Shareholders question Giant Bay option deal

What constitutes a fair option? That was the question on everybody’s mind at the recent Giant Bay Resources annual meeting. Indeed, most of the discussion period centred around President Claus Jensen’s option on 400,000 shares which one irate investor noted was re-priced at what he felt was the market bottom. (The day of the meeting the stock was trading at $1.05 compared to a year high of $3.35.)

The shareholder, who had obviously lost heavily in the market, also queried whether Giant Bay directors had supported the stock during the recent crash; and he expressed concern that Jensen could eventually dump his stock on the market, implying this happened with another senior executive who left the company.

But he expressed complete faith in Jensen and other board members whom he conceded had been doing a good job. “I just think 400,000 will stick in the throats of shareholders,” he said.

Responding to the concerns raised, Jensen, an accountant, said his annual salary had been reduced from $130,000 to $24,000 in exchange for the options. The pay reduction was designed to preserve working capital, he claimed, adding that he was willing to work for that salary again if the options were not approved. But he declined to “reduce” them in exchange for more money, stating it had to be “one way or the other.”

Jensen said he started at Giant Bay on a per-diem basis which later became a full-time salary with no termination notice or severance pay. And he stated he wasn’t prepared to work for less because he had “other business interests.” The share option, which incidentally would be cancelled 30 days after his termination by the board, was later passed as originally proposed.

Discussing future prospects for the company, Jensen said he couldn’t see “going into the market for the next year” unless it improves dramatically. Giant Bay has sufficient working capital to survive for at least two years, he said, adding the company would “batten down the hatches” until things got better.

Commenting on a potential takeover by Giant Yellowknife, which has the option to purchase three million shares over a 3-year period ending in 1990, Jensen felt the company was more interested in joint venturing properties than in acquiring Giant Bay.

Giant Bay constructed and operated a 10-ton-per-day biotank-leach plant at Giant Yellowknife’s Salmita gold mine north of Yellowknife, N.W.T., which is said to have yielded the first commercially- produced bioleach gold. (The test was concluded earlier this year.) Under their agreement, Giant Yellowknife will pay Giant Bay a licence fee for using the process. The latter specializes in acquiring interests in proven gold reserves with metallurgical problems that can be resolved by its proprietary biological leaching process.

The company recently concluded an agreement with St. Joe Canada to earn a 40% interest in its Geordie Lake platinum-palladium- copper prospect in Ontario for $250,000 in exploration work. If bioleaching is used, Giant Bay will be entitled to an additional royalty interest. The company also has an option to earn a 49% interest in St. Joe’s Pinecone Point prospect southwest of Timmins for a $135,000 work program which should begin by year-end.