Oliver Lennox-King Files Letter and Proxy Circular to Roxgold Shareholders

Highlights Roxgold Record of Destroying Shareholder Value

Inappropriate Grant and Extension of Options 

Urges Shareholders To Vote BLUE Proxy FOR a
New Experienced Board That Will Maximize Shareholder Value

TORONTO, Sept. 4, 2012 /CNW/ - Oliver Lennox-King, a significant shareholder of Roxgold Inc. (TSXV:ROG), today filed a letter and proxy circular urging shareholders of Roxgold to vote for five new director nominees at the annual general meeting of shareholders to be held on September 25, 2012.

In the proxy circular, Mr. Lennox-King highlights a history of failed promises and serious mismanagement under the watch of the current board. The letter exposes how Roxgold's current directors have seen fit to grant most of the stock options to themselves even as they paid themselves outrageous cash bonuses as described in the circular. Their hand-picked replacement nominees failed their very first test as Roxgold directors by allowing an exchange of worthless options for a sweetheart deal that extends their more valuable options for a full year. Mr. Lennox-King urges shareholders to take immediate action and vote for five independent and highly-qualified director nominees - Oliver Lennox-King, Walter Segsworth, Jonathan Rubenstein, Richard Colterjohn and Joseph Spiteri. The nominated directors bring extensive experience in the fields of geology, mining, the administration of public companies, corporate development, corporate governance, and capital markets. Together, their skills will give Roxgold the resources to effectively evaluate and define its flagship Yaramoko gold discovery in Burkina Faso.

"As a shareholder I know Roxgold has great potential for significant value that the current board and management have failed to deliver. We will bring an experienced, highly qualified team of independent directors committed to superior governance and maximize shareholder value.  We urge shareholders to take immediate action and protect their investment," Mr. Lennox-King said.

Mr. Lennox-King encourages shareholders to carefully review the letter (included below) and proxy circular and vote only their BLUE proxy in advance of the proxy voting deadline of September 21, 2012 at 12:00 pm (Toronto Time).

Voting Instructions: For questions or assistance, please contact Kingsdale Shareholder Services Inc. at 1-866-228-8614 toll-free in North America, or 1-416-867-2272 outside of North America (collect calls accepted), or by e-mail at contactus@kingsdaleshareholder.com.

YOUR VOTE IS EXTREMELY IMPORTANT - VOTE YOUR BLUE PROXY TODAY.

The full text of the letter follows:

September 4, 2012

Dear Fellow Roxgold Shareholder:

The time has finally come for real change at our company.  There can be no doubt that Roxgold's current board of directors has proved incapable of creating value and serving your best interests.

The board has repeatedly tried to thwart shareholders' democratic rights since being notified that holders of a clear majority of Roxgold shares intended to vote for my slate of highly experienced and capable nominees:

  • They began by postponing the meeting for a virtually unprecedented two and a half months and re-setting the record date to July 30, 2012.

  • When holders of a majority of Roxgold shares remained unwaveringly committed to my slate and proposal, the board reset the record date for a second time to August 23, 2012.

  • In a final act of desperation, the board scrambled to find a new group of directors and management willing to serve under these embarrassing circumstances.

  • The search for a new CEO and a nearly full board replacement was completed in just seven business days, a record for a publicly traded company.

  • Unfortunately, as described below, the new management slate put forward by the outgoing board has already demonstrated a willingness to endorse the same self-dealing that is so endemic to our company.

This cavalier approach is a stunning betrayal of Roxgold's shareholders.  It is also, unfortunately, just more of the same.

As one of Roxgold's largest shareholders, I am proposing an alternate slate of highly qualified and experienced directors to bring about positive, tangible change for the benefit of all shareholders.  These individuals were chosen carefully and will bring a diverse set of skills and strong governance to move the company forward for the benefit of all shareholders.

Your vote at the September 25 meeting will help decide whether Roxgold should be led by a board and CEO cobbled together in mere days under extreme duress.  The alternative is a carefully selected new, independent board that is aligned with your interests, and has the commitment, experience and ability to finally unlock and maximize Roxgold's true potential value.  I have millions of dollars at stake in this endeavour, in contrast to the new nominees proposed by management who own just 20,000 shares.

Our new board will give top priority to the search for a CEO, but with the care, thoroughness and attention that such a critical decision demands.  Meanwhile, we are delighted that one of our prime candidates for the position, John Dorward, has agreed to serve as interim CEO and president.  Mr. Dorward has over 17 years experience in the mining and finance industries.  Mr. Dorward most recently served as Vice-President - Business Development at Fronteer Gold Inc., and was an integral part of the team that sold the large Michelin uranium deposit, acquired AuEX Ventures Inc. and successfully advanced Fronteer Gold's properties prior to its sale to Newmont Mining Corporation for $2.3 billion in 2011.  Prior to his role at Fronteer Gold, Mr. Dorward was the CFO of Mineral Deposits Limited from 2006 to 2009, where he was responsible for financing the construction of the Sabodala Gold Project in Senegal, West Africa.  Mr. Dorward was previously CFO at Leviathan Resources Limited, an ASX-listed gold producer, prior to its acquisition in 2006, and was Commercial Manager at MPI Mines Limited, an ASX-listed nickel and gold mining company, until it was acquired in 2004.  Before he joined MPI Mines, Mr. Dorward was Manager, Project Finance at Bank West in Perth, where he led numerous debt financings for mining project developments.  Mr. Dorward is currently a non-executive director of Pilot Gold Inc. and Navarre Minerals Limited, an ASX-listed explorer.

If you are concerned about Roxgold's future and would like to know more about why I have taken the time, energy and expense to propose these changes, please read the enclosed proxy circular. I am confident you will agree that the facts speak for themselves, and that the solution is clear.

Please then complete the BLUE proxy to vote FOR the election of the shareholder nominees.

In making your decision, consider the following:

  • Roxgold's dismal share price performance under the current board: Roxgold's shares fell from $2.27 on March 5, 2012, to $0.56 on July 6, 2012 (the last trading day before I announced my intention to replace the board), a decline of no less than 75.3% in just over four months.

  • Excessive option grants to incumbents: Since the current board took over in late 2010, it has awarded approximately 12.5 million options, despite the fact that Roxgold had only 13.5 million shares outstanding in total as recently as of October 26, 2010. This means that the company has now issued more than 98% of available options under its rolling 10% stock option plan. The number of shares outstanding has soared nearly ten times, to 124.8 million shares as of the record date for the meeting. Incredibly, the current directors have seen fit to grant most of these stock options to themselves even as they paid themselves outrageous cash bonuses as described below.  Not only is this a damning example of egregious self-dealing but the lack of remaining available option capacity has seriously hampered Roxgold's ability to recruit and develop an experienced senior management team and technical staff. 

The management circular put out by the new management slate trumpets the fact that the current board has agreed to cancel approximately half the excessive option grants.  This is not only a clear admission of guilt but a completely disingenuous gesture to mask further self-dealing.    Let's put into perspective the new management slate's so-called "new direction and focus":

    • All options the directors voluntarily cancelled were deeply underwater and had been for some time. The share price on August 22, 2012 was $0.55 while 3,525,000 of the options cancelled had an exercise price of $1.25 and the other 1,550,000 options cancelled had an exercise price of $2.00.  Half of the excessive options the directors "voluntarily cancelled" were the options with virtually no value to them.  In light of the current share price, these options obviously have negligible value, if any.

    • None of the other options that were NOT underwater were "voluntarily" cancelled.
    • According to the Roxgold stock option plan approved by shareholders at the last AGM, the surviving options held by the directors that are not standing for re-election would expire 90 days following the meeting.  But the new management slate, acting in concert with the existing board, quietly and without notice or support from the shareholders, approved an amendment to the option plan less than a week ago (on August 27th). This allowed them to cut a sweetheart deal with the four directors who were asked to go.  Now, options that would have expired in 90 days will run for an entire year.

    • To add insult to injury, nowhere was this press released.  Nowhere was this mentioned in the new management slate's letter to shareholders or in their summary document.  Instead, the option plan amendment was buried on page 14 of the new management slate's circular where they tried to pull this off as a "housekeeping" matter.  The actual reliance on the amendment and extension of the option terms of the four outgoing directors was further buried on page 30 of the circular.

    • Actions always speak louder than words.  The new management slate would have you believe that they bring something new to the table.  However in their very first test as Roxgold directors, they failed miserably by allowing an exchange of worthless options for a sweetheart deal that extends their more valuable options for a full year. Why did they not stand up for shareholders and demand that the current board cease and desist from these self-serving actions? WE CANNOT ALLOW SUCH EGREGIOUS SELF-ENRICHMENT TO STAND OR BE CONTINUED.

  • Excessive compensation:  In addition to the excessive option grants, the non-executive directors have also paid themselves aggregate cash bonuses of $240,000 in FY2011. In addition, the current board has taken the unprecedented step of paying the CEO $113,000 for serving as a director of the company.

  • Management concerns: The current board has failed to recruit and develop an experienced senior management team and technical staff to advance the Yaramoko project. Roxgold still has only one senior geologist operating on a rotation basis, and management remains dependent on local geologists and contractors to undertake roles that should be the company's responsibility.  We are also  concerned that the new CEO proposed by the outgoing board and endorsed by the new management slate was selected in a matter of days.  The selection of a CEO is a critical decision for any company and requires careful consideration of the best candidates rather than being rushed through in mere days during a proxy battle over the company's future direction.

  • Governance concerns:  The current board has exhibited a disturbing lack of concern for shareholder interests, reflecting its lack of independence from management, its interest in entrenching itself and management, and the egregious self-dealing outlined above under excessive option grants and excessive compensation. Three of the five nominees in the new management slate are in breach of good governance policies established by proxy advisory firms.  Messrs. Mazur, Jones and Knowles as public company CEOs are serving on an excessive number of boards.  This leaves little time to focus on the hard work ahead in rebuilding Roxgold.  Contrary to statements made in the management circular, Mr. Richards, the proposed CEO, is not independent as he was retained by the company as a paid consultant.  The change of control agreement entered into with the present CEO of the company is a modified single trigger which allows the CEO to resign from the company in the event of a change of control and walk away with 12 months' salary.  Interestingly, there is no disclosure in the new management slate's circular of the contract entered into with Mr. Richards the proposed CEO.

  • A refusal to compromise:  In an effort to avoid the inevitable distraction and unnecessary costs of a proxy contest, I have repeatedly sought a reasonable compromise with the current board. For example, we have offered to retain the services of one of the independent directors and a consulting arrangement for the current CEO pending the appointment of his successor. But my proposals have been routinely ignored or dismissed. The current board clearly remains intent on forcing its will on Roxgold shareholders, the company's owners, and maintaining its stock options rather than pursuing the company's best interests.  In the singular pursuit of their own self-interests, they have undoubtedly incurred considerable costs which will ultimately be borne by the company and its shareholders.

  • The new management slate picked by the outgoing board is not the fresh start Roxgold needs:  One of the independent directors who oversaw the grossly excessive option grants remains as a proposed management nominee. The management circular also discloses that this director, supposedly picked as the most suitable of the existing directors, served on the board of a company subject to a lengthy and still continuing cease-trade order.

  • Technical concerns: We are disturbed by serious deficiencies at Roxgold's flagship Yaramoko project in Burkina Faso. These include: a persistent assay backlog which has compromised timely feedback for guiding drilling and regional exploration activities; inadequate initiatives to address this backlog; the absence of a systematic, scientific approach to drill hole sequencing, including high-risk wide step-out holes; and a lack of timely initiation of other critical project evaluation and community engagement activities.

    Strangely, the new management slate is asking you to ignore these significant failings by endorsing Robert Sibthorpe, the outgoing CEO, as the new vice-president of exploration. It is obvious that the company needs to recruit a new senior exploration team rather than retain the very person who has already failed to advance the Yaramoko project in a technically-sound manner.  This is further evidence that the new management slate is prepared to perpetuate the current board's entrenchment strategy in order to get elected.

About my nominees:

Richard Colterjohn: Mr. Colterjohn has over 20 years of involvement in the mining sector, as an investment banker, director and operator. In 2004, he founded Centenario Copper Corporation and served as the President and CEO and a director, until the sale of the company in 2009. Mr. Colterjohn has served on the boards of six additional publicly traded mining companies, during which time he has served on many governance, audit and compensation committees and a number of special committee roles. He played a key role in the successful defence of MAG Silver Corp from a hostile bid from Fresnillo plc in 2009, the purchase by AuRico Gold Inc. of Northgate Minerals Corp. in 2011, and in the sale of five companies between 2005 and 2011.  Mr. Colterjohn currently serves on the boards of AuRico Gold Inc. and MAG Silver Corp.

Jonathan A. Rubenstein: Mr. Rubenstein is a professional director, with significant board expertise in the mining sector. Mr. Rubenstein's career in the mining sector has included playing a key role during the significant acquisition of Aurelian Resources Ltd. by Kinross Gold Corporation in 2006, Cumberland Resources Ltd. by Agnico-Eagle Mines Ltd. in 2006, Canico Resource Corp. by Companhia Vale do Rio Doce in 2005 and Sutton Resources Ltd. (which owned the Bulyanhulu gold deposit and the Kabanga and Kagera nickel projects in Tanzania) by Barrick Gold Corporation in 1999. Between 1990 and 1999, Mr. Rubenstein was active in Tanzania, including working on reform to the Tanzanian mineral law regime and the form of their first fiscal stability agreement.  Mr. Rubenstein currently serves on the boards of Detour Gold Corp. and Eldorado Gold Inc. He is also the chairman of MAG Silver Corp. where he played a critical role in the successful defence of the company from a hostile bid from Fresnillo plc.

Walter Segsworth: Mr. Segsworth, has 40 years of experience in exploration, development and mining in Canada and overseas. Mr. Segsworth served as a senior officer of several mining companies including Westmin Resources, where he was President and CEO, and Homestake Mining Company, where he was President and COO. He has been a key participant in multiple and significant corporate transactions over the course of his career. Mr. Segsworth is currently lead independent director of Alterra Power Corp. and Pan American Silver. He is also a director of Heatherdale Resources, Gabriel Resources Ltd., NovaCopper Inc., and Telus World of Science.

Joseph G. Spiteri: Mr. Spiteri is an independent mining consultant. Mr. Spiteri has over 35 years of experience in advanced stage exploration, ore reserve estimation, feasibility, construction, operations and acquisitions. Prior to becoming a consultant, he held management or executive positions with Dome Mines Group, Placer Dome Incorporated, Northgate Explorations Limited, Lac Minerals Limited and Campbell Resources Incorporated. He continues to serve as a director on the board of AuRico Gold Inc. and Marathon Gold Corporation.

Oliver Lennox-King: I have over 30 years of experience in the mineral resource industry and a wide range of experience in financing, research and marketing. I have served as the non-executive chairman of the board of Fronteer Gold Inc. until it was acquired by Newmont Mining Corporation on April 6, 2011, and currently a Director of Teranga Gold Corporation which operates a gold mine in Senegal.  In the last 17 years I am proud to have held numerous executive positions and directorships with junior mining companies.

My nominees offer the prospect of a fresh, independent and highly-qualified board.  All have extensive experience as directors or executives of mining companies.  Their experience extends from mining exploration and development to operations, banking, capital markets and mergers and acquisitions.  The accompanying circular provides more detailed information on their backgrounds. With these nominees in place, we can begin creating real value together.

My only goal is to maximize the value of Roxgold for all shareholders by ensuring expert guidance and independent governance.  Please read the accompanying proxy circular carefully.  I am confident that you will reach the same conclusion.

Your vote is crucial. Please refer to the instructions in the circular and sign, date and return the enclosed BLUE proxy no later than September 21, 2012 at 12:00 p.m. (Toronto time). Even if you have previously signed a management proxy form, the more recent proxy automatically revokes the earlier one.

If you have any questions about completing your proxy or if you are a non-registered (beneficial) shareholder holding your shares through a broker, please contact Kingsdale Shareholder Services Inc. at 1-866-228-8614 toll-free in North America, or 1-416-867-2272 outside of North America (collect calls accepted), or by e-mail at contactus@kingsdaleshareholder.com.

Thank you for your support as we move Roxgold forward to a bright future.

Oliver Lennox-King


SOURCE: Oliver Lennox-King

For further information:

Kingsdale Shareholder Services Inc. at 1-866-228-8614 toll-free in North America, or 1-416-867-2272 outside of North America (collect calls accepted), or by e-mail at contactus@kingsdaleshareholder.com

Profil de l'entreprise

Oliver Lennox-King

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