RX Exploration Inc.
TSX VENTURE : RXE
OTCQX : RXEXF

June 21, 2011 09:00 ET

RX Exploration Issues Response To Dissidents

TORONTO, ONTARIO--(Marketwire - June 21, 2011) - RX EXPLORATION INC. ("RXE" or the "Company") (TSX VENTURE:RXE)(OTCQX:RXEXF) announced today that it has issued a letter to shareholders in response to a group of dissidents attempting to seize control of the company.

"Our campaign to renew RXE is gaining momentum," said John F. O'Donnell, Chairman, in the letter. "Ever since June 12, 2011, when we issued our amended circular, shareholders have been looking with fresh eyes at the opportunities and challenges ahead. They believe, as we do, that our new team of experienced mining and corporate executives can create tremendous value for the company in the years to come."

In its letter to shareholders, RXE said that the dissidents are refusing to address 11 important matters raised in RXE's amended circular. RXE listed the 11 matters, and provided details that the dissidents need to explain.

Also in its letter to shareholders, RXE said the dissidents attempted to distort the truth on certain other matters that they did address. RXE's letter corrects the record accordingly.

Voting Instructions

RXE recommends that shareholders vote only the BLUE proxy FOR the RXE nominees as the primary step towards real value creation. A completed BLUE proxy will replace any previously voted proxy – dissident or the original Management proxy mailed in May.

In order to be counted at the Annual and Special Meeting of Shareholders, the BLUE proxy should be voted well in advance of the proxy voting deadline of July 4, 2011 at 4:30 p.m. (Toronto time). Please do not attempt to mail your proxy unless you have no other alternative. Shareholders who require assistance voting the BLUE proxy should please contact Laurel Hill Advisory Group at 1-877-304-0211 or by e-mail at assistance@laurelhill.com.

The vote will take place at the adjourned Annual and Special Meeting of Shareholders on July 6, 2011 at 4:30 p.m. (Toronto time) at the Ontario Bar Association Conference Centre, Salon 3, 20 Toronto Street, Toronto, Ontario M5C 2B8.

The complete Chairman's letter to shareholders follows:

WE'RE GAINING MOMENTUM

June 20, 2011

Fellow Shareholders of RX Exploration Inc.,

Our campaign to renew RX Exploration Inc. is gaining momentum. Ever since June 12, 2011, when we issued our amended circular, shareholders have been looking with fresh eyes at the opportunities and challenges ahead. They believe, as we do, that our new team of experienced mining and corporate executives can create tremendous value for the company in the years to come.

The biggest example of our momentum was the decision of RXE's largest shareholder, Sprott Asset Management LP, to vote its shares in support of our RXE nominees. Sprott is not alone. Many other shareholders have changed their minds, now that they are aware of all the facts, and have submitted their BLUE proxies to us.

While we are now developing momentum, the fight won't be over until the annual meeting on July 6, and we still need your vote. The vote of every single shareholder, large or small, will count. Please do your part, and vote the BLUE proxy now.

RX Exploration's Future is in Your Hands

You are voting on the future of your company and the value creation potential of your investment. On the one hand, you have the dissidents and their associated history of excessive compensation demands, nepotism and safety infractions.

On the other hand, you have our superior slate of nominees, who have done it all before and can do it again, this time for you. In the end, we trust that shareholders will make the right choice and vote for the BLUE slate. We are committed to building RXE into a world-class mining company.

The Dissidents' Response to Serious Allegations

In our amended circular we presented some very disturbing facts regarding the dissident executives' past actions and provided the missing information explaining why and how this fight seemingly came out of nowhere. The dissidents have had plenty of time to consider the facts and to provide valid explanations or at the very least, an apology to the shareholders whose interests they failed to represent. Instead, the dissidents have ignored the evidence. Ignoring facts does not make them go away.

With so many critical issues, we have provided a score sheet on the next page to help you keep track before you vote. The score sheet lists 11 items that the dissidents should have addressed, but did not. Under the score sheet we provide, in numerical order, the crucial details that the dissidents need to explain.

11 Items the Dissidents Did Not Address

ItemTopicAddressed?
1NepotismNo
2Expenses that the dissidents plan to recover from RXE for the proxy contest: maybe $1 millionNo
3Polinsky-to-Polinsky cheque for $60,000No
4Loan to G3 (a company whose major shareholders are Messrs. Nye and Polinsky) for $50,000No
5The Scooptram sale for just $18,250 to Mike GunsingerNo
6Unexplained $288,000 advance to Mike GunsingerNo
7Unexplained $186,000 retainer to Mike GunsingerNo
8IIROC criticism of Murray NyeNo
9The billion dollar lawsuitNo
10Reasons for removal of Max Polinsky as CFONo
11Dissident "independent directors" are not independentNo
  1. It was Harold (Mike) Gunsinger's son, Ben Gunsinger who was at the helm of Drumlummon contractor New Millennium Mining and Contracting, the recipient of $10.9 million between May 2008 and April 2011.

  2. The dissidents will seek reimbursement from RXE for their massive proxy contest expenditures that include $500,000 in proxy solicitation expenses as well as ongoing legal expenses, which may equal or even exceed the proxy solicitation expenses.

  3. A $60,000 cheque issued by Mr. Polinsky to himself, without Board knowledge or approval.

  4. A $50,000 loan by RXE management, in 2009, to G3 Mineral Corporation (a company whose major shareholders are Messrs. Nye and Polinsky) without Board knowledge or approval. This loan is unrelated to RXE's business and is still on RXE's books.

  5. In May, 2010 RXE sold a scooptram to Mike Gunsinger for $18,250. The Board was never notified of this transaction.

  6. RXE advanced Mike Gunsinger $288,000 in April 2010 in two payments of $128,000 and $160,000. The funds were subsequently used by Mr. Gunsinger to exercise 900,000 stock options at $0.32 per share. The Board was never notified of this transaction.

  7. RXE's subsidiary, Drumlummon Ltd., paid Mike Gunsinger a retainer of $186,000, which was not disclosed to the Board, and for which there is no obvious explanation considering that Mr. Gunsinger was paid separately for consulting, including $98,250 in June 2010 and $189,000 in April 2011.

  8. In response to RXE President Murray Nye's January 2011 Letter to Shareholders, IIROC said that it was "not appropriate" for RXE's President to project future production "without support of a feasibility study or a reasonable period of profitable production." This criticism was not disclosed in the dissidents' circular.

  9. Last year a billion dollar claim was filed against Gold Reef International, Inc. while dissident Max Polinsky was the President, CEO, CFO, director and sole member of the audit committee, and while dissident executive Murray Nye was a director. This claim was not disclosed in the dissidents' circular.

  10. In April 2011, the Board removed Max Polinsky from the CFO position for failing to perform and offered him another executive position that would have been a better fit. We listed Mr. Polinsky's failings. The dissidents have ignored them, and they hope you will too.

  11. In our amended circular, we warned you that their independent directors are not independent, because most of them are currently consultants to the company. The dissidents have ignored this important fact, and for good reason. If elected they are counting on this compromised independence when compensation negotiations next come around, notwithstanding their promise to behave themselves for a while (see "The dissidents' compensation commitment" on the next page).

These are the facts. The actions described above are incongruent with individuals who claim to have the interests of shareholders top-of-mind.

Items the Dissidents Hope You Will be Confused By

While ignoring some serious questions, the dissidents have attempted to distort the truth regarding other serious allegations. I remind shareholders of the facts:

Compensation agreements

The dissidents now claim that the draft compensation contracts they presented in January "did not represent the actual positions of management." Given the names on each draft employment agreement, it's not clear to me who else's position they could possibly represent.

The golden handshake they demanded was far beyond industry standards. And their demand for a guaranteed bonus misses the whole point of a bonus, which is to reward performance. Do RXE's shareholders really want executives who don't believe in their own abilities to deliver results? I would think not. And yet, when we tried to reach a compromise, they said the contracts were "non-negotiable." True to their word, the dissident executives then ambushed your company with a proxy fight, when their "non-negotiable" demands were rejected.

Compensation vs. salaries

The dissident communication emphasizes "Murray Nye and Max Polinsky worked for the company for years without any salary." This is a great distortion. Instead of salaries, they received consulting fees dating back to fiscal 2008 through their company, Venbanc Investment and Management Group Inc.

The dissident executives claimed (three times) in their latest letter that their collective salaries were less than the legal fees I received, but that's a ridiculous comparison. The three dissident executives collectively received total compensation of more than $1.5 million for fiscal 2010, as disclosed on page 7 of RXE's original Management Information Circular, dated May 9, 2011. That's more than double (in just one year) what the dissidents claim I billed for legal fees (over a period of more than four years). Moreover, their claims about my billings are exaggerated (as we explained in our amended circular on page 15). By using salary to diminish the amount of their actual compensation, and by using an exaggerated measure for my legal fees, the dissidents are manipulating reality to mislead you.

The dissidents' compensation commitment

In their latest letter, and after we had revealed the truth, the dissidents made a commitment to behave themselves on compensation demands. If the commitment was meaningful, it might have been a step forward, even if it was just a gesture intended to win votes from angry shareholders. But this is no step forward, and here is why.

The measureable part of their commitment is only for the current fiscal year. The wording cleverly avoids mentioning that the fiscal year ends on June 30th – less than two weeks from now. In the new fiscal year, which starts before the shareholder vote, the dissident executives will be free to demand guaranteed bonuses and fat golden handshakes all over again. If they are elected, that's exactly what they will get from the friends they picked to sit on the Board.

Safety at Drumlummon

In our amended circular we told you that former contract miner New Millennium Mining LLC received $67,000 in fines for safety violations and 111 safety citations in 2010, an awful record by any measure. The dissidents responded that New Millennium won a safety award in 2009, and the issue raised with respect to the safety record in 2010 was "nonsense." Unfortunately, 2010 was not nonsense. It was a near catastrophic decline in standards, while the dissident executives looked the other way and kept the Board in the dark.

Dissident qualifications vs. RXE nominees' qualifications

While the RXE nominees represent a superior slate of nominees, this didn't stop the dissidents from trying to attack them or their plan to create value for shareholders. The dissidents claim in writing that RXE's nominees plan to spend millions of dollars putting five large-core drills underground, and they are whispering to investors that we will shut down test mining. There is no disclosure by RXE to support either the claim or the whisper. RXE's plan to create value was clearly laid out in the amendment to the circular and can be viewed at www.rxexploration.com. The plan includes a continuation of test mining.

The dissidents also claim to have superior knowledge of Montana, and that this should be a decisive factor. Don't be misled:

  • The dissident executives have grossly exaggerated the importance of their knowledge and have understated the value of RXE's nominees, who have been involved with mines in 20 countries on five continents. RXE's nominees have experience in all kinds of mining and regulatory conditions, most of them significantly more complicated than those in Montana. For example, RXE nominee Louis Dionne is a mining engineer and was Senior Vice-President of Underground Operations for Barrick Gold. He has many years of experience with narrow vein mines that are similar to the geology and structure at Drumlummon.

  • A number of RXE's nominees, including designated President and CEO Darren Blasutti, are very familiar with Montana's geology, its politics, and its regulators. This is in part because Golden Sunlight, one of the largest gold mines in Montana, is owned by Barrick Gold, for which Mr. Blasutti served as a senior executive for 13 years. Golden Sunlight is just 120 kilometres from RXE's Drumlummon project.

  • The three-dozen RXE employees at Drumlummon would not be affected by the outcome of the proxy contest. Nor would relationships with regulators, with the possible exception that safety inspectors might be relieved to know that more safety-conscious leaders were in charge. For the record, the RXE nominees look forward to working with all stakeholders associated with the company.

The dissidents: taking pride in deception

We have to give the dissidents credit: They are really good at deception. They claim that the Board had its head in the sand, and should not have been surprised by the proxy contest ambush. But we were surprised, because their deceit was very effective. When the dissidents put their names on RXE's slate, we trusted that they had made a commitment to resolve issues together as we had for several years. Six days later they broke their word, sprung their trap and launched their proxy fight against RXE.

Now the dissidents claim they are being straight with shareholders. Notwithstanding the evidence of their "so-called" draft compensation contracts, they expect you to believe that they will behave next time, if only they get your vote. Notwithstanding their nepotism and unsafe practices, they claim to be superior leaders and miners. Notwithstanding IIROC's criticism of their disclosure and all the omissions in their circular, they expect you to take them at their word. We won't fall for it this time. Neither should you.

RXE's Superior Nominees

RXE's nominees are clearly superior to the dissident slate in terms of mining and corporate experience. This superiority is based on a comparison of their track records as executives in the gold mining industry and elsewhere.

If elected, we believe RXE's nominees will add significant value. From developing and executing the right strategy, to forging relationships with key government officials, to world-class operations management, the new RXE nominees have been involved in transactions whose value is in the billions of dollars. Please join us. Vote the BLUE proxy, the most direct path to value creation for RXE.

On behalf of my fellow RXE nominees,

John F. O'Donnell, Chairman of the Board

About RX Exploration Inc.

RX Exploration Inc. is a gold exploration company whose strategy is to re-examine gold and silver projects within North America that have previously reached advanced exploration, underground development or past gold or silver production. The Company is currently focused on re-starting production from its Drumlummon Mine, a past producing high-grade, bonanza-type, epithermal underground gold and silver mine in Montana.

The Company's shares are listed on TSX-V (Symbol: RXE) and on the OTCQX (Symbol: RXEXF). There are 160,438,980 common shares issued and outstanding.

Cautionary Statement Regarding Forward Looking Information

This press release contains "forward-looking information" within the meaning of applicable securities laws. Forward-looking information includes, but is not limited to, the Company's expectations, intentions, plans and beliefs with respect to, among other things, the Drumlummon property. Often, but not always, forward-looking information can be identified by forward-looking words such as "anticipate", "believe", "expect", "goal", "plan", "intend", "estimate", "may" and "will" or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information is based on the opinions and estimates of the Company as of the date such information is provided and is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, 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 plant, 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. Although RXE has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Readers should be aware that this forward-looking information is subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by such information and are cautioned not to place undue reliance on such information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.

On Behalf of the Board

John F. O'Donnell, Chairman of the Board

John A. Ryan, Chief Financial Officer

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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