Atna eyes Valerie Gold

Vancouver — Like many junior explorers, 1996 was a stellar year for Valerie Gold (VLG-V). With $20 million in the kitty and the drill rig set to turn on the prospective Mamatla massive sulphide project in Mexico its stock price soared to $28.90 that eventful season. However, there has been a lot of water under the bridge since those heady days and now with its stock trading around 25 per share, a major shareholder has set its sights on removing the current board of directors.

Atna Resources (ATN-T), which holds 750,000 shares or 6% of Valerie Gold’s stock, has formed a limited partnership called Valerie Good Corporate Governance and tabled an alternative slate of directors to stand on Valerie Gold’s board at the company’s annual general meeting slated for Jan. 30.The current management of the company plans on putting up a vigorous fight.

“All they want is our cash,” Valerie Gold’s executive vice president, Bill Witte told the Northern Miner. “Atna put $150,000 into the partnership to effectively take over Valerie and grab control of the working capital.”

According to Witte, Atna has been pursuing Valerie Gold for the past seven months.

“Atna approached Frank Lang (Valerie Gold’s president) in late July about acquiring his shares in an attempt to take over the company but Frank turned it down,” says Witte.

Atna’s next move was to discuss a possible merger of the two companies with the individual board members.

“Touting their flagship Barreal Seco copper project down in Chile, we considered it,” says Witte. “but internal and outside due diligence concluded that the project was too small and sub-economic.”

Atna denies that it is making a run at taking over Valerie Gold.

“We had some discussions with Valerie last year but we have not talked to them for several months,” says nominated member for Valerie Gold’s board of directors and Atna’s current president, David Watkins. “As shareholders we were concerned about what was happening to the company and decided to take action.”

The dissident proxy circular sent out by the newly formed partnership to shareholders describes the deterioration of Valerie Gold’s balance sheet which has seen $22 million in losses and $17 million in property write downs over the past five years.

“The record of Valerie’s board over the last five years has been one of consistently destroying shareholder value through poor management judgment and dubious corporate governance practices,” says the Partnership’s spokesman, Gaylord Virden.

The partnerships main points of contention lie in the high administration-management fees charged to Valerie, as well as the company’s conflict of interest resulting from investments in related junior explorers.

Valerie Gold forms part of the Lang Mining group, which includes fellow junior companies Sultan Minerals (SUL-V), Emgold Mining (EMR-V) and Cream Minerals (CMA-V). Of particular concern to Atna is the conflict of interest between these entities. As the current president of Valerie Gold, Frank Lang is also the largest shareholder of the three sister companies. Over the past few years, Valerie has invested in shares of these companies including 5.3 million shares or 30.5% of Sultan Minerals, 5.1 million shares or 33% of Emgold Mining and 3.2 million shares or 42.6% of Cream Minerals.

A private management company headed by Frank Lang, Lang Mining has charged Valerie some $5 million in management fees to over see the day-to-day operations during the past five years.

“For a company the size of Valerie, management fees of $200,000 per year would be high,” adds Watkins. “Management has been run for the benefit of Lang Mining and not the shareholders of Valerie.”

Interest free loans to Lang Mining by Valerie has also raised the eyebrows of the partnership. The proxy states that loans of up to $600,000 have been made to management without interest charges, without a repayment schedule and without security as collateral.

The alternate slate of six directors proposed by the partnership for Valerie Gold includes a number of well-respected mining men. Among the nominees are Mario Caron (Vice president of Operations for Geomaque Explorations (GEO-T), David Watkins (President and Chief Executive Officer of Atna and Frank Wheatly (General counsel for Gabriel Resources (GBU-T).

Atna does not rule out the potential of a possible merger between the companies some time down the road.

“We might look at it and think about it, but I am doubtful that we would do it,” states Watkins. “Our primary objective is too put in an independent board that will take care of Valerie shareholders.”

Valerie Gold insiders hold only about 14% of the stock, making the battle for control of the company a heated one. The junior is currently working several early stage platinum-palladium properties in northern Ontario and is gearing up to drill test the Crystal Lake diamond property in Manitoba. Valerie Gold also holds the Walker Lane gold property in Nevada’s Mineral Cty. and an original $1.5 million equity stake, now valued at $500,000, in Northern Orion Explorations (NNO-T).

Valerie Gold has about $5 million in cash and securities with 14.5 million shares fully diluted. Atna Resources, as of Sept. 30,2001 had $8.6 million in cash and 25.2 million fully diluted shares.