mr. Lett said he was tired and had to go to bed. The question was not answered. Coincidence? Perhaps. Some posters have stated that they feel that those who do have an interest in JL still would want what is best for Naxos. That may or may not be true (what if their interest in Naxos is small, ie: only free options and their interest in JL is large). Additionally, it is a clear conflict of interest for someone with a financial stake in Naxos and JL to be making the decision. That was precisely Matt Walters' position, and I think we need to know who else is in that position.
Sorry for the length of this post. I welcome comments. |
