Raging River Capital LP

April 11, 2016 08:17 ET

Raging River Capital LP Launches Lawsuit in Connection With a $110 Million Claim Against Conflicted Directors Hallbauer, Thiessen and Dickinson

VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 11, 2016) -

- Conflicted Hunter Dickinson related directors stood, together with other HDI representatives, to personally receive a benefit in excess of $10 million from the Curis Resources acquisition
- Raging River seeks a finding of shareholder oppression as a result of Taseko Mines' related party acquisition of the failing Curis Resources
- Raging River asks B.C. Supreme Court for an order authorizing it to bring legal proceedings on behalf of Taseko Mines against the conflicted directors and for an order to stop further entrenchment by preventing shares inappropriately acquired by the conflicted directors through the Curis acquisition from being voted

Raging River Capital LP ("Raging River") announces that it has commenced a lawsuit in the Supreme Court of British Columbia ("Court") for a finding that the affairs of Taseko Mines Limited ("Taseko Mines") (TSX:TKO)(NYSE MKT:TGB) in connection with the acquisition of Curis Resources Ltd. ("Curis") were conducted in a manner that unfairly harmed shareholders. Raging River has asked the Court, among other things, to make an order that legal proceedings be commenced by Raging River in the name of Taseko Mines against Russell Hallbauer, Ronald Thiessen, Robert Dickinson, Trevor Thomas, Hunter Dickinson Inc. ("Hunter Dickinson" or "HDI") and its subsidiaries for damages of $110 million to compensate shareholders. Raging River alleges that Taseko Mines' acquisition of the failing Curis - which included assets that proved to be essentially worthless - constituted a related party transaction, and that the failure by Taseko's board of directors to allow shareholders to vote on the acquisition constitutes oppressive conduct. Raging River has also asked the Court for an order that the conflicted directors and officers not be allowed to vote any of the Taseko shares they received as a result of the Curis acquisition.

"Since the conflicted directors at Taseko Mines pushed to acquire another of Hunter Dickinson's companies, Curis, shareholders have seen the value of their investment destroyed with no recourse while the conflicted directors and other HDI representatives stood to benefit to the tune of $10 million. Today, as Taseko Mines' second largest shareholder, we are standing up for our fellow shareholders to get their money back, stop further entrenchment and hold the self-interested directors accountable," said Mark Radzik, Managing Partner of Raging River. "While this step may ease the damage this board has done to shareholders, the only way to correct the problem permanently is to replace the three conflicted directors -Ronald Thiessen, Russell Hallbauer and Robert Dickinson- with four new independent and qualified nominees Paul Blythe, Randy Davenport, Henry Park and Mark Radzik."

As outlined in greater detail below, based on consideration representing $1.055 per Curis common share, Hunter Dickinson representatives, including Thiessen, Hallbauer and Dickinson, stood to personally receive a benefit of over $10 million from Taseko Mines' premium purchase of Curis.

THE CASE AGAINST TASEKO MINES' CONFLICTED DIRECTORS

On behalf of all shareholders, Raging River believes that the Board's decision to acquire Curis without putting the matter to a shareholder vote unfairly harmed shareholders and constitutes oppressive conduct under British Columbia's Business Corporations Act and was in violation of the B.C. Securities Act. Raging River has no choice but to bring this petition to the B.C. Supreme Court to ensure that shareholders are compensated for this conduct and are protected from similar incidents in the future.

At the time the Curis acquisition was announced, Directors and Officers of Taseko Mines, including Russell Hallbauer (President, Chief Executive Officer and Director of Taseko), Ronald Thiessen (Chairman of the Board and Director of Taseko), Robert Dickinson (Director of Taseko), Brian Battison (Vice-President of Taseko) and Trevor Thomas (Corporate Secretary of Taseko) held approximately 8% of the issued and outstanding shares of Curis. When you include other Hunter Dickinson-related parties, such as David Copeland (President, CEO and Director of Curis), Robert Schafer (Director of Curis), and Brian Causey (CFO of Curis), these individuals' collective ownership of Curis' common shares exceeds 11%. Taseko Mines, meanwhile, owned 17.27% of Curis' common shares.

By virtue of these holdings and the inter-relationship between Taseko Mines, Curis, and HDI, Raging River considers Taseko Mines' acquisition of Curis to be a related party transaction for which minority approval was required under Multilateral Instrument 61-101. Taseko Mines did not seek to rely upon any of the exemptions to MI 61-101. Put simply, Taseko Mines' Board ought to have put the Curis acquisition to a shareholder vote but, perhaps worried shareholders would not like what they were doing, no vote was held. Moreover, Taseko Mines' Board also failed to keep shareholders adequately informed at the time of the acquisition, in breach of the disclosure requirements of MI 61-101. Shareholders were kept in the dark and were robbed of their voice.

Raging River believes that it is important that Taseko Mines' shareholders are compensated for the Board's offside acquisition of essentially worthless assets at a cost in excess of $110 million. As such, our petition will seek, among other things, from the Court:

- A declaration that Taseko Mines' conduct in connection with the Curis acquisition unfairly harmed and is oppressive to Taseko Mines' shareholders.
- An order authorizing that legal proceedings be commenced by Raging River, in the name of Taseko Mines, against Hallbauer, Thiessen, Dickinson, Thomas, HDI and its subsidiaries for damages of $110 million for the losses incurred as a result of the Curis acquisition, as shareholders should not have to pay themselves back with their own money.
- An order that none of the conflicted Taseko Mines directors and officers be entitled to vote the Taseko shares they received pursuant to the Curis acquisition at the upcoming meeting of Taseko Mines' shareholders. It would be entirely inappropriate to allow these individuals to further entrench themselves with votes that they obtained through the Curis acquisition given the failure to disclose the conflicts of interest and the failure to hold a shareholder vote.

BACKGROUND TO THE CURIS ACQUISITION

On November 20, 2014, Taseko Mines acquired Curis, a failing business, for consideration representing $110 million, inclusive of debt assumed. Curis shares were acquired at a 21% premium to their 20-day volume weighted average price. At the time of the acquisition, Curis was in significant financial distress with approximately US$690,000 in cash and US$27 million of debt. Taseko Mines had to loan $2 million to Curis for it to remain solvent until the deal closed. As soon as the acquisition was announced the market punished Taseko Mines and its shareholders.

This acquisition raised a serious question that exposed a conflict of interest: Why would Taseko Mines buy a company on the verge of bankruptcy when Taseko could have purchased the asset out of bankruptcy at a fraction of the cost?

The answer traces back to the common involvement of Hunter Dickinson in both Taseko Mines and Curis. Taseko Mines has a twenty-five year history of CEOs, Presidents, Chairs and Directors affiliated with privately held Hunter Dickinson. Taseko Mines was even identified in the past as part of "the Hunter Dickinson Group of companies". At the time of the acquisition of Curis, Taseko Mines Directors and Officers affiliated with Hunter Dickinson included Hallbauer, Thiessen, Dickinson, and Thomas. All of these individuals were also directors and/or officers of Hunter Dickinson and/or its subsidiaries - and they still are today. In fact, Thiessen, Hallbauer, and Dickinson admit that, with their families, they own about 50% of Hunter Dickinson.

At Curis, five directors or officers were also directors and/or officers of Hunter Dickinson and/or its subsidiaries, including Copeland, Hallbauer, Schafer, Thomas and Causey. In fact, in its public disclosures during this period, Curis identified itself with the logo "HDI CURIS" and abbreviated the related-entity Hunter Dickinson Inc. as "HDI". The dots are not difficult to connect.

Taseko Mines' current Board seeks to take shelter in the special committee of "independent" directors it formed to consider the acquisition. But even this committee, however, has numerous ties to Hunter Dickinson. The independent committee consisted of Barry Coughlan, Alex Morrison, William Armstrong, Richard Mundie, and Wayne Kirk. Of these individuals:

Coughlan sits or has sat on the Board of a number of Hunter Dickinson-related entities including Northcliff Resources Ltd., Amarc Resources Ltd., Rathdowney Resources Ltd. and Quartz Mountain Resources Ltd. Past or current directors and officers of these entities include the following individuals affiliated with Hunter Dickinson: Dickinson, Thiessen, Thomas, Schafer, Scott Cousens, Marchand Snyman, and Copeland. Coughlan also sat on the board of Quadro Resources Ltd. with Thiessen;
Morrison sits on the board of Detour Gold Corporation, having served on this Board concurrently with Thiessen;
Armstrong worked together with Hallbauer at Teck Resources. Soon after Mr. Armstrong retired from Teck in 2006, he joined the Board;
Richard Mundie worked together with Hallbauer at Teck. Mundie appears to have retired from Teck in 2009 and he joined the Board; and
Kirk retired from the Board early in the process.

HISTORY REPEATS ITSELF - THIS IS NOT TASEKO'S FIRST BUDDY BAILOUT

The Curis bailout by the Hunter Dickinson affiliated directors should come as no surprise given their history of helping themselves out of a jam at the expense of Taseko Mines' shareholders.

In 2001, Taseko Mines purchased the Harmony Project from Misty Mountain Gold Ltd. in October 2001 for consideration that was estimated at $65 million. What happened to this project? In Taseko Mines' own words, it "was written down to a nominal value in 2004" as "there had not been significant exploration or development conducted". In under three years, the value of the project went from $65 million to zero.

Taseko Mines' Board at the time included the following Hunter Dickinson-affiliated individuals: Dickinson (then President, CEO and Director of Taseko), Thiessen, Ronald Hunter (then Chair and Director of Taseko), Jeffrey Mason, Copeland, and Cousens.

At the time of the acquisition, Misty Mountain's own Board and management described its financial position as "precarious" and were deeply concerned about an approximately $3.5 million working capital deficiency and the likely "total loss or serious impairment of… Misty Mountain's viability as a public corporation."

And, of course, Misty Mountain's Board included the following Hunter Dickinson-related individuals: Thiessen, Hunter, Mason, Copeland, and Cousens. In other words, Taseko Mines acquired a worthless asset for tens of millions of dollars from a public company with close ties to Hunter Dickinson when that company was on the verge of bankruptcy. Sound familiar?

There is, however, one key difference. The Misty Mountain acquisition was put to a shareholder vote. The Curis acquisition was not.

SHAREHOLDERS ARE ENCOURAGED TO VOTE FOR CHANGE

Shareholders are encouraged to vote their BLUE proxy or VIF "FOR" the removal of each of the self-interested and conflicted incumbent Taseko Mines directors: Ronald Thiessen, Russell Hallbauer and Robert Dickinson and the election of the following four independent and highly qualified new directors to the Board: Paul Blythe, Randy Davenport, Henry Park and Mark Radzik.

Shareholders with questions should contact Kingsdale Shareholder Services at 1-888-518-6832 toll-free in North America, or 1-416-867-2272 outside of North America, or by email at contactus@kingsdaleshareholder.com.

ADVISORS

Raging River has engaged Norton Rose Fulbright Canada LLP as its legal advisor and Kingsdale Shareholder Services as its strategic and communications advisor and proxy solicitor.

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