VANCOUVER, March 2, 2017 /CNW/ - Delbrook Capital
Advisors Inc., the largest shareholder of Rapier Gold Inc.
("Rapier" or the "Company") (TSX Venture: RPR) announced today that
they have released an open letter to the Company's shareholders
(the "Shareholders"). The full content of the letter disclosed
below will help Shareholders understand that the current leadership
of the Company is broken and not acting in the best interests of
Shareholders. We are not alone and at least 40% of Rapier
Shareholders support our actions and agree that management and the
Board are not acting in Shareholders' best interests, but are
entrenching their own interests at our expense. New stewardship is
needed.
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As shareholders read
this letter they should ask themselves, why would management and
the board:
- In February 2016, decline a
30% premium offer which would have equated to $0.25 per share
(versus $0.11 today)?
- In October 2016, decline a
47% premium offer valued at $0.22 per share as part of a larger
package which would have allowed Rapier Shareholders to hold 49% of
a $40mm+ market cap company versus Rapier's current $8mm market
cap?
- Decline a superior bought
deal financing at twice the current entrenching private
placement?
- Decline Delbrook's interim
financing at a significant premium to the market price and the
entrenched private placement, only to offer the entrenched private
placement demanding a highly-unusual 18 month support agreement for
management?
- Move the record date for
voting to allow for the entrenched private placement to close, and
ensure the locked up support agreements for management under this
placement are able to vote?
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Whose interests
are being protected?
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An Open Letter to Shareholders of Rapier Gold
Inc.
Fellow Shareholders of Rapier Gold:
We are writing an open letter to Shareholders of Rapier Gold
Inc. as the largest shareholder of the Company, and therefore
aligned with your interests. As we have declared through
public filings, Delbrook Capital Advisors Inc. ("Delbrook")
controls 12,500,000 common shares of our Company, representing
approximately 17.6% of the issued and outstanding common shares and
over 2.25 times more than the amount owned by insiders.
The ownership position we have disclosed should not be viewed as
a vote of confidence in management or the Board of Directors
(collectively, the "Board"), who have relentlessly destroyed value
at Rapier and continue to do so today.
On February 14, 2017 we issued a
press release highlighting the necessity for change at Rapier.
In that press release, we proposed a stronger and more
experienced group of directors, with a track record of creating
value for Shareholders (the "Revitalizing Directors"). Our
decision to "go public" with our concerns was not made in haste,
and was the direct result of the Board's continued stonewalling of
any and all attempts to create value for our Company. As
noted in our press release dated February
23, 2017, we currently have significant support from over
40% of Rapier Shareholders. This level of support confirms
the need for change to the Board in order to unlock shareholder
value.
Our sole objective is the maximization of long term value
for all Shareholders
Simply the Facts
We believe that Shareholders need to be made aware of the facts
regarding the oppressive conduct, poor governance, and Board
entrenchment conducted by Rapier. When presented with the
facts, the need for change is obvious:
- The Board is entrenched and lacks the expertise necessary
to maximize value for Shareholders. In February 2016, an offer was made for shares of
Rapier at a significant (30%) premium to the trading price at the
time. This offer was made by a very well-funded intermediate
exploration company with a proven track record of success. It is
uncertain if management brought this transaction to the Board,
however Shareholders clearly were not given an opportunity to
vote. Instead, management let the opportunity pass. The value
of this transaction would have equated to over $0.25 per Rapier share versus a price of
$0.11 per share today.
- The Board has gambled with the Pen Gold Property,
breaching their duty of care. Changes need to be made, the status
quo is no longer an option. In June
2016, Delbrook was made aware that Rapier was days away from
losing the Pen South property which was under option from Rogue
Resources Inc.. This property represents approximately 65% of the
total acreage of the Pen Gold Property, making the loss of these
claims detrimental to the strategic value of the Company's sole
asset. Shareholders were forced to step up, at a moment's notice,
to provide lifesaving capital through a private placement.
- A proposed 47% premium transaction thoughtlessly rejected
by the Board. In October
2016, the Board was presented with an offer to acquire all
outstanding shares of Rapier at a 47% premium to a reference price
of $0.15 (i.e $0.22 per share). The objective was to feature
the Pen Gold Project as a major asset within an Ontario focused exploration company. Rapier
Shareholders would have been significant shareholders
(approximately 49%) of a $40mm+ market cap. company with a greater
liquidity profile and significantly more experienced management
team. In addition, this focused "explore-co" was to be financed
with $10mm of fresh capital—almost 5 times more capital than the
Board has been able to raise in the last 3 years. The
transaction was summarily rejected and not brought to
Shareholders.
- Actions of management negatively impacted share
price. In November 2016,
Rapier finalized a program which forced an early exercise of
outstanding warrants, due to significant liquidity pressure. The
forced exercise severely impacted the share price which declined
26.7% between the announcement of a forced exercise and the day
after the program concluded. The Company raised only $590,120 through this program.
- In December 2016, the above noted
"explore-co" transaction was amended in order to address concerns
from Rapier's Board and included bridge financing to alleviate
financial distress (despite the recently raised $590,120), allowing the Company to complete a
transaction. Management delayed and did not exercise good faith
in reviewing the proposal. The transaction again was not brought to
Shareholders.
- Track record of value destruction. The Board
seems more concerned with their entrenched positions than advancing
the Pen Gold Project. The Board has a track record of value
destruction and we encourage Shareholders to look into their
previous roles with companies including, but not limited to,
Luna Gold, Jennings Capital, and
Minera IRL. The Board has empowered a management team who
have not looked after the Company, and neither of them have a
positive track record.
- Depleting the treasury. Examining Rapier's Q1
2017 financials (released March 1,
2017) underscores the Board's lack of concern for external
shareholders. During the quarter, the Independent Committee paid
themselves $67,500 in "consulting
fees" related to the October 2016
proposal, despite summarily rejecting it. In addition, the Board
increased compensation for management by 106.6% vs. the same period
last year. The Board is looking out for their own best interests
and shareholders are picking up the tab.
Over the past months, Delbrook has engaged with the Board
continuously with the sole objective of increasing long term
shareholder value. We were concerned with the Board's lack of
action in cases where shareholder value could have or still can be
created. We fear that the Pen Gold Property is being mismanaged
by an ineffective Board with a long track record of poor financial
management.
The Entrenching Private Placement
Unfortunately, the Board has chosen to continue down the path of
shareholder oppression by diluting Shareholders through an
entrenching private placement (the "Entrenching Private
Placement").
In addition, prior to the closing of the Entrenching Private
Placement, the Board chose to move the date of record for the
upcoming shareholder meeting in order to allow exclusive
subscribers of the Entrenching Private Placement to vote their
shares.
It should be noted that the Entrenching Private Placement was
not made available to any existing significant shareholders of
Rapier without agreeing to unconventional terms that demanded
entering into an 18 month support agreement. As well, upon
release of news of the placement, the Board was offered a bought
deal placement (the "Bought Deal"), on much less dilutive terms,
from a registered dealer. Given the Board's track record, the
Bought Deal was unsurprisingly turned down. Instead, the dealer was
asked to participate at the Entrenching Private Placement terms,
with the stipulation that they obtained voting support agreements
from all client(s). The dealer refused. The Bought Deal
would have provided Rapier with over 2 times the capital announced
in their press release dated February 28,
2017.
Parties currently considering participating in the Entrenched
Private Placement should,
- question the Board's track record of misusing funds
and assume that any new funding will be focused on mounting
litigation expenses, not the advancement of the Pen Gold
Property;
- be concerned with writing off their money in exchange
for holding illiquid shares that will most likely continue to
decline in value should the current Board remain; and
- note that Delbrook currently has over 40% support for
the Revitalizing Directors.
We remain concerned that any capital raised by Rapier
while the current Board is in place will not fund exploration at
the Pen Gold Project but will instead only fund mounting legal
expenses.
Recent Press Release Highlighting Q1 Financial
Results
On February 25, 2017 the Company
issued a press release outlining the current financial state of
Rapier. The press release further confirmed the deplorable
actions being taken by the Board and reiterated the case for their
swift removal. The press release was also filled with inaccuracies
related to the transaction first presented to the Board in
October 2016, and then amended in
December 2016. We set the record
straight on the following statements made in Rapier's press
release:
- "In the first quarter the Company was highly successful in
continuing to carry out the Company's ambitious exploration program
at the Pen Gold Project." We strongly object to the use of the
word "successful" when discussing the exploration and corporate
achievements of the Board. The fact is, Rapier listed in 2013 with
a $0.30 private placement and now
trades at approximately $0.10 per
share, a decline of 66.7%. In that time, the number of shares
outstanding has increased over 300%. The Board needs to stop
publically congratulating itself and question their definition of
success.
- "…the involvement of a needless intermediary shell company
which would dilute Rapier Shareholders and increases
liabilities." We are unaware of any significant associated
liabilities with regards to the shell company. Rapier's comment on
dilution is ridiculous when considering that Rapier Shareholders
were to receive a 47% premium and that over $10mm of fresh capital
was to be raised at this higher share price. In our opinion, the
Board's objection to using this structure is simply that doing so
would result in their termination.
- "…participation of a streaming and royalty company with
terms that would be highly unfavorable to the Company and its
Shareholders". In order to raise additional capital, it was
suggested that a 0.5% royalty be sold on properties in the new
"explore-co". A royalty of this level is inconsequential to the
economics of higher grade gold projects, as typically found in the
Timmins area. We would
encourage the Board "to do the math" on a 0.5% royalty instead of
putting vague language into a press release to mislead
Shareholders.
- "…no ability of the Company to do due diligence on the
proposed shell company or the assets proposed to be acquitted".
We will politely call this a terminological inexactitude as
opposed to a blatant lie. The Board was presented with a
transaction in October 2016 and had
over four months to examine documentation, including an electronic
data room of files, and access to numerous individuals involved in
the properties scheduled to be vended in. The fact is, we don't
believe the Board ever intended to take this transaction seriously,
and reward Shareholders by entering into a premium takeover. To do
so would be against their culture of entrenchment.
Delbrook made an offer on February 26,
2017 to provide interim financing to Rapier in order to
address short term working capital requirements identified in the
Company's Q1 Financial Highlights. Our objective was to
provide ample liquidity to support the Company until the annual
general meeting, scheduled for March
30, 2017. We have offered to provide financing
at a significant premium to the recent market price, as well as the
terms of the Entrenching Private Placement—see the press release
dated February 27, 2017 titled Rapier
Rejects Two Financing Offers Superior to the Entrenching Private
Placement.
In keeping with their track record of poor financial choices,
the Board rejected our offer. Instead, the Board offered to
include our proposed investment in its dilutive and lower priced
Entrenching Private Placement with the condition that we sign an 18
month support agreement, which would further entrench management
and the Board.
Failure to Meet Key Success Factors versus Thriving Peer
Group
We must compare Rapier to a peer group of Ontario & Quebec focused exploration companies in order
to be able to judge the success of the Board. Since the 2012
downturn of the metals and mining sector, Probe Metals, Osisko
Mining, First Mining Finance and Pure Gold have all been created,
and have been successful in gaining access to capital, launching
and executing significant drill programs, obtaining sell side
research coverage, attracting significant institutional ownership,
creating trading liquidity and obtaining premium
valuations. In the same period of time, the Board of
Rapier has not been successful in accomplishing even one of these
key success factors. In fact, shareholders are materially
worse due to the direct actions of the Board. Instead of
telling shareholders of their "make-believe" successes via
vaguely worded press releases, this Board should spend time
studying their peers to learn how strong management teams create
and grow long-term shareholder value.
After reading this letter, we hope that our fellow Shareholders
are no longer misled by the current ineffective management and
Board. The future can be better but change is necessary.
Yours Truly,
Matthew Zabloski
Managing Director
Delbrook Capital Advisors Inc.
About Delbrook Capital Advisors Inc.
Delbrook Capital Advisors Inc. is an independent investment
manager which focuses on alternative strategies. Delbrook Capital
Advisors Inc. manages the Delbrook Resource Opportunities Fund, an
alternative investment fund, focused on identifying and investing
in unique growth opportunities within the metals and mining
sector.
Delbrook Capital Advisors Inc.
1021 West Hastings Street, Suite 650
Vancouver, BC, V6E 0C3
604.229.1450
Matthew Zabloski, Managing
Director
www.delbrookcapital.com
SHAREHOLDER QUESTIONS
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1-877-452-7184
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Email: assistance@laurelhill.com
Disclaimers
Delbrook has not sought or obtained consent from any third party
to the use herein of previously published information. Any such
information should not be viewed as indicating the support of such
third party for the views expressed herein.
Except for the historical information contained herein, the
matters addressed in these materials are forward-looking statements
that involve certain risks and uncertainties. You should be aware
that actual results could differ materially from those contained in
the forward-looking statements. Delbrook does not assume any
obligation to update the forward-looking information.
Information in Support of Public Broadcast
Solicitation
Delbrook is relying on the exemption under section 9.2(4) of
National Instrument 51-102 – Continuous Disclosure
Obligations ("NI 51-102") to make this public broadcast
solicitation. The following information is provided in accordance
with corporate and securities laws applicable to public broadcast
solicitations.
This solicitation is being made by Delbrook, and not by or on
behalf of the management of Rapier.
The head and registered address of Rapier is #2270-1055 West
Georgia Street, Vancouver, BC
Canada, V6E 3P3.
Rapier has announced that it has called the AGM, to be held on
March 30, 2017. Delbrook may file a
dissident information circular (the "Dissident Circular") in
connection with the AGM, or any adjournment or postponement
thereof, in due course in compliance with applicable securities and
corporate laws.
This press release and any solicitation made by Delbrook in
advance of the AGM is, or will be, as applicable, made by Delbrook
and not by or on behalf of the management of Rapier. All costs
incurred for any solicitation will be borne by Delbrook, provided
that, subject to applicable law, Delbrook may seek reimbursement
from Rapier for Delbrook's out-of-pocket expenses, including proxy
solicitation expenses and legal fees, incurred in connection with a
successful reconstitution of the Company's board of directors.
Any proxies solicited by Delbrook may be solicited by way of
public broadcast, including through press releases, speeches or
publications and by any other manner permitted under applicable
laws, including pursuant to a Dissident Circular sent to
shareholders of Rapier. Solicitations may be made by or on behalf
of Delbrook, by mail, telephone, fax, email or other electronic
means, and in person by directors, officers and employees of
Delbrook or by the proposed nominees. Delbrook has engaged the
services of Laurel Hill Advisory Group ("Laurel Hill") as
communication advisor and as proxy advisor to assist with
solicitation on behalf of Delbrook. Pursuant to the agreement
with Laurel Hill, Laurel Hill will receive fees up to $125,000 plus disbursements.
It is expected that any proxies solicited by Delbrook in
connection with the AGM may be revoked by instrument in writing by
the shareholder giving the proxy or by its duly authorized officer
or attorney, or in any other manner permitted by law.
Delbrook has filed this press release and the press release
dated February 14, 2017, which
contains the information required by section 9.2(4)(c) of NI 51-102
and Form 51-102F5 Information Circular in respect of the
proposed nominee directors under Rapier's company profile on SEDAR
at http://www.sedar.com.
SOURCE Delbrook Capital Advisors Inc.