In the newsBCSC looking at Barkerville ex Callaghan
2015-06-30 12:22 ET - Street Wire
Also Street Wire (C-BGM) Barkerville Gold Mines Ltd
by Mike Caswell
It appears that the B.C. Securities Commission has been investigating one of Howe Street's best-known promoters, former Barkerville Mines Ltd. chief executive officer Frank Callaghan. There are no details of what this investigation could encompass, but the BCSC cease traded in Barkerville in 2012 after the company claimed to have a massive 10.6 million ounces of gold indicated at its Cow Mountain property. The company later had to reduce the figure to 1.04 million ounces while under a BCSC cease trade order.
News of the possible investigation is contained in a tiny snippet found deep in Barkerville's annual financial results, filed on Thursday, June 25. In the notes to those statements (on page 41 of 50) the company discloses that it will reimburse its former CEO for "all the ongoing legal fees related to BCSC claims against the former CEO." The note does not say who that former CEO is, but it could only be Mr. Callaghan.
The note also does not say why the BCSC would be interested in Mr. Callaghan. Three years ago, however, the regulator had plenty of interest in Barkerville, when Mr. Callaghan was CEO. On June 29, 2012, the company issued a resource estimate for its flagship Cow Mountain property. It claimed to have 10.62 million ounces of gold indicated, with as many as 65 million to 90 million ounces in the same trend. The figures, if correct, would have made the discovery one of the largest gold finds in mining history. The stock hit $1.60 that day. It had been trading between 45 and 80 cents in the weeks leading up to the news.
The estimate quickly drew scrutiny. Within days, the BCSC asked the company for more information about the figures. Barkerville provided a draft technical report, which the BCSC then found to suffer from many problems. The regulator expressed concern about the methods the company used to come up with the estimate, among other things. Problems with the calculation likely resulted in a "material overestimation."
Then, on Aug. 15, 2012, the BCSC issued a cease trade order against Barkerville, citing the company's problems filing an acceptable technical report. The cease trade remained in effect for about 10 months, while the company updated the Cow Mountain estimate. When the company issued the updated version on June 18, 2013, the gold estimate was a fraction of the original amount. The company reported 1.04 million ounces of gold indicated.
Meanwhile, Barkerville's shareholders were becoming uneasy with management. One, named Rex Harbour, filed a petition in the Supreme Court of British Columbia, asking a judge to force the company to hold an annual general meeting. He complained that the company was in precarious financial condition, having spent over $100-million on Cow Mountain without creating an economic prospect. He also said the company had been delaying its AGM.
In response, Barkerville said there was no urgent need to call an AGM. The company had sufficient cash to continue and had received approval from the Registrar of Companies to delay the meeting. Barkerville later resolved the dispute out of court by setting a firm date for its AGM.
After that meeting, on April 16, 2013, Mr. Callaghan remained a director and the CEO. The term turned out to be temporary, however, as he resigned as CEO on July 29, 2014, and later as a director as well. His stated reason for leaving was to allow the company to bring in management that would be more appropriate for a producing company.
Barkerville later agreed to pay him severance of $20,000 per month for two years. The company disclosed those payments in the same section of its annual report where it mentioned the BCSC legal fees. In addition, the company will grant him an option to buy 401,161 shares.
The BCSC would not say anything about any claims against Mr. Callaghan on Monday. "We do not confirm or deny investigations," spokesman Ken Gracey told Stockwatch.
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