LETTER TO THE EDITOR — Vengold ought to reassess its priorities

Thank you for your recent coverage of Vengold’s annual meeting for shareholders, held in Vancouver, Canada. We appreciate your focus upon minority shareholder rights.

There are a few minor clarifications to your coverage; contrary to what was published, we at RS Investment Management had urged Vengold not to go through a rollback, and that they thereby avoid the need for a name change. Vengold initiated the rollback to ensure continued trading in the national market on Nasdaq.

In our experience, rollbacks inevitably result in a loss of market capitalization through a subsequently decaying share price. Since the bulk of Vengold’s shares trade in Canada, we felt Vengold’s moving to the Nasdaq’s “pink sheets” would not deleteriously impact either the real liquidity in Vengold’s shares or market interest. And, we felt Vengold management faced more important issues, in the manner of restructuring their debt, and their putting attention toward a roll-back and name-change seemed of much lesser importance.

Another issue we raised was their use of bonuses in forgiving about 80% of personal relocation loans made from the company to the executive team. We were at odds with this aspect of the bonus plan when it was initiated some years ago, as we thought the plan irregular, and overly generous. The loan obligations were (and remain) fully funded by the company, with the company making all payments of principal and interest and related personal tax obligations. Overall, it is a scheme we do not agree with.

However, being in the minority, one has little real influence over decisions at the corporate level. At the meeting, we argued against the taking of this “bonus” action at this time, as Vengold has a very weak balance sheet, being limited in cash and heavily leveraged with debt. The doling out of nearly 10% of the remaining cash to the executives seems insensitively timed, and lacking in fiduciary responsibility. At the meeting, we stood to present our case.

Since that time, Vengold has blamed our actions on putting extra focus upon them. This perspective is disappointing, as we have been long-term shareholders and supporters of the company — a role that suited Vengold as long as their actions went unchallenged, and apparently unnoticed, as well.

Borden Putnam

RS Investment Management

San Francisco, Calif.