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MGX Minerals Inc
Symbol XMG
Shares Issued 140,385,960
Close 2020-03-09 C$ 0.09
Recent Sedar Documents

MGX Minerals' concerned holders seek to replace board

2020-03-09 12:20 ET - News Release

Mr. Lance Arneson reports

CONCERNED SHAREHOLDERS REQUISITION ANNUAL GENERAL MEETING TO SECURE COMPETENT STEWARDSHIP OF MGX MINERALS AND ENHANCE SHAREHOLDER VALUE

A group of MGX Minerals Inc. shareholders, together owning not less than 5 per cent of the issued and outstanding shares of MGX Minerals, have requisitioned an annual general meeting of shareholders of MGX Minerals for the purpose of replacing the board of directors of the company with a new board capable of ensuring the proper stewardship of the company. The full text of the requisition is included in this press release as schedule A.

Among the principal reasons for this action are:

  • Destroyed shareholder value: The concerned shareholders believe that the board and management of MGX Minerals have destroyed considerable shareholder value and continue to operate the company without a clear strategy focused on maximizing shareholder returns. After a period of prolonged value destruction, the board has shown an inability to reverse continued poor performance or stop MGX Minerals' share price free fall. This is evidenced by the decline of the company's share price from its high of $2 in January, 2017, to 8.5 cents as of March 6, 2020, representing a decrease of 95.75 per cent.
  • Dysfunctional board and entrenchment: The concerned shareholders are frustrated by the ineffectiveness of the board in advancing the company's goals. Rather than focusing on significant issues facing the company, the board has been distracted by litigation initiated by two of the directors over the actions of MGX Minerals' chief executive officer, Jared Lazerson, who has misspent company finances on defending this litigation for the purposes of self entrenchment. This public infighting and loss of confidence in management has diverted finances and attention from the company's business, and must be put to an end before further value is lost.
  • Potential misuse of company finances and inadequate reporting practices: The concerned shareholders have questions regarding the use of company finances for apparent personal expenses, and improper reporting of spending by management and, in particular, Mr. Lazerson. This includes the hiring of a personal bodyguard and driver by Mr. Lazerson at a cost of $1.6-million to the company. The failure to properly account for expenses, and the use of company finances in such a manner, does not appear to be in the best interest of the company or its shareholders.
  • Failure to maintain lithium technology licence, a critical asset to the company: Management of the company failed to perform its responsibilities under the technology licence agreement with PurLucid Treatment Solutions Inc., pursuant to which PurLucid had granted the company an exclusive licence to use its lithium extraction technology. PurLucid informed management of its default under the agreement and the licence has been revoked.
  • Damaged business relationships: Due to financial mismanagement, MGX Minerals now faces several legal actions and claims for payment from previous project partners. These include clients in lithium-rich zones of South America, the United States and Canada.
  • Ineffective shareholder communication: The board and management's poor communication practises and lack of shareholder disclosure is detrimental to minority shareholders and needs to be corrected.
  • Potential dilutive transactions: The concerned shareholders are worried that potential transactions conducted by MGX Minerals in the near future could be highly dilutive and at a material discount to the current share price to the detriment of all shareholders.
  • Failure to address concerned shareholder issues: The concerned shareholders have tried to engage with management to resolve these issues, but have largely been ignored to date.

Recognizing this mismanagement, self interest, entrenchment and ineffectiveness of the board, management and, in particular, MGX Minerals' CEO, Mr. Lazerson, the concerned shareholders seek the removal of all current board members and the nomination of the individuals named herein to the board.

Dr. Preston McEachern

Dr. McEachern is a respected leader in mineral extraction and water management technologies in the oil and gas industry with 23 years of experience in solving water treatment challenges. He is actively engaged by clients in advisory roles, holds a faculty position with a Canadian university, and was the vice-president of research and development at one of the largest North American oil and gas service companies (Tervita) prior to forming Purlucid Treatment. Dr. McEachern currently acts as CEO and president of Purlucid Treatment, a subsidiary of MGX Minerals, and the chief technology officer leading MGX Minerals' development to extract minerals from lithium-rich brines and waste streams.

Randall W. Keller

Mr. Keller is the former vice-president of business development for MGX Minerals, and is credited with the development and writing of the company's joint venture agreement with Eureka Resources to become the first-ever commercial business to extract lithium from oil and gas produced waters. Prior to MGX Minerals, Mr. Keller was director of business development, transmission and land assets, for Berkshire Hathaway Energy Renewables with the geothermal division. Mr. Keller currently consults and advises clients in matters regarding heavy civil construction, geothermal brines, mineral extraction opportunities and the renewable energy industry.

Antonio (Tony) Loschiavo

Mr. Loschiavo prepared the preliminary economic assessment for MGX Minerals' Driftwood Creek magnesium project. Mr. Loschiavo is a professional engineer licensed in the province of British Columbia and is well recognized with more than 20 years of practical experience in mining operations and consulting, where he has worked on major projects in Canada, Europe, Russia, China, and Central and South America. Prior to consulting, Mr. Loschiavo worked for Rio Algom Ltd. and BHP Billiton, developing mineral projects in North and South America. He holds a BASc in mining and mineral process engineering from UBC, and is currently the president of AKF Mining Services Inc. and the vice-president of development for Contact Environmental Inc.

David Simmons

Mr. Simmons previously served as an assistant vice-president of corporate audit within the banking industry where he held the professional certification of certified internal auditor, and worked closely with Bain and Co. Mr. Simmons worked for 20 years with Nike as a director/general manager in offices throughout Asia, at Nike's world headquarters, advancing to a global director role at Nike's world headquarters responsible for managing personnel and operations throughout Asia to negotiate and complete several billion dollars in footwear supply contracts annually. Considered an expert in negotiation and dispute resolution with extensive experience in the banking industry, Mr. Simmons received formal training from Willamette University School of Law. Currently retired, Mr. Simmons is dedicated to protecting shareholder rights and ensuring a smooth transition in management.

Lance Arneson

Mr. Arneson is currently employed as a power engineer working in the Alberta oil sands. He is currently engaged as the control room operator for Suncor Energy Inc.'s base-plant hydro treaters in Fort McMurray, Alta., where he operates oil and gas industrial equipment within safe operating limits to obtain upgraded product for the company's sales and storage team. Mr. Arneson is responsible for maintaining and troubleshooting the operation of the industrial equipment in his control. Prior to his time in the oil sands at Suncor, Mr. Arneson had a career spanning 20 years in retail management, where he rose to the position of store manager for Walmart stores. At Walmart, he championed customer service and operational excellence. Mr. Arneson led teams through large projects including store renovations and relocations as well as new-store buildouts. Mr. Arneson created and executed store budgets to plan, and enforced compliance to government and industry standards.

Over all, the concerned shareholders have chosen a slate of nominees who: (1) will work to turn the company around and seek other needed experts to implement a business plan to maximize shareholder value, (2) are committed to further revitalizing and refreshing the board and management with highly qualified additional personnel, (3) will seek to deploy the company's assets in a focused and effective manner, and (4) are committed to communicating to shareholders the status of the company, and its projects, technologies and plans going forward.

The election of the nominees should be considered as the initial step to mend shareholder trust amid the value-destroying controversy surrounding the board and management.

MGX Minerals has 21 days from the date of the requisition to call and send notice of an annual general meeting to address the matters raised in the requisition, to be held within four months of the date of the requisition. If MGX does not call an annual general meeting, the concerned shareholders will send notice of the annual general meeting to all shareholders.

Mr. Arneson and Mr. Simmons, on behalf of the concerned shareholders and the nominees, welcome the opportunity to engage with fellow shareholders. Mr. Arneson can be reached at 780-381-6510 or by e-mail. Mr. Simmons can be reached at 503-360-3353 or by e-mail.

Information concerning the nominees

As set out in the requisition, the nominees are Dr. McEachern, Mr. Keller, Mr. Loschiavo, Mr. Arneson and Mr. Simmons.

Dr. McEachern of Alberta, Canada:

  • Present and past five years principal occupation, business or employment: CEO, PurLucid Treatment, a water treatment company, and president, PurLucid Consulting Ltd., an environmental consulting business;
  • Number of common shares beneficially owned or controlled (directly or indirectly): 1,473,328 common shares of MGX, 7,436,200 common shares of PurLucid Treatment, a partially owned subsidiary of MGX Minerals.

Mr. Keller of Ohio, USA:

  • Present and past five years principal occupation, business or employment: principal of Randall W. Keller Corp., which provides consulting services for the lithium, geothermal and construction industries. Vice-president of development for MGX Minerals from Jan. 1, 2018, to Aug. 15, 2019. Director of development for Berkshire Hathaway Energy, an energy company, from Jan. 1, 2010, to May 17, 2017;
  • Number of common shares beneficially owned or controlled (directly or indirectly): 16,000 common shares of MGX Minerals.

Mr. Loschiavo of British Columbia, Canada:

  • Present and past five years principal occupation, business or employment: principal mining engineer, president of AKF Mining, an engineering and geoscience consulting firm;
  • Number of common shares beneficially owned or controlled (directly or indirectly): none.

Mr. Arneson of Alberta, Canada:

  • Present and past five years principal occupation, business or employment: power engineer, Suncor, an integrated energy company;
  • Number of common shares beneficially owned or controlled (directly or indirectly): 837,563 common shares of MGX Minerals; the number of common shares of MGX Minerals held by Mr. Arneson was incorrectly stated in the requisition to be 737,563.

Mr. Simmons of Oregon, USA:

  • Present and past five years principal occupation, business or employment: no present or past five years occupation, business or employment;
  • Number of common shares beneficially owned or controlled (directly or indirectly): 1.55 million common shares of MGX Minerals.

Advisers

The concerned shareholders have retained Borden Ladner Gervais LLP to act as legal advisers on their behalf.

Schedule A

Requisition of annual general meeting of shareholders of MGX Minerals

CDS & Co. of 100 Adelaide St. West, suite 300, Toronto, Ont., M5H 1S3, being the holders of not less than 5 per cent of the issued and outstanding common shares of MGX that carry the right to vote at a shareholders meeting hereby requisition the board of directors of MGX to call a meeting of the shareholders of MGX, on an expedited basis and by no later than April 11, 2020, for the transaction of the following business:

  1. To consider and, if thought advisable, to pass four ordinary resolutions to remove each of the following incumbent directors of the board: Mr. Lazerson, Andris Kikauka, Michael Reimann, Lyndon Patrick;
  2. If any removal resolution is passed, to consider and, if thought advisable, to pass an ordinary resolution fixing the size of the board at five directors;
  3. If any removal resolution is passed and, if thought advisable, to pass five ordinary resolutions electing each of the following nominees as directors of the board to fill the vacancies created by the removal resolutions and the board size resolution: Dr. McEachern, Mr. Keller, Mr. Simmons, Mr. Arneson, Mr. Loschiavo;
  4. The transaction of such other business as may properly come before the meeting.

With respect to the appointment resolutions, if the number of nominees for such election of directors is greater than the number of vacancies created by the removal resolutions and the board size resolution, then those nominees receiving the greatest number of votes will be declared elected until all such vacancies have been filled, and if the number of such nominees for election is equal to the number of vacancies to be filled then all such nominees will be declared elected.

In the event that the board fails to call the meeting within 21 days after receiving this requisition, the board is hereby notified that Johann Lochner or Lucy Mullins will call the meeting. This requisition is made pursuant to Section 167 of the Business Corporations Act (B.C.).

Mr. Lochner and Ms. Mullins hereby represent and warrant that, together, they are the holders of not less than 5 per cent of common shares.

This requisition instrument may be executed in counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this requisition instrument by telecopy or other electronic transmission shall be effective as delivery of a manually executed signature page of this requisition instrument.

Dr. McEachern owns, directly or indirectly, 100 per cent of the issued and outstanding shares of PurLucid Consulting. PurLucid Consulting owns 38 per cent of the issued and outstanding shares of PurLucid Treatment Solutions Inc., a partially owned subsidiary of MGX. MGX owes PurLucid approximately $1.1-million in connection with a lithium technology development licence agreement between the parties from the commencement of the financial year ended July 31, 2019, to January, 2020. While the licence agreement was cancelled in January, 2020, the outstanding unpaid amounts remain due and payable.

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