Past Management of Gallery Resources Limited

November 07, 2006 12:52 ET

Past Management and Directors of Gallery Respond to News Release Dated November 1, 2006

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 7, 2006) - The purpose of this news release is to provide the response of the past officers and directors (the "past management") of Gallery Resources Limited ("Gallery") to the news release issued on November 1, 2006 by current management of Gallery. The past management consists of Mr. Robin Chandler, past CEO, CFO and director of Gallery, Mr. Bruce Costerd past President, CEO and director of Gallery and Mr. Richard Haderer, past Secretary and director of Gallery. The current management consists of Mr. Karl Basi, COO of Gallery and Mr. Ralph Kettell, Mr. Marvin Miller and Mr. Ross Lawrence, all current directors of Gallery.

On October 13, 2005 Gallery advised its shareholders that the trading halt and subsequent suspension on the TSX Venture Exchange (the "Exchange") was related to an ongoing compliance review of Gallery by the Exchange and the alleged failure of the Company to file satisfactory responses and documentation relating to the review within the time periods required by the Exchange. It was the view of past management that the time period imposed by the Exchange in their correspondence dated July 21, 2005 was unreasonable and did not provide Gallery with sufficient time to respond in order to prevent the trading halt imposed on August 15, 2005.

Gallery also advised its shareholders that the Exchange was not prepared to consider lifting the trading suspension until the completion of the compliance review. As a result, past management of Gallery determined that it would be more practical to apply to list Gallery on the CNQ. Gallery filed an application on September 9, 2005 to obtain a listing on the CNQ.

In November of 2005 the Exchange advised past legal counsel of Gallery of their suitability requirements for individuals to act as officers and directors of Gallery. Past management of Gallery felt that these suitability requirements were unreasonable. Past legal counsel of Gallery made two separate proposals to the Exchange of individuals to replace Mr. Bruce Costerd as CEO of Gallery. Both of these proposals were rejected by the Exchange. As a result of the suitability requirements for new officers and directors and the great time and expense involved in completing the Exchange's extensive and exhaustive compliance review, the past management of Gallery felt that they had no alternative other than to continue to pursue the listing of Gallery's shares on the CNQ.

On December 21, 2005 legal counsel for the dissident shareholder group sent a notice to Gallery and its then management and board of directors to requisition a special meeting to remove the existing board of directors.

In January of 2006 legal counsel for Mr. Costerd contacted legal counsel for the dissident group and advised him that the holding of a special meeting was not necessary and that past management was prepared to resign if the dissident group was prepared to provide Gallery with the necessary funding for the company to continue. No response was received by legal counsel for Mr. Costerd. Shareholders should be aware that the last Gallery financings in which Ralph Kettell and Marvin Miller participated were October, 2003 and August, 2004 respectively. To the best of the knowledge of past management Mr. Ross Lawrence, a new director of Gallery, is not a shareholder and has not participated in any financing of Gallery.

The Information Circular mailed by the dissident shareholders for the shareholders meeting set for August 14, 2006 contained no information of any proposed financing or business plan for Gallery.

Past management of Gallery have not received any formal correspondence or documentation requesting the books and records of Gallery since the change in the board of Gallery on August 14, 2006 other than two telephone phone calls received by Bruce Costerd, a former director and officer of Gallery, from persons claiming to be acting on behalf of Ralph Kettell. The only other attempt by current management to contact past management were a number of threatening e-mails and phone calls from Karl Basi, the new COO of Gallery, to the former accountant for Gallery.

In addition, past management is not aware of any local legal counsel that has been retained by new management. In late August, 2006, legal counsel for Mr. Costerd contacted the lawyer that acted on behalf new management for the dissident proxy meeting to seek direction from new management for the transfer of books, records and bank authorities. Counsel for the dissident group advised that he was only retained for the shareholders meeting.

As a result of this lack of direction from new management, the Financial Statements and MD&A for the six months ended August 31, 2006 were prepared by past management and sent to the new management to assist Gallery in meeting its ongoing continuous disclosure requirements. Upon receipt of formal instructions, arrangements will be made by past management for the books and records of Gallery to be provided to new management.

Shareholders will be aware from the continuous disclosure of Gallery that the Company has been in dire need of funding since August, 2005. Despite requests of past management of a variety of shareholders of the Company and except for members of past management, no other persons or entities were prepared to provide any ongoing funding for the day to day operations of the Company. As a result of no other persons or shareholders assisting in the financing of Gallery, significant delays were experienced in obtaining the listing of Gallery's shares on the CNQ.

Past management was therefore compelled to continue to finance Gallery without the assistance of others. Deirdre Lynch, a long-term employee of Gallery, loaned and advanced funds to Gallery for its survival during the period the shares of Gallery were halted and suspended from trading and then subsequently delisted from the Exchange. This debt was secured by Gallery's Cabot Lake and Cariboo mining claims pursuant to a Hypothecation Agreement and Declaration of Trust dated November 30, 2005. The loans and advances were due on demand after February 1, 2006. On August 3, 2006 Ms. Lynch realized upon the security and effected the transfer of the mining claims in satisfaction of the debt.

The transfer of these mining claims was disclosed in the Financial Statements and MD&A for the period ended August 31, 2006 which were provided to new management of Gallery. These transfers were not disclosed in a news release as these claims are not material to Gallery as a result of no expenditures having been made on these properties in the past several years and the fact that the properties have been written-off.

Shareholders are reminded that North Range Resources Ltd., a company which Mr. Ralph Kettell, a director of Gallery, was a founder, staked certain mining claims which were which were previously held by the BHP Billiton/Gallery joint venture. These properties were part of Gallery's most material resource property, the Shabogamo Project. On August 14, 2006 Gallery demanded the return of the properties and to date these properties have not been returned to Gallery in spite of the fact that Mr. Kettell is now a director.

As previously disclosed the issuance of 7,500,000 units to Mr. Bruce Costerd was pursuant to the termination on February 15, 2006 of Mr. Costerd's Management Agreement with Gallery. The 523,440 units issued to PubCo Services Inc. were for regulatory consulting fees and disbursements made on behalf of Gallery. The 300,000 units issued to Capital Resource Group Inc. were for management fees for the period April 1, 2006 to June 30, 2006. Deirdre Lynch and Nelson Da Silva, long term employees of Gallery, received 1,120,000 units for severance.

The $75,000 in consulting fees contained in the August 31, 2006 financial statements consists of $50,000 to Mr Bruce Costerd for the period March 1, 2006 to July 31, 2006; $17,500 to Deirdre Lynch for the period January 1, 2006 to May 31, 2006 and $7,500 to Capital Resources Group Inc. for the period July 1, 2006 to August 14, 2006.

The majority of the $24,426 in office and miscellaneous expenses disclosed in the August 31, 2006 financial statements is for regulatory consulting services and out-of-pocket expenses on behalf of Gallery by PubCo Services Inc. including but not limited to obtaining Gallery's CNQ listing.

Past management incurred substantial time, effort and funds in obtaining the listing of the shares on the CNQ on May 31, 2006. The new board has now decided to delist Gallery from the CNQ rather than incur the immediate costs of approximately $20,000 for the payment of outstanding transfer agent and filing fees to ensure that the shares of Gallery would continue to trade on the CNQ. The continued listing of the shares of Gallery on the CNQ would have provided Gallery with the opportunity to raise additional financing for the Shabogamo Project including flow-through financing.

It may be the intention of the new directors to only trade Gallery on the OTC market in the United States rather than maintain the listing of the Gallery shares on a Canadian Exchange. Shareholders should be aware that if Gallery is subject to a cease trade order imposed by the BCSC as described in the November 1, 2006 news release that Canadian shareholders may not be able to trade their shares on a U.S. market.

On behalf of the past management of Gallery:

Robin Chandler, past CEO, CFO and Director

Contact Information

  • Past President, CEO and Director of Gallery
    Bruce Costerd
    (778) 280-3057
    Past Secretary and Director of Gallery
    Richard Haderer
    (403) 275-4461