The Concerned Shareholders of RX Exploration Inc.

June 24, 2011 15:17 ET

RX Exploration Concerned Shareholders Announce Filing of Response Letter to Update Shareholders on the Facts Regarding Their Company

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WINNIPEG, MANITOBA--(Marketwire - June 24, 2011) - The Concerned Shareholders of RX Exploration Inc. ("RX Exploration" or the "Company"), announce the filing of a response letter to the letter to shareholders written by the Chair of the Special Committee of the board of directors of the Company, Mr. John O'Donnell, dated June 21, 2011. The Concerned Shareholders correct the inaccurate and misleading statements by a desperate board that is losing the vote.

Shareholders are reminded to vote their GOLD proxy today to implement the Concerned Shareholders' plan to increase revenues and generate greater value for shareholders. The Concerned Shareholders have a proven track record of success at RX Exploration.

The full text of the letter may be found at and reads as follows:

June 24, 2011

Dear fellow shareholders,

We, the Founders and Managers of RX Exploration Inc. ("RXE" or the "Company"), write to update you about your Company.


We are here to increase shareholder value and have proven results. We have a productive mine that was built on time and on budget and that, for the month of June, shipped over $2,000,000 worth of gold and silver concentrates based on today's silver and gold prices. Put your vote on GOLD and visit

In contrast to these results, the Special Committee of the board of directors of the Company, organized to oppose the Concerned Shareholders, takes cheap shots and has misled shareholders. We are producing gold and silver – the Special Committee has produced a "score card" in the letter to shareholders by John O'Donnell. Your investment, and the outcome of this proxy contest, is not a game.

The So-Called "Blue Ribbon" Board

Several of the proposed directors of the Special Committee's so-called "Blue Ribbon" board – Darren Blasutti, Alex Davidson, Paul Parisotto and Lorie Waisberg – are also directors of Noront Resources Ltd. ("Noront"), a nickel, copper, platinum and palladium mining company with properties in northern Ontario. Messrs. Blasutti, Davidson, Parisotto and Waisberg were added to the board of Noront in connection with the settlement of a proxy contest in 2008. Since that announcement, and under the stewardship of these so-called "Blue Ribbon" individuals, the share price of Noront has decreased in value by over 40%. This is not a track record we want to bring to RXE.

Value Dilution by the "Blue Ribbon" Board

This not-so "Blue Ribbon" board wants to load up the Company with costs and delays. We are convinced that this board will lead to a future of more financings and further shareholder dilution. The dilution is clear: The board nominees are taking a chunk of your company before they even start. This is a large price to pay if they are going to repeat the results from Noront.

The Special Committee is Wasting Precious Financial Resources

Faced with a losing proxy contest, the Special Committee is wasting the Company's financial resources on lawyers and accountants. The tally now includes: (1) John O'Donnell – who has charged the Company over $700,000 in legal fees over the past four years; (2) Fogler Rubinoff LLP – which was retained to prepare the Management Information Circular; (3) Paliare Roland Rosenberg Rothstein LLP – which was retained as litigation counsel; (4) Goodmans LLP – which was retained as additional counsel; (5) Collins Barrow LLP, Chartered Accountants – the Company's external auditors; (6) Fuller Landau LLP, Chartered Accountants – additional accountants; (7) Longview Communications Inc. – a corporate communications firm; and (8) Laurel Hill Advisory Group – a proxy solicitation firm. These are needless expenditures.

As stated above, the Special Committee of the board of directors has also proposed rich compensation packages for their proposed new management team that will cause significant dilution of shareholders. Enough is enough.


Setting the Record Straight

The Special Committee, which is well behind in the shareholder vote, has made a number of inaccurate allegations in an attempt to sway shareholders. These allegations are desperate and incorrect.

Let us set the record straight:

  • The Concerned Shareholders brought the Drumlummon mine into production for under $11 million without incurring any debt. New Millennium Mining and Contracting LLC was a major player in our ability to do so and we continue to support our decision to contract with this award-winning company. Our success speaks for itself.

  • Max Polinsky was terminated as CFO after questioning the appropriateness of John O'Donnell's legal invoices. Mr. O'Donnell has charged the Company over $700,000 for services that have provided little value.

  • The Special Committee has spent weeks digging through the financial records to try to find dirt. It now highlights a handful of transactions it claims it had no knowledge of. What you have not been told is that Mr. John Ryan (a proposed director nominee of the Special Committee), as Chairman of the Audit Committee of the Company, reviewed each of these items. In any event, the suggestions of wrongdoing are ludicrous:

  • The Special Committee suggests that Mr. Polinsky was conflicted because he signed certain cheques. While he was CFO, Mr. Polinsky had the responsibility to issue all cheques under TSX Venture Exchange guidelines.

  • Much is made of a loan to G3 Mineral Exploration Inc. ("G3"), yet you are not told that Mr. John O'Donnell, Chairman of the board, himself incorporated G3 and that his spouse served as a director. Obviously, Mr. O'Donnell was well aware of all matters involving G3.

  • The Special Committee attacks the $186,000 paid to Mr. Gunsinger for his ongoing consulting services. This amount is simply a retainer for future services to be provided by Mr. Gunsinger for the Company. These services are invaluable to the Company and this retainer was disclosed in the original Management Information Circular.

  • The Special Committee impugns consulting fees of $128,000 and $160,000 paid to Mr. Gunsinger. In fact, these were monies authorized by the Company to Mr. Gunsinger for past services rendered to the Company dating as far back as 2009. Moreover, Mr. Gunsinger re-invested in the Company through the exercise of stock options. Mr. O'Donnell, who is responsible for administering the stock-option plan, was well aware of this re-investment. The fact that Mr. O'Donnell now pretends not to know of these transactions is misleading.

  • The Special Committee raises issues about RXE's disclosure. The Special Committee fails to note that Mr. O'Donnell, in addition to acting as its Chair, was also the Company's counsel. Any fault regarding disclosure lies at Mr. O'Donnell's feet. The fact is the Company paid him hundreds of thousands of dollars a year to get these issues right.

  • The historic $1 billion dollar claim against Montana Gold Mining Company Inc. (formerly Gold Reef International Inc.) ("Montana Gold") is a joke. Montana Gold is a company with a total market capitalization of approximately $3 million. Raising this claim is an obvious sign of desperation as these allegations have no relevance to RXE and its future.

  • The Special Committee has taken advantage of the Company's need for an updated independent Technical Report under NI 43-101 by including this on its list of to-dos for its proposed slate of nominees. What the Special Committee hasn't told you is that the Company's updated independent report is already well underway by the Company's NI 43-101 Qualified Person, and has been for months - under the leadership of Murray Nye and Mike Gunsinger, as management of the Company. It is anticipated that the updated Technical Report will be completed toward the end of July, 2011.

Fair & Aligned Compensation

The two most senior officers of RXE have worked for years without a salary. The claim of the Special Committee that we "demanded" payment and received compensation of more than $1.5 million is totally misleading.

The actual facts are set out on page 7 of RXE's original Management Information Circular dated May 9, 2011, but are hard to read. We set out below the total executive cash compensation received by the management team for the fiscal years ended 2008, 2009 and 2010:

Fiscal Year EndedSalary
Director Fees
All Other Cash Compensation (Consulting Fees)
Total Cash Compensation
Murray Nye, President & CEO2008NilNilNilNil
Max Polinsky, CFO to April 21, 20112008NilNilNilNil
Mike Gunsinger, Vice President of Mining Operations2008NilNilNilNil
(1)These fees were paid to Venbanc, a company which is 50% owned by each of Messrs. Nye and Polinsky. The numbers represented above reflect, for each of Messrs. Nye and Polinsky, half of the total amounts of $55,000 and $120,000 (reflecting each of Messrs. Nye and Polinsky's proportionate ownership of Venbanc), which were paid to Venbanc in each of 2009 and 2010, respectively.
(2)This amount includes a retainer of $186,250 that was paid by the Company to Mr. Gunsinger during the year ended June 30, 2010 for future services.
(3)Total Cash Compensation is composed of directors fees and consulting fees paid to Venbanc. At no point in the last three years have these individuals drawn a salary for the work they have performed.
(4)The above is taken from the Management Information Circular of the Company dated May 9, 2011.
By contrast, we invite you to consider John O'Donnell's cash compensation received (including his legal fees). It is easy to see who the real compensation culprit is at RXE.
Fiscal Year EndedSalary
Director Fees
All Other Cash Compensation (Legal Fees)
Total Cash Compensation
John F. O'Donnell2008n/aNil181,790181,790
(1)The above is taken from the Management Information Circular dated May 9, 2011, as well as the Management Information Circular dated February 8, 2010 and the Management Information Circular dated December 19, 2008.

The above amounts do not even include fees charged by Mr. O'Donnell prior to 2008 or the year-to-date for fiscal 2011. Mr. O'Donnell has invoiced the Company over $700,000 in fees. We remind you that the CFO was terminated shortly after questioning the appropriateness of the amounts invoiced by Mr. O'Donnell.

To address any concerns about salaries, the Concerned Shareholders are prepared to agree to cap their respective salaries and bonuses at the current level for the fiscal years ending 2011 and 2012 and align their compensation with the performance of the Company (determined in accordance with best practices in corporate governance).


Remarkable Results

The Concerned Shareholders founded the Company and have built it into a success. From September 1, 2010 to present, RXE has traded over 42 million shares on the TSX Venture Exchange and several million shares in the OTCQX market in the United States.

On June 22, 2011, management issued a news release announcing that, for the month of June to date, RXE shipped over $2,000,000 worth of gold and silver concentrates at today's gold and silver prices. This is the beginning of what we believe will be a consistent source of revenue for years to come.

Our Reputation Speaks for Itself

The Concerned Shareholders have delivered a producing gold and silver mine on time and on budget. Our results are proven. We started the drilling program at the Empire vein last September, completed the program by December and have already started mining that vein with shrinkage stopes that we believe will be ready in approximately two weeks.

At the same time, we have built a solid reputation in the State of Montana. The people of Montana know and respect us. We understand the regulatory process and have established relationships with the regulatory authorities in Montana that are vital to the success of RXE. We are well underway to securing a full mining permit for the Drumlummon Mine. The proposed nominees of the Special Committee cannot say the same.

Mr. Nye was invited by the Governor of Montana to the 2011 State of the State address where the Governor publicly praised the management of RXE for our contribution to the economy of the State of Montana by creating 140 much-needed jobs. The Governor has been very supportive of us by helping RXE with numerous meetings with investors, mine tours and public statements.


If the Special Committee has its way, the Company will lose key management and operational people, including Mike Gunsinger. Mr. Gunsinger was instrumental in negotiating RXE's acquisition of the Drumlummon property and, along with Ben Porterfield (another Concerned Shareholder nominee), discovered the Charly vein. It is thanks to Mr. Gunsinger and his team that we have a producing gold mine with tremendous opportunities for shareholders. Mr. Gunsinger moved his family to Montana in January of 2010 and saw through the completion of the internal ramp, working 12 hours a day, seven days a week. The Gunsinger Decline that was completed in April of this year has allowed the Company to resume its mining and milling operations. Instead of recognizing Mr. Gunsinger for his contributions to RXE, the Special Committee chooses to publicly disparaged him for a personal health issue.


Shareholders are asked to vote their GOLD proxy today to support the Concerned Shareholder Nominees and to enable them to protect what the founders and managers have built and to continue to increase shareholder value.

The Concerned Shareholders will continue to honour their commitments to the employees and key professionals who have made personal sacrifices to ensure the success of the Drumlummon mine.

The Concerned Shareholders.

- end letter -

Support the Concerned Shareholders and protect your investment by voting ONLY your GOLD proxy by the proxy voting deadline, July 4, 2011 at 10:00 a.m.

Shareholders who require assistance voting their GOLDproxy should contact Kingsdale Shareholder Services Inc. at 1-888-518-6812 or email

For more information about the Concerned Shareholders and the RX Exploration proxy contest, please visit WWW.SAVERXE.COM.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this document and documents incorporated by reference constitute forward-looking statements. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions as they relate to the Concerned Shareholders, the Company or its future management, are intended to identify forward-looking statements. Such statements reflect the Concerned Shareholders' current views and intentions with respect to future events with respect to, among other things, the Company and the Drumlummon property, and are subject to certain risks, uncertainties and assumptions. Many factors could cause the Company's actual results, performance or achievements that may be expressed or implied by such forward-looking statements to vary from those described herein should one or more of these risks or uncertainties materialize. Such factors include, but are not limited to, economic, business, technological, competitive and regulatory factors, including the ability to develop and operate the Drumlummon property, risks associated with the mining industry such as economic factors (including future commodity prices, currency fluctuations and energy prices), failure of plan, equipment, processes and transportation services to operate as anticipated, environmental risks, government regulation, actual results of current exploration activities, possible variations in ore grade or recovery rates, permitting timelines, capital expenditures, reclamation activities, social and political developments and other risks of the mining industry. Any such forward-looking statements are subject to such known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by such information and are expressly qualified in their entirety by this cautionary statement. Moreover, the Concerned Shareholders do not assume responsibility for the accuracy or completeness of such forward-looking statements. The forward-looking statements included in this document are made as of the date of this document and the Concerned Shareholders undertake no obligation to publicly update or revise forward-looking statements, other than as required by applicable law.

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