Letters to the Editor Inaccuracies and misinterpretations

We are appalled by the inaccuracies and misinterpretations in the two articles in your April 15 issue relating to recent agreements between Echo Bay Mines and three companies of our group.

Your front-page heading “Echo Bay to control Muscocho” is wrong and misleading. In fact, as your article itself points out, the agreements contain numerous provisions to ensure that they do not contribute a takeover or change of control of any of the companies involved. They will remain under their present managements, but with a large infusion of capital and with Echo Bay as a substantial and helpful minority shareholder.

We have negotiated these arrangements on behalf of Muscocho, McNellen and Flanagan McAdam Resources in order to preserve our companies’ independence and at the same time permit them to grow and to increase gold reserves and gold production much more rapidly than would otherwise have been the case.

The purpose of the personal article on us in the same issue is difficult to fathom, as we pointed out to your reporter when he telephoned regarding our involvement with the companies. We did, however, attempt to resolve his confusion about management fees, but apparently without success.

To set the record straight, the management fees payable under joint venture agreements are received by the company designated as manager or operator. This is Muscocho Explorations at Magina and Magnacon and Flanagan McAdam Resources in the case of the Chibougamau joint venture with Greenstone Resources. Such management fees are standard industry practice, recognizing that one party to each joint venture generally has to bear the full burden of managing the project on behalf of all.

The “140125 Canada Inc.” mentioned in the article is the contimation of our consulting and contracting partnership which dates from 1955 and in recent years has been incorporated as a numbered company to avoid confusion with publicly-owned Flanagan McAdam Resources. Our geological firm has maintained an exploration office and staff in Chibougamau for over 30 years and is thus able to carry out work there at less cost and with greater efficiency than outside companies. This service has been provided to dozens of clients over the years at competitive rates.

The dollar amounts your article quotes from the Muscocho prospectus as having gone to 140125 Canada were not paid to us personally. They included reimbursement for major invoices from diamond drilling and underground mining contractors which were paid by 140125 on behalf of the joint venture partners, as well as the salaries and expenses of all field personnel involved in the projects they relate to.

We have always believed that our rewards, financial or otherwise, should be based on success in exploration and mine development rather than on management fees. But even your characterization of us as “former prospectors” is odd in a couple of ways. Many “true” prospectors would object that geologists do not qualify for this distinction, while the implication that we are no longer actively seeking mineral deposits could not be further from the truth. J. McAdam J. T. Flanagan Muscocho Explorations Toronto, Ont.