Concerned Shareholders of Chariot Resources Limited

August 25, 2009 14:47 ET

Concerned Shareholders Respond to Chariot Press Release

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 25, 2009) - The Concerned Shareholders of Chariot Resources Limited ("Chariot" or the "Company") today responded to the Chariot press release of August 21, 2009. The Concerned Shareholders are disappointed, but not surprised, that the entrenched Board and management of Chariot have elected to pursue a campaign of misinformation in order to attempt to preserve their positions by distracting shareholders from the real issues and frightening them with conspiracy theories.

Unannounced Strategic Review

The incumbent Chariot Board reveals for the first time in the August 21 press release that Chariot is in a "well advanced" strategic review process. Moreover, the press release reveals that the Board has concluded that "the preferred outcome for Chariot's shareholders is to receive a control premium for their shares". It is unfortunate that this material information has been withheld from the shareholders of Chariot until now, in the face of a challenge to replace the Chariot Board.

The announcement by the current Board of their intention to sell the Company at some unspecified date in the future is an admission that they are incapable of progressing the Mina Justa Project. However, announcing the sale at this stage of the Company's development is premature, and is likely to result in opportunistic offers that do not reflect the true value of the company. The true value of Chariot is unknown.

The feasibility study which was published in June of 2009 is incomplete as it only deals in detail with a part of the identified mineral resource at Mina Justa. The total resource that has been identified is 400 Million tonnes of copper ore. However, the feasibility report is based on approximately 160 Million tonnes of the total resource, and concludes that much more work needs to be done concerning the definition and the metallurgy of the "sulphide" resource which contains approximately half the contained copper and is expected to be a major contributor to project economics. Until the sulphide resource has been brought up to a full feasibility level it is impossible to determine the true value of the Company. Putting a "for sale" sign on the Company at this point is not wise and will likely result in further destruction of shareholder value.

However if, in fact, a sale is the "preferred outcome", the Concerned Shareholder nominees have a proven record of delivering exceptional shareholder value through sale of control transactions and are much more likely to achieve a sale of the Company at a value that reflects its true value than the incumbent Board. In the past 18 months, in the most difficult economic environment in the last 60 years, the Concerned Shareholder nominees have delivered exceptional value to shareholders of companies they have managed:

Colin Benner:

- Sale of Skye Resources in June of 2008. Mr. Benner was Chairman and CEO of Skye. Deal value was $460 million, with a premium to shareholders of 35% (on the basis of a 20 day volume weighted average of Skye's shares on the date of announcement);

- Sale of PBS Coals Inc. in October of 2008. Mr. Benner was CEO of PBS. Deal value was $900 million paid in cash.

Lukas Lundin:

- Sale of Tanganyika Oil in December of 2008. Mr. Lundin was a director of Tanganyika. The Tanganyika transaction was negotiated and completed during the severest part of the 2008 market downturn. Tanganyika shareholders received a premium price for their shares in cash. Deal value $2 Billion.

Lundin Mining is acting only to protect its significant Investment (18.3%) in Chariot and has no present interest in acquiring Chariot or the Mina Justa Project

The incumbent Chariot Board, in an attempt to frighten shareholders, further claims that the dissident proxy solicitation is an opportunistic attempt on the part of Lundin Mining Corporation ("Lundin Mining") to "steal" control of Chariot. Nothing could be further from the truth. Lundin Mining is the largest shareholder of Chariot and its interests are exactly aligned with those of the other shareholders. On August 21, Lundin Mining released the following statement to address the allegations made by Chariot:

"Lundin Mining wishes to make clear that it has taken no part in the dissident proxy solicitation launched by certain concerned shareholders of Chariot Resources Limited. Lundin Mining has no intention of acquiring the Mina Justa Project or in making a bid to acquire Chariot." (emphasis added)

Commenting on the allegations contained in the advertisement, Mr. Phil Wright, President and CEO said "Lundin Mining is just as concerned as any other shareholder to ensure that we realize the best possible value for our holding in Chariot.

"We have lost confidence in the ability of present management to accomplish this and accordingly we support the initiative of the Concerned Shareholder Group and strongly believe that a change of management and the board of directors of Chariot is necessary.

"We are a major shareholder and we intend to support the slate of directors proposed by the Concerned shareholders" Mr. Wright said."

The Concerned Shareholders' Plans for Chariot

The incumbent Chariot Board also criticizes the Concerned Shareholders for putting forth a plan for Chariot that lacks specificity. One of the factors that the Concerned Shareholders believe has led to a consistent undervaluation of Chariot by the market is the poor quality of its public disclosure. The fact that Chariot's public disclosure is inadequate makes it difficult for any shareholder, including the Concerned Shareholders, to know exactly what the current state of affairs is with Chariot and to propose a detailed plan of action. What the Concerned Shareholders and their nominees have proposed is in keeping with their experience as mining engineers and managers of mining companies; that is, to determine the situation "on the ground" in Peru and to do what is necessary to transform the current feasibility study into a true "bankable" feasibility study that considers all available mineral resources.

Until a full assessment of the current status of Chariot and the project has been completed, it would be imprudent for the Concerned Shareholder nominees to make any definitive pronouncements as to what the future course of Chariot will be. However, it is clear that the new board would bring a renewed energy and focus to the project, and Chariot's future development.

What is surprising is that the incumbent Chariot Board states that the measures proposed by the Concerned Shareholder nominees are, in fact, what is being done at Chariot right now. One would have thought that, with the access the current management has to detailed project information, that they would have already published a business plan that has the level of detail that they criticize the Concerned Shareholder nominees for not providing.

Chariot has Rebuffed Previous Offers of Assistance

The incumbent Chariot Board further criticized the Concerned Shareholder nominees and their largest shareholder, Lundin Mining, for not approaching the incumbent Chariot Board prior to launching the proxy contest.

In fact, when Mr. Benner, one of the nominees for director, was Vice-Chairman of Lundin Mining, he approached Chariot in October of 2007 with an offer of technical assistance in order to permit it to advance the project. Lundin Mining was evaluating its holding in Chariot in order to determine whether it would retain the investment or sell the shares. Lundin Mining signed a Confidentiality and Standstill Agreement with Chariot and made clear that its intention was to merely assess the quality of the Mina Justa Project and to lend technical assistance if merited, and that it had no intention of making a bid for Chariot unless that bid was supported by the Chariot Board. All approaches to provide technical assistance were rebuffed by Chariot management. This, notwithstanding that Lundin Mining had agreed not to make an offer to acquire Chariot without the Chariot Board's consent and was merely offering to provide much-needed technical assistance in order to advance the project.

This is an example of the "lone wolf" approach that current management of Chariot has taken to the development of the Mina Justa Project, an approach which has led to the significant delay in bringing it on stream.

The Incumbent Board has made False and Reckless Allegations regarding Certain Nominees

The incumbent Chariot Board makes unfounded assertions regarding "appropriate corporate governance practices" regarding the Concerned Shareholder nominees in its press release. It specifically refers to the involvement of Messrs. Benner and Charter in the HudBay/Lundin transaction. The fact is that Messrs. Benner and Charter, who were directors of both HudBay and Lundin Mining at the time the two companies were discussing a merger, excused themselves from and took no part in any meetings of either Board relating to the transaction. The assertion that their actions were somehow inconsistent with the highest standards of corporate governance is false, unfounded and reckless.

One of the other director nominees, Brian Edgar was Chair of the Corporate Governance and Nominating Committee of Denison Mines when, in 2007, Denison was awarded the Corporate Governance Award by the Ontario Chamber of Commerce (over 56,000 member companies) for its exceptional corporate governance practices.

The Concerned Shareholders will ensure that their Director Nominees' Interests are aligned with those of the Shareholders

It will be a requirement that each director of Chariot hold a minimum of 500,000 shares. This will ensure that each director has a personal interest in ensuring that value is delivered to shareholders. As the Concerned Shareholders pointed out in the dissident circular, the current Board does not, either individually or collectively, hold a material number of shares, despite the fact that the incumbent directors had been directors of Chariot for periods of between 3 and 7 years. The current Board have, however, received generous option grants; including 1,500,000 options in the last fiscal year.

The recent rise in Chariot's share price reflects the market's view that Chariot will soon be under new management, and is not the result of any actions taken by current management

During the months of May, June and July of 2009, Chariot traded 20.7 million, 17.8 million and 10.9 million shares respectively. During that period Chariot's share price rose 9.1% (May), 0% (June), and 8.7% (July). So far in August 2009 over 30 million Chariot shares have traded and Chariot's share price has risen by 86%. Chariot has made no significant announcements during that period that would account for the increased trading and dramatic rise in share price. In fact, during the month of June, when the Feasibility Study was released, Chariot's share price did not change.

There can be only one explanation for the rise in Chariot's share price and trading volume in August: the market is anticipating a change in management and recognises that the new Board is likely to bring enhanced value to Chariot's shareholders.

THE BOTTOM LINE

Both current management of Chariot lead by Mr. Rath, and the Concerned Shareholders, lead by Mr. Lundin, have made their views known to Chariot's shareholders, However, in the final analysis, the key issue for Chariot's shareholders is: Which slate of directors can deliver increased shareholder value in the shortest period of time?

The correct answer is the new slate nominated by the Concerned Shareholders consisting of Colin Benner, Donald Charter, Richard Clark, Brian Edgar, Lukas Lundin and Wojtek Wodzicki. If you are still in doubt, you should contact your broker or other investment professional.

The Shareholders of Chariot deserve a change. Vote the BLUE form of proxy as soon as possible.

Contact Information

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