Golden Phoenix Minerals Inc GPXM

The Claims

[Rocks123]

Thanks for posting the link to the GP filing of complaint.

 

I have several observations.

1. The basis of the complaint is that Waterton and Scorpio colluded to delay the reports which caused GP harm. GP had entered into an agreement to fund their Panama project which had large financial commitments and the financing of those committments was provided by Waterton. Waterton is alleged to have done this deal knowing that GP was not going to make their committments and they could then steal the MR propoery.
2. They allege that Scorpio has a special relationship with Waterton that includes Waterton as senior secured lender and "Hawley" has been retained to assist with then with sourcing / reviewing deals therefore they are conflicted.
3. They alleged that had they been provided with the resource estimate and depending on the reserves, the property value would be valued anywhere between $13,500,000 to $51 M for their 30 % interest. They seem to think that Scopio would be in a position to buy it or it could be sold to another party thereby providing the cash in time for GP to make its payments to Waterton and Silver Global.

 

Here is my quick assessment of the claims....

 

Point 1. above

 

1. It would be considered a high risk venture to enter into any agreement with a lender or property vendor that called for payments and milestones by pledging a start up Gold mine. There is no mention of a contract between Scorpio and GP stating the time frame in which commercial production must start or when a 43-101 must be completed. For GP to have entered into a contract with Waterton and Silver Global(Panama Property Vendor) that called for payments of cash under the assumption Scorpio's mine start up and 43-101 would be ready is a high risk proposition. Clearly, GP is to blame for entering into such a contract. They should have sought some legal assistance with tech wording of the contracts to provide an out clause.
2. Unless GP can produce a document or contract that prevents "Hawley"   from working with Waterton they really have no case. They knew Waterton was the secured lender and that Scorpio had a relationship with Waterton. That is not an argument, it is a fact. I am not sure why Scorpion can only sell the Gold to Waterton but I suspect, the sharp pencils at Waterton wanted to make sure they were getting their money or the Gold as security. That is common sense in my books
3. If GP had not put a gun to their own head with their Waterton contract, they would not be in this position. What were they thinking. The contract calls for commercial production as 3500 oz per month. Anyone with experience knows that start up do have issues and 43-101 do take time to complete particularly when regulators are cracking the whip on over zealous 43-101 reports. They severely limit resource estimates to proven and do not take kindly to unsubstantiated probable or inferred. These reports take a lot longer that you think and given the number of mining companies all scrambling for reports, the industry is overwhelmed. Nobody is getting reports out on time, at least those being done by reputable firms whose reputations are on the line. 

 

Bottom Line - it is very difficult to prove collusion, although GP has outlined some compelling arguments and assertions, without a smoking gun or direct evidence, they cannot prove it. It would be hard to imagine that Waterton would sully their reputation over a relatively small deal. Not likely. Waterton claims that that GP breached the contract but that is no reason to take the drastic steps to squeeze out GP. They must have other more pressing insights into GP and I believe it relates to the funding of the Panama project.

 

They will have to provide insight and evidence and once they do, they will be allowed to exercise the option to acquire GP's 30% stake in Mineral Ridge. It is simply a matter of when not if. GP could simply go out and find a white knight to lend or give then the $8M owed to Waterton but that does not seem possible at this late stage. If I had $8 M, I would do the deal and maybe give GP a net 5% interest but not much more. You can't legislate or make a defense based on stupidity and that is why GP is most likely done.

Good luck !