Dissident Directors of Argonaut Exploration Inc.

February 27, 2012 20:12 ET

Dissident Directors Respond to Argonaut Exploration Management News Release

CALGARY, ALBERTA--(Marketwire - Feb. 27, 2012) -

Dear Shareholders,

Please be advised that the Annual General and Special Meeting of shareholders of Argonaut Exploration Inc. will be held on Saturday, March 3rd, 2012 and not on the misdated Tuesday as stated on the title page of the Management's "Supplementary Material Mailing".

On February 8th, the Management Directors of Argonaut Exploration Inc. ("Argonaut" or the "Company") issued a press release (the "Management Directors' Press Release") and a Supplementary Material Mailing in an attempt to dispute the information circular delivered to shareholders by the Dissident Directors (that information circular together with the cover letter, the "Dissident Directors' Materials"). The goal of the Management Directors' Press Release and Supplementary Material Mailing is to increase their proxy vote base by discrediting the corporate performance of past President and C.E.O. Ray Cook and minimize the corporate contributions of Dissenting Directors Brad Bakuska and Tell Stephen. In so doing, the Management Directors distance themselves from their own performance as directors of the Company in what has become a divided boardroom which has undermined Mr. Cook, the Dissenting Directors and the performance of a team focused on creating market value for Shareholders.

Argonaut is an exploration company, hence the name "Argonaut Exploration Inc." The Company is not currently, nor in the near future going to be, in production. The Management Directors slate of directors is cumbersome with non-geological engineers and old directors with an unproved financing record for the Company above $0.05. Argonaut is in the earliest stage of exploring the Columario Mine where a proven resource has not been delineated. The need for mining engineers and biologists in management and on the board is premature and an unnecessary expense to the shareholders in the current state of the Company's asset development.

Based on the Management Directors' decision to postpone the Annual General and Special meeting of the shareholders of the Company (the "AGM") from February 14th, 2012 to March 3rd, 2012, the proxy voting shareholder majority agreed with the position of the Dissident Directors. The sole purpose of the Management Directors in delaying the AGM was to ignore the vote on the meeting date and solicit further proxy votes for the March 3rd AGM.

Mr. Cook located and acquired for Argonaut all of the Company's properties in the Terrace, B.C. area including the Columario Gold property and mine. Mr. Cook acquired these properties at an approximate cost to the Company of $200,000 most of which was financed through the issuance of shares in the Company. These properties have multi-million dollar asset potential. The mineral claims adjoin and include 4 historic mines and in excess of 40 separate mineral occurrences in a 202 square kilometre land area. Mr. Cook negotiated all required government work permits with the assistance of Professional Geologists and has established the current healthy relationships that exist for the Company with the First Nations stakeholders on their traditional lands. The value of these assets in today's precious metal market has divided the Board into two groups of directors competing to take the Company forward by exploring and potentially developing the highly prospective assets that Ray Cook brought into the Company.

Contrary to the position stated by the Management Directors, Mr. Cook, as President and Chief Executive Officer, strived to ensure that the Board of Directors and management worked together as a team to ensure the success of the Company. He planned and managed the budgets for field expenditures since incorporation. The field budgets were determined by the annual funds raised and all expenditures were ratified through discussions between the Board of Directors and management. These budgets were managed within established contingency cost limits year after year.

Argonaut's potential has not been appreciated in the market place and for that reason a comprehensive financing plan to change the Company's market position was introduced to all Directors by Mr. Cook in October of 2011. The response of the Management Directors to the Financing Plan was to remove Mr. Cook from management and delay a much needed financing into 2012. When the Managing Directors did approve a financing early in January 2012, it was highly dilutive and was offered selectively to certain investors in an attempt to consolidate votes for the upcoming AGM.

It is important to state that based on the news release associated with the closing of the dilutive Management Directors financing dated January 26th, (the "Management Financing") that none of the $500,000 proceeds raised will be directly applied to "on the ground" Terrace property work programs. How, therefore, can the Management Directors execute a turnaround plan that will "increase the share price well above $0.10" when none of the $500,000 raised in the Management Financing will be spent in the field to obtain new results?

The Managing Directors' News Release suggests that the Dissident Director's Materials are materially misleading. The Dissenting Directors stand by their statements and continue to support the Dissident Directors' Materials. The Management Directors focused on a number of items of concern from the Dissident Directors' Materials. Several of these items require discussion.

  • Former C.E.O. and President Ray Cook voted for the Management Financing because he understood that all shareholders would be invited to participate. The Management Directors have attempted to obscure this fact.
  • Mr. Cook voted against closing the first tranche of the Management Financing at a Director's meeting on January 12th, 2012 because the Management Financing was offered selectively by the Management Directors to certain investors rather than all Shareholders. The unanimous Board approval format required by the TSX Venture Exchange ("TSXV") was unusual because normally only a quorum of directors would be needed to approve the first tranche of financing. The request for unanimous consent came from the TSXV. This board vote was one day before the record date for the AGM. The view of the Dissenting Directors is that the timing of the vote (immediately prior to the record date), combined with the selective targeting of subscribers by the Management Directors, was designed to unfairly favour the Management Directors share vote representation at the AGM, to the detriment (and dilution) of long time Argonaut shareholders.
  • The 61.5% "dilution" of pre-existing Shareholders is TRUE as stated in the Dissident Director Materials. The 61.5% number is the percent increase in the number of Common Shares if all of the $0.10 warrants are exercised.
  • The dismissal of former President and C.E.O. Ray Cook was described by the Management Directors as being performed by a clear majority of the board. The vote was four to three. The same Management Directors claim that they acted with integrity in the matter of the Ray Cook dismissal and in all matters related to the Company. Management Directors forced through, by quorum vote, the expensive contract for new President and C.E.O. David Jensen while knowing that in 45 days the AGM would be held that could reverse their decision. The Dissenting Directors unanimously voted against the David Jensen contract.
  • The selective and exclusive aspect to the Management Financing, although rigorously denied in both the Management Directors' News Release and Supplementary Material Mailing is self evident and requires no additional comment.
  • The stated intention of the Management Directors to "increase the share price well above $0.10" is misleading to Shareholders and denies the ability of the market to evaluate the success or failure of the Company in exploring the Terrace and Columario mineral properties.
  • The section beginning with "Concerns regarding Ray Cook's stewardship of Argonaut Exploration are NOT news to him"... IS NEWS TO HIM. The Management Directors statement on how Mr. Cook was advised by Mr. Jensen, Mr. Chebry and other board members on planning and expending the Company's 2011 money on a so called "high risk" surface drilling program is taken out of context. The Directors did discuss the allocation of the 2011 money, however these exploration dollars were "flow-through" funds, raised specifically to be spent on exploration (eg. surface drilling). Once funds have been raised on a "flow-through" basis, they cannot be used for non-exploration purposes. The majority of the $600,000 spent in 2011 was directed at this exploration program requirement. This obligation was well known to the Management Directors. Further, Mr. Jensen was uninvolved in the business of the Company until January 2012.

These statements malign Mr. Cook's efforts on behalf of the Company and attempt to distance the Management Directors from their fiduciary responsibilities to the Company for the past two years. Mr. Cook has dedicated his efforts to creating a strong, well structured Company since co-founding Argonaut in 2002. It is the actions of the Management Directors that have created a troubled board and harmed Argonaut's abilities to raise financings.

The Company is sound in spite of a troubled Board and the damaging pressures of a global economic downturn that has particularly harmed the ability of the junior resource mining sector to raise financings.

The Management Directors' Materials state that they require a slate of seven directors to administer the Company. The need for seven directors compared to the Dissident Directors slate of five directors could be explained by the extensive commitment of the Management Directors to other corporate boardrooms in addition to Argonauts' boardroom. Let's look at the allegiance indicated by the Management Directors as evidence of their commitment to Argonaut.

Current Management Director Corporate Affinity
Charles Chebry Director and past CFO Argonaut Exploration Inc.
President, Chairman, C.E.O., director of
TSX-V Company Cedar Mountain Exploration
(Discovery Group Company),
Director, North Country Gold Corp.
(Discovery Group Company).
Director and past C.F.O. for Happy Creek Minerals Ltd.
David Blann Director of Argonaut Exploration.
President, C.E.O., director of TSX-V Company Happy Creek Minerals Ltd.
Dale Hansen Director and C.F.O. Argonaut Exploration.
C.F.O. for Happy Creek Minerals Ltd.
C.F.O. for Cedar Mountain Exploration (Discovery Group Company).
Craig Bentham Director of Argonaut Exploration.
Director of North Country Gold (Discovery Group Company).
Director of Bluestone Resources Inc. (Discovery Group Company).
Director of Poynt Corporation.
Manages a legal practise.

The Management Directors' News Release attempts to minimize the experience and merits brought to the boardroom by the two new directors proposed by the Dissident Directors' Materials: Mr. Jeffrey Dawson and Mr. Oleh Wowkodaw. The fact is that each of these proposed directors brings a wealth of experience and skills which will greatly benefit the strategic goals of Argonaut.

Jeffrey A. Dawson, CFP, CLU, CH.F.C., CHS, FLMI, TEP

Jeffrey A. Dawson is the President of Jeffrey Dawson Insurance Agencies Limited, a full-service insurance agency representing major life insurance companies operating from offices in Toronto, Ontario. Mr. Dawson is a 32 year veteran of the life insurance industry, holding designations as a Certified Financial Planner, Chartered Life Underwriter, Chartered Financial Consultant, Certified Health Insurance Specialist, Fellow of the Life Management Institute, and a Registered Trust & Estate Practitioner. Mr. Dawson currently serves as a director of Galleria Opportunities Inc. and Stakeholder Gold Corp. and has been a director and officer of numerous other public companies including Dawson Creek Capital Corp. (now Lydian International Limited), San Anton Resource Corporation (now Cerro Resources NL), and EXMIN Resources Inc. (now Dia Bras Exploration Inc.).

Oleh Wowkodaw, B.Sc. Geological Engineering, M.B.A, P.Geol

Mr. Wowkodaw is currently the managing director of SilverStar Management Ltd., an asset evaluation and management company focused on resources (mining, oil, gas and alternative energy projects). Mr. Wowkodaw has over 30 years experience in the mining exploration and oil and gas industries. He was a senior geologist and corporate planner at Home Oil Company Ltd. Mr. Wowkodaw's professional experience includes mining exploration with a focus on precious metals (gold, silver) in various gold and silver mining camps in Manitoba, Ontario, Quebec and Nova Scotia with senior mining exploration companies like Esso Minerals Canada Ltd. and St. Joseph Explorations Ltd. He also founded Silverwing Energy Inc., a private oil and gas exploration and production company, and grew the company to over 1,000 Boepd in western Canada and successfully listed on the Toronto Stock Exchange. Mr. Wowkodaw raised approximately $100 million in financings from domestic and international sources to support the company's growth.

Collectively, Ray Cook, Brad Bakuska, Tell Stephen, Jeff Dawson and Oleh Wowkodaw (the "Concerned Shareholders Nominees") have a broad range of skills, experience and expertise in the mineral resources industry, public companies, corporate governance, corporate finance, capital markets and other matters that are critical in ensuring that Argonaut has the necessary leadership to steward and develop the assets of Argonaut.

Argonaut will require financing in order to develop its Properties. Currently, Argonaut's Common Shares are thinly traded and lack market support. The Concerned Shareholders Nominees intend to return to the Financial Plan previously proposed by Ray Cook. Argonaut is a well built company with extensive precious metal assets, well positioned for a turnaround in its fortunes.

The Financial Plan described in the Dissident Directors Materials is specifically structured to reverse and improve the Company's fortunes, provide market liquidity and growth through strategic financings and a marketed corporate profile to attract new investors - all to the benefit of Argonaut and its Shareholders.

The proposed Financial Plan structure is currently in place to turnaround the Corporation once the Concerned Shareholders Nominees are elected to Argonaut's Board of Directors. PLEASE VOTE YOUR GREEN PROXY FOR THE DISSIDENT DIRECTORS' CONCERNED SHAREHOLDERS SLATE. Votes are still accepted until the 5:00pm (Mountain Standard Time) on Wednesday, February 29th, 2012. If you have any questions about how to vote your GREEN PROXY, please contact Ray Cook at 403-276-5422.

It is now time to bring in a dedicated and committed team of directors who will work together to explore and develop the Columario Mine and other Terrace assets for the benefit of Argonaut and its shareholders.

Sincerely on behalf of the Concerned Shareholders,

Ray Cook, Director and Former Chief Executive Officer and President

Brad Bakuska, Director

Tell Stephen, Director

Contact Information

  • Ray Cook
    Director and Former Chief Executive Officer and President
    403-276-5422