Selwyn Resources Ltd.
TSX VENTURE : SWN

Selwyn Resources Ltd.

June 07, 2013 12:52 ET

Selwyn Resources Addresses Statements Made in Dissident Circular

VANCOUVER, BRITISH COLUMBIA--(Marketwired - June 7, 2013) - Selwyn Resources Ltd. (TSX VENTURE:SWN) ("Selwyn" or the "Company") addresses certain statements made in the dissident proxy circular (the "Dissident Circular") prepared by Resource Capital Fund IV L.P. ("RCF"), Samara Capital Inc. ("Samara"), Pan Pacific Metal Mining Corporation ("PPMMC"), China Mining Resources Group Limited ("China Mining"), Transaminvest S.A. and RCF Management L.L.C. (together, the "Dissidents").

Employment Agreements

In the Dissident Circular, the Dissidents refer to employment agreements with Selywn's employees and the change of control payments payable thereunder. The Dissidents state that these agreements were entered into under the supervision of the current Selwyn board. The Dissidents' statement is inaccurate, as all employment agreements were already in place when the Selwyn board was reconstituted in September 2012. The Dissidents have conveniently avoided discussing their own involvement with the approval of the employment agreements.

The employment agreements were entered into between 2008 and 2011. Mr. Russell Cranswick, nominee of RCF, and Mr. Yun B. Choi, nominee of PPMMC, served on the board of directors of Selwyn during the time period in which most of these employment agreements were approved. Mr. Cranswick served as a Selwyn director from August 2008 to September 2012, and Mr. Choi served as a Selwyn director from July 2009 until May 2012. For the Dissidents to express such surprise in regards to the employment agreements is disingenuous.

The Dissident Circular also states that the Liquidation Resolution would "unnecessarily require those change of control payments be paid out…" This statement by the Dissidents is inaccurate. The employment agreements provide change of control payments on a "double trigger" basis. In order to be triggered, there must first be a change of control event, and then the employment of the employee must either be terminated or the employee must have good reason to terminate his employment as a result of constructive dismissal. These provisions are market standard terms in such agreements.

The sale of the Company's remaining interest in the Selwyn Project, as a sale of substantially all of the assets of the Company for which shareholder approval was sought and obtained, constitutes a change of control event under the employment agreements. The Liquidation Resolution has no bearing on the determination as to whether a change of control event has been triggered under the employment agreements, and the Dissidents' statement to that effect is inaccurate. In fact, the Dissidents have made it clear that their proposed nominees will distribute substantially all of the cash available to the Company and effect the possible wind-up or sale of the Company. As a result, if successful at the June 17th meeting, the Dissidents will control decisions with respect to the termination of employees and the triggering of any severance payments.

Since the Selwyn Project sale has now been completed, the change of control payments will be triggered under any scenario, including under the Dissidents' strategy, which involves the termination or constructive dismissal of the employees in question.

Return of Capital

In its May 21, 2013 proxy circular (the "Company Circular"), the Company states that a return of capital would be taxed similarly to the liquidation distribution. However, the Dissidents have ignored the fact that any return of capital outside of the liquidation context also requires the commensurate reduction in the Company's stated capital, and that the Business Corporations Act of British Columbia requires that any reduction of a company's capital must be approved by a special resolution of shareholders or by court order. If no such shareholder authorization or court order is obtained, the distribution to shareholders will be a taxable dividend. The Dissident Circular does not address this approval requirement or the timeline required to obtain such approval.

The Dissident Circular also ignores the statements in the Company Circular indicating that the resolution appointing the liquidator also instructs the liquidator to consider an interim distribution of capital to shareholders to the extent and in an amount that the liquidator considers prudent and appropriate. Such a distribution would be taxed as a return of capital and not a taxable dividend.

Adjournment of April Annual General Meeting

The Dissident Circular states that Selwyn postponed its April 22, 2013 annual general meeting (the "First AGM") "…upon learning that shareholders holding approximately 50% of the shares of the Company intended to vote in favour of an alternative slate of directors." Samara announced its dissident slate of directors one day before the proxy cut-off for the First AGM, and in its press release it made misleading statements about the level of shareholder support for its proposal. As of the proxy cut-off on April 18th, no proxies in support of Samara and its nominees were received by the Company's transfer agent. Prior to the Company approving the adjournment on April 19th, none of RCF, PPMMC, China Mining, Transaminvest S.A. or RCF Management L.L.C. had expressed to the Company their intention to support Samara and its nominees. As a result, the Company acted appropriately in adjourning the First AGM.

This press release contains forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") regarding change of control payments under the employment agreements and liquidation payments to shareholders. These forward-looking statements are based on assumptions and judgments of management regarding future events or results that may prove to be inaccurate as a result of the results of regulatory review, dissident shareholder actions or other risk factors beyond Selwyn's control.

Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. Selwyn's actual results, programs and financial position could differ materially from those anticipated in such forward-looking statements as a result of numerous factors, many of which are beyond Selwyn's control. These factors include, but are not necessarily limited to, court and regulatory review and rulings, the availability of funds, and general market and industry conditions. There is no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on this information. Selwyn does not undertake to update any forward-looking statements, except as, and to the extent required by, applicable securities laws. For more information about the risks and challenges of Selwyn's business, investors should review Selwyn's Annual Information Form dated March 28, 2013 and its management's discussion and analysis available at www.sedar.com.

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.

Contact Information

  • Selwyn Resources Ltd.
    Dr. Harlan Meade, President and CEO
    (604) 801-7240 or Toll-free: 1-888-989-9188
    International toll-free: 800-7581-2133

    Selwyn Resources Ltd.
    Carlos Gonzalez, Manager of Investor Communications
    (604) 801-7240 or Toll-free: 1-888-989-9188
    International toll-free: 800-7581-2133
    (604) 689-8355 (FAX)
    info@selwynresources.com
    www.selwynresources.com