By John Helmer, Moscow
Last week, on September 26, Justice D.M. Brown of the Ontario Superior Court threw out a suit challenging the terms of the White Tiger Gold takeover of Century Mining, aka “the Arrangement”, which has been orchestrated by the Russian duo, Maxim Finsky and his career patron, Mikhail Prokhorov.
An oral hearing on the issues took place in Toronto on September 23. The 13-page ruling by Justice Brown ignored most of the unfairness claims which minority shareholders of Century mining have compiled, publishing them on the internet and in submissions to the Ontario regulator, the Ontario Securities Commission (OSC).
The judge ruled in favour of the Finsky syndicate, and of the deal combining White Tiger Gold with Century Mining without mentioning the control stakes Finsky holds in both companies. The principal ground for dismissal of the shareholder challenge was not that the evidence of unfairness had been tested and found wanting, but rather that the only submissions challenging the deal were from sources the judge decided to call nobodies:
On the central issue, which shareholders pro and con have been arguing over for months – the fairness and accuracy of the exchange ratio on which the deal was founded – the judge failed to investigate the market, share price, and geological data at all. Instead, he ruled that because procedural requirements for assessing the assets on which the asset ratio had been calculated were followed, there was no point in assessing the underlying evidence. The fact that through the course of the takeover bid, the share markets had priced White Tiger Gold and Century Mining quite differently from the offer ratio was simply ignored by the judge.
Just how unbalanced the ratio was to begin with, and how unsubstantiated the Russian asset value Finsky claimed for White Tiger Gold, can be read here.
In January the minority shareholders had challenged the takeover on several grounds, arguing from evidence that White Tiger Gold’s assets had been valued too highly in relation to Century Mining’s assets. Everything depended on a check of White Tiger Gold’s single operating goldmine in Russia – the almost unheard of Savkino mine, which by the time the takeover bid was in the Toronto court, had produced just 3,231 ounces of gold.
That such a midget should prove to be such a giant in Finsky’s offer required an erstwhile expert report from the Micon consultancy which was released on June 30. That cut Century’s measured and indicated resources by 76% from the previously issued expert report. “This kind of reduction of reserves and resources from a previous report is of scandalous proportions,” the dissenting minority shareholders argued in one of their publications and in submissions to the Toronto court. “How can two official NI43-101 reports produce such starkly different results?” That’s not a question which occurred to Judge Smith to ask or answer.
It is, however, a question that is relevant to the investigation which the Ontario regulatory commission says it is carrying out into rule-evasive, disclosure-discreditable reverse takeovers which take advantage of the OSC’s loose regulations and invitational loopholes. The OSC hasn’t wanted to discuss its enquiry since launching it in July.
The OSC refuses to identify targets or topics in the investigation. Finsky’s spokesman in Moscow also refuses to say whether he or his companies, or partners, have responded to questions asked by the OSC.
Judge Smith may therefore not have the last word. According to a company release last week announcing that the court had approved the business combination, approval must still be given by the Toronto Stock Exchange and the TSX Venture Exchange. Here then is the detailed timetable of the deal, which the challenging shareholders have compiled and submitted to the OSC for checking. The judge ignored everything. It may be just as easy for the OSC to avoid investigation by not revealing that White Tiger Gold and Century Mining were ever the targets of investigation at all. So read the evidence for yourself – you be the judge.
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