more shareholder dilution - as an addendum to the letter that was sent to all known institutional shareholders (below):
In the CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2021 that was filed on SEDAR May 13/21, the number of ESM common shares has increased from 169,750,514 to 171,250,514. This shareholder dilution is a result from an internal share option exercise of 1,500,000 shares to ESM Directors.
Also in the Management Discussion and Analysis For the three months ended March 31, 2021 (all amounts in U.S. dollars) filed on SEDAR May 13, 2021, "the Change in fair value of investments has resulted in a loss in Q1 2021 of $206,011. This expense represents the change in market value of the Company’s holdings of Bluelake Mineral shares which were acquired in Q3 2020."
- this letter was sent to all known institutional shareholders
Euro Sun Mining Inc 2021 ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS - June 21, 2021
Re: Vote “WITHHOLD” for Scott Moore as Director
: Vote “AGAINST” the Share Incentive Plan
To all institutional shareholders of Euro Sun Mining Inc (ESM):
Many retail shareholders are fed up with Scott Moore’s refusal to work in the best interest of the shareholders of ESM. The NOTICE OF 2021 ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS is now released as mail outs and filed on SEDAR. If you read the MANAGEMENT INFORMATION CIRCULAR, ask yourself a question. Will there be anything leftover for shareholders that the Executives of ESM haven’t taken? We need your help to replace Scott Moore with a competent CEO who will work in the best interest of shareholders at a reasonable rate of pay.
Performance
“TORONTO, ONTARIO--(Marketwired - May 19, 2016) - Carpathian Gold Inc. (CSE:CPN) (the "Corporation" or "Carpathian") wishes to announce that it has closed the previously announced financing whereby Forbes & Manhattan Inc. ("Forbes & Manhattan"), Sulliden Mining Capital Inc. and Black Iron Inc. have subscribed to a private placement (the "Private Placement") of units (the "Units") at a subscription price of CAD$0.07 per Unit for aggregate gross proceeds of ten million dollars (CAD$10,000,000).”
“Forbes & Manhattan and its associated entities will own approximately 15.75% of the outstanding Common Shares based on the current outstanding Common Shares of 764,364,355. After giving effect to the exercise of the Warrants, Forbes and its associated entities will own approximately 22% of the outstanding Common Shares. As part of the Private Placement, Forbes will be entitled to appoint that number of additional directors in order to provide it with a majority on the Corporation's board of directors.”
“The board would also like to welcome Mr. Stan Bharti, Mr. Peter Tagliamonte and Mr. Matt Simpson to the board of Carpathian. Additionally the Board of Carpathian would like to announce the appointment of Mr Scott Moore as the new interim CEO of Carpathian. Mr. Moore is a seasoned capital markets executive and current COO of Forbes and Manhattan Inc.” On Aug. 18, 2016, Carpathian Gold Inc announced a name change to Euro Sun Mining Inc.
From the above press release, Scott Moore was appointed to be the new CEO of ESM by Forbes & Manhattan on May 19, 2016. It stipulates within the MANAGEMENT INFORMATION CIRCULAR that “the CEO’s primary role is to manage the Corporation in an effective, efficient and forward-looking way and to fulfil the priorities, goals and objectives determined by the Board of the Corporation in the context of the Corporation’s strategic plans, budgets and responsibilities, with a view to increasing shareholder value.”
During the last 5 years with Scott Moore as CEO, the price of an ESM share has fallen from $1.27 to $0.38 today, having lost 70% of its value. $57 million dollars cash has been spent from 12 private placements that increased the total outstanding shares to 169 million. Initially, there were about 42 million shares outstanding.giving a dilution factor of about 400%. Forbes & Manhattan and insiders have sold all of their shares putting downward pressure on the share price. Other comparable companies, that ESM mentions with similar grade and reserves, are worth many times more in value. Over these years, Scott Moore has paid himself millions of dollars in management fees and share based compensation for this dismal performance.
Compensation
Scott Moore 2020 2019 2018
Salary/Fees 430,000 360,000 360,000
Sharebased awards 92,000 770,500 446,500
Optionbased awards 532,953 72,176 Nil
Annual incentive plans 250,000 Nil Nil
Total Compensation $1,304,953 $1,202,676 $806,500
The compensation of $1,304,953 that Scott Moore received last year is a ridiculous amount for a penny stock company that has no current source of operating cash flow, especially in comparison to other similar junior mining companies
The Management Information Circular states that ”in 2020, the Corporation engaged Human Well (the “Compensation Consultant”) to review the Corporation’s compensation practices against a comparator group of 15 companies of similar stage of development, size and complexity identified by the Compensation Consultant and agreed by the Corporation. Those benchmark companies included NorZinc Ltd, Moneta Porcupine Mines Inc., INV Metals Inc., Dynacor Gold Mines Inc., Anaconda Mining, Erdene Resource Development Corporation, Copper Mountain Mining Corporation, O3 Mining, Troilus Gold Corp., Josemaria Resources Inc., Western Copper and Gold Corporation, Gold X Mining Corp., Bluestone Resources Inc., Belo Sun Mining Corp. and Sierra Metals Inc.”
Since 2020, two of these companies have been sold and two of them have recently replaced their CEO. According to ca.wallmine.com, the total compensation of each CEO/President and COO/CFO of the remaining companies as of April 2021 are listed below:
CEO / COO / Share Market
President CFO Price Cap
Euro Sun Mining Inc $ 1,304,953 $ 712,612 0.38 $ 63.43M
Moneta Porcupine Mines Inc 290,762 232,729 0.40 221.59M
Dynacor Gold Mines Inc 453,576 325,486 2.58 100.69M
Anaconda Mining 346,299 331,875 0.76 124.08M
Erdene Resource Development 466,246 227,040 0.40 106.08M
Copper Mountain Mining Corp 1,409,590 700,572 4.39 903.93M
Troilus Gold Corp 380,000 252,689 1.20 182.19M
Josemaria Resources Inc 360,114 349,809 0.99 374.58M
Western Copper and Gold Corp 314,650 247,950 3.14 426.40M
Belo Sun Mining Corp 780,004 332,225 0.73 332.19M
Average Of All Above $ 533,471 $ 333,375
Difference vs ESM (-771,482) (-379,237)
Average Of Penny Stocks Only $ 448,685 $ 294,736 (< $1.00)
Difference vs ESM (-856,268) (-417,876)
It is unlikely that any of these CEOs took a pay cut this year. You will notice that none of these companies have a share price or market cap less than ESM. This indicates that ESM is the poorest performing company of the group and Scott Moore should therefore be the lowest paid CEO, not the highest paid. The same argument applies to Samuel Rasmussen, the Chief Operating Officer (COO), who entered into a consulting agreement with ESM on Jan 6/21. Only the CEO of Copper Mountain Mining Corp, with a share price 10 times more than ESM making it an inappropriate comparable, is paid slightly more than Scott Moore. The next highest is Belo Sun Mining Corp, not coincidentally another Forbes & Manhattan company. It is left up to the readers of this letter to try to determine how anyone could possibly justify giving an annual compensation package from this comparator group to Scott Moore of $1,304,953 and Samuel Rasmussen of $712,612.
Scott Moore is very aware of his ridiculously overpaid status being involved in the industry for over 25 years. He personally knows many of the other CEOs. It is simply a slap in the face and a complete lack of regard to his own shareholders. The overpayment of the Executives of ESM is by far the biggest threat to the survival of the Company. To make matters worse, a few weeks ago Moore had the audacity to give himself a $70,000 raise, described later in this letter.
Insiders
Being overpaid might be one of the reasons why Scott Moore and insiders have not purchased any ESM shares personally, thereby causing a complete lack of motivation to increase the share price of this company. Obviously, Moore is happy with the slow pace of progress to collect his million dollar salary for as long as possible. However, management clearly gives a dire warning of this cash drain. It states in the CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 filed on SEDAR that “the Company has no current source of operating cash flow, and there can be no assurances that sufficient funding, including adequate financing, will be available to explore and develop its property and to cover general and administrative expenses necessary for the maintenance of a public company. The Company’s status as a going concern is contingent upon raising the necessary funds through the issuance of equity or debt. These matters represent material uncertainties that cast significant doubt about the ability of the Company to continue as a going concern.” This is a very negative self-prognosis towards the ability of the Company to develop a successful mine, even though the current prices of both copper and gold are significantly higher than the amounts used in the DFS.
Within these same financial statements for the Year ended December 31, 2020, total compensation of $3,565,103 was paid to Directors and officers of the company. This amount is $1,240,164 higher than the previous year thus showing a complete disregard towards management’s own misgivings about ability of the Company to continue as a going concern. Any competent CEO would have cut expenses including salaries, not increase them.
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Incentive Program
According to the MANAGEMENT INFORMATION CIRCULAR that was filed on SEDAR an May 13/21, “it is the responsibility of the Human Resources and Compensation Committee to assist the Board with:compensation policies that include evaluating the performance and related incentive compensation entitlement of the CEO.” It is now evident that the "undisclosed Director" that the Company committed to pay a $250,000 bonus on completion of the Feasibility Study in the 2020 financials was Scott Moore. It was paid to him as part of the Annual Incentive Plan. So the Human Resources and Compensation Committee feels that the CEO needs further incentive, over and above the millions in total compensation that he already receives, to be paid a bonus to hire firms to complete necessary project milestones. Most retail shareholders totally disagree with this type of bonus/incentive because completing mining project milestones, like attaining a PEA or a mining licence or a DFS or an EIA, is part of the normal course of doing business and should be regular duties in the CEO's job description. Scott Moore and the other Directors have the same opportunity to purchase shares personally, “to share in the growth and value of the Corporation”, just like any other shareholder. It was shown that Scott Moore and the other Executives are extremely overpaid without further incentive that will only put further strain on the cash flow situation and dilute existing shareholders. Vote “AGAINST” the Share Incentive Plan at the upcoming Annual Meeting on June 21/21. Please note that the Human Resources and Compensation Committee consists of Danny Callow (Chair), Eva Bellissimo and David Danziger, all of which are also up for reelection as Directors at the Annual Meeting.
The Moore Agreement
As filed on SEDAR a few weeks ago, “Scott Moore entered into an amended and restated consulting agreement with the Corporation as of May 12, 2021 (the “Moore Agreement”) for the services of Mr. Moore as CEO of the Corporation. For the 2021 calendar year Mr. Moore will receive a base annual fee of C$500,000, plus applicable goods and services tax. Mr. Moore’s base fee is reviewed on an annual basis, and he may be entitled to bonuses, Options and benefits and the discretion of the Board.”
”The Moore Agreement provides for a severance payment equal to 24 months of base fees plus the average of any cash bonus paid over the prior two calendar years to be paid within 30 days of termination in the event the Corporation terminates the Moore Agreement without cause. The Moore Agreement may be terminated at any time by the Corporation for just cause without notice or payment in lieu thereof and without payment of any fees. Just cause is defined to include, but is not limited to: dishonesty or fraud; theft; breach of fiduciary duties; being guilty of bribery or attempted bribery; or gross mismanagement.”
”In the event that there is a change in control of the Corporation, either Mr. Moore or the Corporation shall have one year from the date of such change in control to elect to have Mr. Moore’s appointment terminated. In the event that such an election is made, the Corporation shall, within 30 days of such election, make a lump sum termination payment to Mr. Moore that 33 is equivalent to 36 months of base fees plus an amount that is equivalent to all cash bonuses paid to Mr. Moore in the 36 months’ prior to the change in control. Therefore, assuming a change of control occurred as at the year ended December 31, 2020, Mr. Moore would be entitled to $1,750,000 upon a change of control. Following a change in control, all Options granted to Mr. Moore shall be dealt with in accordance with the terms of the Stock Option Plan; however all Options granted to Mr. Moore, but not yet vested, shall vest immediately. Similarly, following a change in control, all Common Shares issuable to Mr. Moore under any share compensation plan, but not yet issued, shall be issued immediately.”
The Moore Agreement will cost the Company an additional $70,000 in Moore’s base annual fee plus $65,000 in applicable goods and services tax every year. As discussed earlier, Scott Moore is overpaid already and the Company is concerned about running out of cash and funding. Therefore, it could be argued that the Moore Agreement in itself is gross mismanagement because it unnecessarily hampers the ability of the Company to continue as a going concern, thereby making it invalid. It was approved by Peter Vukanovich, Chairman of the Board, dated at Toronto, Ontario, the 13th day of May, 2021, obviously in time for the Annual Meeting. Please note that Peter Vukanovich is also up for reelection as a Director.
Non-transparency
Further the 2020 financials report an additional consulting and technical expense of $2,514,652 over and above the Feasibility Study cost of $1,933,096. No other details were given. Plus a $250,000 bonus that the Company committed to pay to an "undisclosed Director" on completion of the Feasibility Study, who we now know was Scott Moore. The potential of Stanija seems to have fallen off the map with no explanation whatsoever to shareholders since the Corporation submitted a request to NAMR to participate in a bidding round with the aim of obtaining an exploration license in November 2019. No replies to emails requesting details were received back from the Company, unfortunately reinforcing its reputation for being non-transparent.
Another example of Scott Moore’s non-transparency to shareholders follows:
In a press release in Jan 2019, “Swedish junior resource company Vilhelmina Mineral AB has appointed Scott Moore as new Chairman of the Board. Mr. Moore represents Canadian owner Vilhelmina Minerals Inc. which is indirectly controlled by Canadian investment company Forbes & Manhattan. Mr. Moore's predecessor as Chairman, Michael Timmins, is leaving Forbes & Manhattan and thereby also his assignments in portfolio companies.”
Without prior notice to shareholders, Scott Moore spent millions of dollars of ESM cash and shares in 2018 and 2019 to purchase all the outstanding shares of Vilhelmina Minerals Inc, a private company incorporated in Canada. Vilhelmina Minerals Inc had a 46.9% ownership in Vilhelmina Mineral AB, a private company located in Sweden which owned an interest in exploration and evaluation properties in Sweden and Norway. This positioned Scott Moore to become its Chairman in Jan 2019.
In March 2020, ESM entered into an agreement to sell its interest in Vilhelmina to Nickel Mountain Resources AB. ESM received 96,211,544 shares of Nickel Mountain owning approximately 11.8%. This is reflected in the company financials as losses from discontinued operations of (-$994,274) and (-$3,104,552) for the years ended 2020 and 2019. In December 2020, Nickel Mountain changed its name to Bluelake Mineral AB and in January 2021, it completed a reverse stock split merging 20 existing shares into one new share. Following this reverse stock split, ESM held 4,810,577 shares or 11.8% of Bluelake Mineral.
This stock split of 20:1 is very reminiscent to the 18:1 stock split when Forbes & Manhattan took over ESM in 2016. In March 2021, a Bluelake Mineral press release announced that “a Board member Anders Thorsell was prosecuted for insider trading as a suspect in stock trading on behalf of others and chose to resign from all board and management assignments in the Group.” Anders Thorsell was the former Chief Executive Officer of Nickel Mountain Resources. As of yet, it is not apparent who the “closely affiliated” (insiderscreener.com) other persons were. By the way, the Chairman of the Board of Bluelake Mineral is a lawyer at Forbes & Manhattan
Summarizing, Scott Moore invested millions of ESM dollars and shares in another questionable company without prior notice to shareholders. He spent this money knowing that ESM was concerned “that sufficient funding, including adequate financing, will be available” for its own development.
Future
It is necessary that Scott Moore is removed and replaced with a competent CEO and President who will work on behalf of the best interest of the shareholders of ESM and not for somebody else. Last year Scott Moore received 62% “Votes For” and 38% “Votes Withheld” to narrowly maintain his directorship. How much longer are we going to tolerate this gross mismanagement and disregard towards ESM shareholders?
Vote “WITHHOLD” for Scott Moore as a Director at the upcoming Annual Meeting on June 21, 2021.
Vote “AGAINST” the Share Incentive Plan at the upcoming Annual and Special Meeting of Shareholders on June 21, 2021.
Finally, Directors Peter Vukanovich, Danny Callow, Eva Bellissimo and David Danziger have already been mentioned in this letter. Bruce Humphrey (who is also a Director of ESM) and Brad Humphrey (who is currently the Vice President of Corporate Development) are long time associates of Forbes & Manhattan. We also need a Board of Directors and officers whose number one priority is for ESM shareholders solely.
Please pass this letter on to other ESM shareholders that you know.