Battle for control of Arizona Star heats up

Vancouver – A disgruntled Arizona Star (AZS-T) shareholder is trying to wrestle control of the junior company away from its affiliate, Bema Gold (BGO-T) in an effort to realize more value for Arizona Star’s shares.

The proxy battle, initiated by Albert Friedberg centres on financing and development of Arizona Star’s 25% interest in the Cerro Casale copper and gold project in Chile which is set for development pending financing.

While Friedberg wants independence from Bema, which has a 24% stake in the mega-project, Bema’s president, Clive Johnson, who also sits on the board of Arizona Star, is resisting his efforts.

Cerro Casale is held by Placer Dome (51%), Arizona Star (25%) and Bema Gold (24%). Placer is responsible for financing $1.3 billion of the $1.65 billion price tag of the Cerro Casale mine development.

Friedberg owns 12.1 million shares (nearly a third of Arizona Star’s shares) through his family’s private bank, Pan Atlantic Bank and Trust. At Arizona Star’s last annual general meeting in November, Friedberg unsuccessfully tried to vote in a new board of directors for Arizona Star but was prevented from doing so.

The meeting was postponed until Dec. 16 at which time a vote for the board members will take place.

Since the meeting, Friedberg launched a proxy battle for shareholder’s votes to support his position.

While Friedberg acknowledges that Bema is responsible for finding and advancing the Cerro Casale deposit, he believes that the interests of Arizona Star would be better represented by a board that is more independent from Bema. Arizona Star and Bema currently have three of the same board members in common.

He also thinks that its shares are undervalued and would trade closer to net asset value if it were independent.

Friedberg also wants a more independent board so that decisions on financing the company’s share of Cerro Casale in future are made with a view toward maximizing shareholder value for Arizona Star. He initially stated he doesn’t want to have the financing agreements tied to hedging.

Johnson responded to Friedberg’s open letter with his own six pager to Arizona Star shareholders on Dec. 3. There Johnson accused Pan Atlantic of wanting to delay development of Cerro Casale. He expressed concern that two of Pan Atlantic’s nominees have shady pasts that would hamper Arizona Star’s future financing efforts.

Two days later, Friedberg fired back. He denies wanting to delay the project and agrees that the project should move forward now in light of recent increases in prices for gold and copper.

Friedberg assures shareholders that if successful at changing Arizona Star’s board and management, they plan to work with Placer Dome to ensure that the project is developed and put into production in a timely fashion and under the best possible financing terms for Arizona Star’s shareholders.

Friedberg sees the most recent changes to the Cerro Casale agreement with Placer Dome as constituting “a significant reallocation of project revenues”, noting that Placer Dome’s management fees increased up to 300% to get them to sign on.

Friedberg believes that a higher share price is necessary to help minimize equity dilution when it comes time to fund its share of the capital cost of the project.

While Johnson had stated that Arizona Star’s share price won’t reflect true net asset value until Placer Dome makes a definitive production decision, Friedberg says it is a matter of marketing Arizona Star to institutions and retail investors.

The two nominees that Johnson says would jeopardize the company’s ability to secure financing in future, are Rudi Fronk and James Anthony. The former was in charge of a failed mining venture owned by the now defunct Greenstone Resources where investors lost millions.

Friedberg defends their reputations and points to the fact that the two have been running Seabridge Gold (SEA-V) over the last few years and has been able to raise money and been a better market performer than both Bema and Arizona Star.