VANCOUVER, British Columbia--(BUSINESS WIRE)--Fancamp Exploration Ltd. (“Fancamp” or the “Corporation”) (TSX Venture Exchange: FNC) today announced that it has filed a civil claim in British Columbia Supreme Court (the “Claim”) against Mr. Peter H. Smith, a director of Fancamp and its former President and CEO. Fancamp commenced the Claim to remedy Mr. Smith’s wrongdoing, including his:
- Unauthorized sale of Fancamp’s assets, which caused a loss currently estimated at over $3.1 million;
- Undisclosed transfer of Fancamp’s assets to himself and to other individuals for little or no consideration; and,
- Refusal to disclose Fancamp’s technical and financial information to its Board of Directors (the “Board”).
Fancamp may not yet know everything that Mr. Smith did to hurt the Corporation and help himself. Fancamp recently announced that a formal forensic investigation has been launched, and has strong reason to believe more misconduct and self-dealing by Mr. Smith will be uncovered. The Special Committee will report its findings as they become available and Fancamp may amend the Claim to address any further wrongdoing that the Special Committee identifies.
Mr. Smith Treated Fancamp as His Personal Property
Despite being a widely-held public company, Mr. Smith viewed Fancamp as ‘his company’ to do with as he pleased. Between 1986 and 2020, while Mr. Smith held the positions of Chairman, Director, President and CEO of Fancamp, he entered into numerous self-dealing transactions where he enriched himself, his friends and his business associates by transferring assets of Fancamp to himself or to his associates for little or no consideration. Mr. Smith hid these self-dealing transactions from the Board.
Mr. Smith Paralyzed Fancamp’s Subsidiary, Magpie Mines, For His Own Benefit
One of the self-dealing transactions that Fancamp is aware of involves The Magpie Mines Inc. (“Magpie”), a subsidiary of Fancamp. As discussed on the January 19, 2021 and March 4, 2021 investor calls, a key component of the new management team’s three-pronged strategy is supporting titanium technology. The global titanium dioxide market is over $16 billion and expected to grow at 8-10% rate. Titanium (TiO2) is used in numerous products, such as paint, cosmetics, paper and pulp, and the use of titanium in 3D printing is expected to double to $1 billion by 2026. Magpie is a titanium-rich deposit and the Corporation is creating a new and simplified process to extract the TiO2, which would unlock significant value for Fancamp and its shareholders.
However, Mr. Smith caused Magpie to be incorporated with a capital structure that included a class of special shares (the “Special Shares”). The Special Shares carried the right to appoint 51% of Magpie’s directors and, as a result, the holder(s) of the Special Shares could effectively control Magpie.
The Special Shares should have been issued to Fancamp, but Mr. Smith issued them to himself and two individuals. This meant that Mr. Smith and the two individuals personally controlled Magpie’s Board of Directors.
Mr. Smith ultimately caused Fancamp to acquire 96% of Magpie’s common shares, but none of the Special Shares. This scheme conferred on Mr. Smith and the two individuals’ personal control of Fancamp’s almost wholly-owned subsidiary.
To make matters worse, Mr. Smith then had a falling out with the two individuals. This falling out has effectively paralyzed Magpie as well as the Corporation’s ability to unlock value from the deposit, and destroyed value for Fancamp’s shareholders.
Mr. Smith Squandered Shares of Champion Iron Limited
Fancamp acquired Champion Iron Limited (“Champion”) shares in a series of transactions between 2008 and 2012. The shares of Champion have consistently increased in value since 2016. Fancamp’s Champion shares are a valuable corporate asset that it can deploy to progress its business and create shareholder value.
In 2019, independent director Mark Billings conducted a detailed review of Fancamp’s business and discovered that Mr. Smith had sold large numbers of Champion shares to fund indiscriminate spending, without proper budgets or controls. In response, the Board specifically prohibited any further sale of Champion shares without Board approval.
Mr. Smith defied the Board and never provided proper budgets, continued to sell shares of Champion without Board approval, and authorized exploration expenditures without budget or approval from the Board. These unauthorized sales caused losses estimated to be in excess of $3.1 million.
Mr. Smith Withheld Critical Information from the Board
Mr. Smith resigned as President and CEO of Fancamp after the Board discovered his unauthorized sale of corporate assets. When he stepped down, Mr. Smith had critical technical and financial information that Fancamp needed to properly operate its business. He has refused to provide that information to Fancamp, despite multiple demands.
Mr. Smith’s refusal is illegal. It also shows a complete disregard for the interests of Fancamp and its shareholders. Fancamp will, if necessary, seek a court order requiring that Mr. Smith provide it with all of the documents and information that he has refused to provide.
Advisors
Lavery, de Billy, L.L.P. and Goodmans LLP are serving as legal advisor to Fancamp. Kingsdale Advisors is acting as strategic shareholder and communications advisor to Fancamp. Koffman Kalef LLP is serving as legal advisor to the Special Committee.