Teddy Bear ousts chairman to attract Canadian investors

Shaken by a lawsuit and recent inquiries from the Ontario Securities Commission (OSC), Teddy Bear Valley Mines (CDN) has replaced long-time chairman Ross Hofmann with Jack Riddell, a director of the company since 1987.

The main reason for the board shuffle was to improve the company’s chances of raising development and exploration funds for the Lightning gold deposit near Matheson, Ont., says President Andrew Chater. He says the replacement of Hofmann, an American resident, with Riddell, a Canadian, should make Teddy Bear more attractive in the eyes of Canadian investors.

Riddell is president of Canadex Resources (TSE), a junior oil and gas producer.

Chater wouldn’t elaborate on the other reasons for the change, but it is no secret that Hofmann’s reputation has been tarnished lately by allegations about his past share dealings. According to former Teddy Bear director Paul Zyla, who has launched a lawsuit against Hofmann and Teddy Bear, 1.58 million Teddy Bear shares (slightly more than 50% of the company) registered in Hofmann’s name actually belong to the Teddy Bear Valley Syndicate, a group of investors formed to develop the Teddy Bear claims.

Records filed with the OSC show that Hofmann owned 2.2 million shares, or about 78% of Teddy Bear after the company’s restructuring and revival in 1984. No mention was made of the syndicate at the time, although it had held a control block of the company since 1927. More recently, Hofmann has appeared as “acting manager” of the syndicate on notices to its unit holders. In an accurate foreshadowing of future events, Hofmann asks his lawyer to clarify the status of the syndicate shares through a letter dated Oct. 30, 1984. “We seem to have had trouble with mathematics all through the reorganization route and I am worried it may come back to haunt us later if it is not clarified immediately,” Hofmann says in the letter, which has been filed as part of Zyla’s application.

The OSC has also been keeping a close eye on Teddy Bear. This year, the commission completed a preliminary review of the 1984 consolidation but decided against further action for the time being.

At stake is part ownership in the Lightning zone, a 5-million-ton gold deposit that is likely to become a mine by 1994. Hemlo Gold Mines (TSE), which holds a 58% direct and indirect interest in the deposit, is currently negotiating with partners Teddy Bear, Freewest Resources (TSE) and Newmont Mining (NYSE) to unitize the fragmented mine property. Almost half of the current reserves, and most of the exploration potential, lie on Teddy Bear ground.

Teddy Bear’s response to Zyla’s allegations remain vague.

“The company is reviewing all the past share issues and continuing our review of what happened in 1984,” said Chater. “Ultimately, we may have to take some action.” Hofmann continues as a director of Teddy Bear.

Zyla says a group of unit holders representing about 40% of the syndicate met recently to discuss their newly found fortune. Several alternatives were explored, including selling the syndicate’s investment as a control block and dissolving the syndicate into individual holdings.

He added that, through investigative work by both Teddy Bear and himself, 70-75% of the unit holders or their heirs have been found.