Mosquito Consolidated Gold Mines Limited V.MSQ

RE: RE: RE: : RE: Did they come for them?

[halcrow]

 Since you seem to know so much about the dissident's plans Halcrow, why don't you tell us RIGHT NOW (before Shaun jumps in) exactly what their plan is if they get control of the board/company?

 

And below, they state what they won't do and won't allow to be done.

 

Mosquito dissident group takes hit and strikes back

2011-12-12 10:50 ET - News Release

Mr. Hongxue Fu of the concerned shareholders of Mosquito Consolidated reports

CONCERNED SHAREHOLDERS OF MOSQUITO CONSOLIDATED GOLD MINES LIMITED RESPOND TO MANAGEMENT'S NEWS RELEASE

The concerned shareholders of Mosquito Consolidated Gold Mines Ltd. wish to correct errors and omissions in the news release from current management of Mosquito on Dec. 9, 2011. Management's news release was in response to the concerned shareholders' Dec. 7, 2011, news release and information circular which are available at the website of Laurel Hill, the company's proxy solicitation agent. The concerned shareholders are the current chairman of the board of Mosquito (Hongxue Fu), the current exploration manager, member of the board of Mosquito and the technical expert behind the CuMo project team (ShaunDykes), and Mosquito's largest shareholder (IEMR H.K.).

Did the board of Mosquito address the concerns of the concerned shareholders?

The Mosquito news release was signed by Brian McClay, the president of Mosquito, "On behalf of the board." Both Mr. Fu and MrDykes are members of the current board and should have been notified had a board meeting been called. There is no mention of the board or the special subcommittee of the board meeting to consider the serious concerns outlined in the concerned shareholders' circular and news release. It would appear that it is the president's news release, taking the liberty of speaking on behalf of the board.

In a public company, when the president is the subject of significant criticism, the independent directors usually lead both the internal deliberations and the communication with shareholders, confirming the suspicions of the concerned shareholders that this is not a properly functioning board and that the president is operating solo without proper board involvement.

Lots of words. No specifics. No compelling vision for the future

Management's news release contains lots of words but few specifics and no compelling vision for the future. The news release provides:

• No answer to the concern that over 60 per cent of money raised by Mosquito in the period from March 1, 2010, to June 30, 2011, has been spent on Kirkness, not the world-class asset, CuMo;
• No explanation as to why Kirkness Diamond Drilling loses so much money, why Mr. McClay appointed his son as president of Kirkness, and why Mr. McClay is not willing to sell Kirkness to allow Mosquito to focus on CuMo;
• No explanation of why Kirkness has 127 trucks when a drilling company of this size should have 30 to 40 trucks or why Mosquito owns an airplane and a truck limo;
• No meaningful response to the concern that many of the drilling jobs that money-losing Kirkness does are for companies in which Mr. McClay's family seems to have interests or some relationship;
• No response to the concern that Mr. McClay is not the right person to raise much-needed financing for the CuMo project and take it to the next stage of development;
• Most importantly, no commitment to focus exclusively on CuMo and no plan for getting the financing in place to develop this great project.

Important facts missing that should have been addressed in management's news release

The concerned shareholders urge shareholders to consider these important facts that were omitted from management's release:

1. Management describes MrDykes as the outgoing exploration manager. Not only is this an inappropriate way to inform MrDykes of his impending termination but, more importantly, there is no mention as to the succession plan.
2. Management has attempted to minimize the qualifications and accomplishments of the slate of directors proposed by the concerned shareholders and listed in the blue proxy. The concerned shareholders urge you to read the qualifications of these directors on pages 14 to 17 of the concerned shareholders' circular and compare them with the qualifications of management's proposed slate outlined on pages 6 and 7 of management's circular. The concerned shareholders are confident that you will agree the slate proposed by the concerned shareholders has far more experience in developing deposits and putting mines into operation than management's nominees. Furthermore, Mr. Fu and Mr. Burns have assisted with introducing Mosquito to several of the world's largest financial, mining and steel-manufacturing companies for the purpose of securing a potential significant financing and/or strategic partner for the CuMo project.
3. Management heralds their four independent directors and the 50-per-cent independence ratio. The concerned shareholders' circular outlines doubts as to their so-called independence and that the board acts as directed by the president. The slate of directors proposed by the concerned shareholders will act independently and in the best interest of all shareholders. The only member of the concerned shareholders' five-person new slate who is a full-time member of management is MrDykes, while Mr. Wang has a part-time management role. In addition, the new slate satisfies the independence and financial literacy requirements under securities laws. The new slate of directors intends to appoint an additional director, as stated on page 10 of the concerned shareholders' circular: "Following their election, the new slate will seek to appoint an additional independent director with appropriate experience in mine development or mining operations to assist with the company's new focus on developing the CuMo project. Several candidates have already expressed interest, and proper due diligence would be undertaken to ensure the best fit for the company."
4. The delay in the exploration permitting of CuMo was because Mr. McClay refused to pay the environmental consultants working on the company's environmental assessment in December, 2008. They were finally paid six months later and resumed work; however, there was a further delay because the U.S. Forestry Service took an additional three months to restart its approval process. CuMo was starved for funds at a critical time while at the same time money was being poured into Kirkness.
5. Management's references to permitting and costs are completely misleading. The $200,000 referred to was the budget for the remaining work to be done by the environmental consultants to complete the initial environmental assessment work. By the year-end 2009, the total amount spent was less than the total budgeted amount and, in fact, the work would have been completed by April, 2009, if the president had not refused to pay the environmental consultants. Starting in 2010, several new budgets for additional work were submitted and approved, which make up the balance of the $2-million of spending referred to in management's news release.
6. Management expresses concern about the relationship between IEMR Resources Inc. and Mosquito. A large shareholder usually has a representative on the board because of being a significant shareholder. Mr. Fu and Mr. Wong would abstain from voting on any discussion or voting regarding any potential or perceived conflicts. IEMR has a significant investment in Mosquito and thus, like you, would like to ensure that management is working in the best interest of shareholders and making decisions to maximize the shareholder value. IEMR Resources, and Mr. Fu and Mr. Wong as representatives, are interested in serving on the board because they want the same outcome as you: to increase the share price and make money on their investment while sustaining the long-term viability of the company and continue to grow shareholder value.
7. The unpaid drilling bill owed by IEMR to Kirkness was entirely the responsibility of Kirkness. The drilling company performed poorly and, in addition, charged IEMR approximately 160 per cent of the market rate (approximately $198 per foot drilled compared with a market rate for that project of about $120 per foot drilled). Naturally, IEMR refused to pay the inflated bill and Kirkness recently agreed to settle the bill for a rate of approximately $120 per foot drilled. The amount settled on is less than $1-million.
8. Management claims that the reason for the large sums of money being sent to Kirkness is to pay for bills associated with the CuMo project. The following statement is erroneous: "Nearly all funding for Cumo is made through Kirkness and most expenses of Cumo are incurred by Kirkness." Of the millions spent on CuMo in the applicable period, only $765,000 involved Kirkness and that amount was charged back to Mosquito. The balance was paid directly by Mosquito.
9. Also misleading is the following claim from management: "The main obstacle to advancing the CuMo project has been the delays in the issuance of a permit to access and drill the heart of the deposit." Fully permitted drill pads and drill holes (four pads and eight drill holes) were available to Kirkness in May, 2011. These specific drill locations are far more critical to the project than to "drill the heart of the deposit," which has already been subject to extensive drilling. Despite repeated requests by MrDykes for additional drills to be sent to CuMo, the drills were sent to projects of other companies.
10. The concerned shareholders have co-operated with the subcommittee appointed by the board on Nov. 18, 2011, to investigate concerns raised by MrDykes with the board and MrDykes has provided to the subcommittee a detailed summary of the concerns, together with detailed supporting information (including receipts and details of wire transfers). MrDykes concluded that the subcommittee was not interested in fully investigating these concerns and decided that the investigation was unlikely to address any of the concerns raised by him. The concerns that he and Mr. Fu raised with the board in mid-November resulted in them being excluded from the list of director nominees in management's information circular. As the shareholders meeting was fast approaching and they believed it was important for Mosquito to have a new start now (as opposed to a year from now), Mr. Fu and MrDykes had no other option than to nominate the concerned shareholders' slate of directors on Dec. 7.

Who does CuMo need most? MrDykes or Mr. McClay?

Management indicated in its news release that ShaunDykes, the exploration manager of Mosquito and head of the technical team for CuMo, will be terminated if management's proposed directors are elected. In addition, Mosquito may lose many important members of the CuMo technical team should MrDykes leave.

Shareholders should consider the impact on the CuMo project if MrDykes and other members of the technical team were to leave.