<PAGE>
GRAHAM & DUNN PC
1420 Fifth Avenue, 33rd Floor
Seattle, Washington 98101-2390
(206) 624-8300
Facsimile: (206) 340-9599
April 8, 1999
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street N.W.
Washington, D.C. 20549
RE: GOLDEN QUEEN MINING CO., LTD.
SCHEDULE 14A DEFINITIVE PROXY STATEMENT
Dear Sir or Madam:
On behalf of Golden Queen Mining Co., Ltd., a British Columbia corporation
(the "Company"), we are transmitting the Company's Schedule 14A Definitive
Proxy Statement, pursuant to Section 14(a) of the Securities Exchange Act of
1934, which is being filed electronically via the EDGAR system.
In the event there are any questions concerning the enclosed Definitive
Proxy Statement, please feel free to contact me at (206) 340-9642.
Very truly yours,
GRAHAM & DUNN
/s/ Carmen L. Smith
-----------------------------------
Carmen L. Smith
Enclosures
cc: Golden Queen Mining Co., Ltd.
<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a.11(c) or Section 240.14a-12
GOLDEN QUEEN MINING CO., LTD.
(Name of Registrant as Specified in Charter)
N/A
---
(Name of Persons Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
---
(2) Aggregate number of securities to which transaction applies:
N/A
---
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
N/A
---
(4) Proposed maximum aggregate value of transaction:
N/A
---
(5) Total fee paid:
N/A
---
/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
---
(2) Form, Schedule or Registration Statement No.:
N/A
---
(3) Filing Party:
N/A
---
(4) Date Filed:
N/A
---
<PAGE>
GOLDEN QUEEN MINING CO. LTD.
NOTICE OF ANNUAL AND EXTRAORDINARY GENERAL MEETING
TO BE HELD ON MAY 5, 1999
To Holders of Common Shares:
The Annual and Extraordinary General Meeting (the "Meeting") of the holders
of common shares of Golden Queen Mining Co. Ltd. (the "Company") will be held
at the offices of Lawson Lundell Lawson & McIntosh, 1600 - 925 West Georgia
Street, Vancouver, British Columbia, on Wednesday, May 5, 1999 at 10:30 a.m.,
Vancouver time, for the following purposes:
1. To receive the report of the directors, the audited consolidated financial
statements of the Company for the year ended December 31, 1998 and the
report of the auditors thereon;
2. To elect directors for the ensuing year;
3. To appoint auditors for the ensuing year and to authorize the directors to
fix the remuneration to be paid to the auditors;
4. To consider and, if thought fit, approve a private placement involving the
issuance and sale of an aggregate of 13,250,000 special warrants, each
exercisable for one common share of the Company, and the issuance of
warrants to purchase up to 463,750 common shares of the Company to the
agent in respect of such private placement;
5. To consider and, if thought fit, approve the issuance by the Company of up
to 2,000,000 common shares on a private placement basis in payment of
certain required land payments relating to the Company's Soledad Mountain
Project; and
6. To transact any other business that may properly come before the Meeting
or any adjournment thereof.
The board of directors has fixed the close of business on March 30, 1999 as
the record date for determining holders of common shares who are entitled to
vote at the Meeting.
The report of the directors, the audited consolidated financial statements of
the Company for the year ended December 31, 1998 and the report of the
auditors thereon are contained in the Annual Report dated December 31, 1998
accompanying this Notice of Annual and Extraordinary General Meeting.
Holders of common shares who are unable to be present at the Meeting are
requested to date, execute and return the accompanying form of proxy to
Montreal Trust Company of Canada, 510 Burrard Street, Vancouver, British
Columbia, Canada V6C 3B9 (a self-addressed envelope is enclosed) or to the
Company's registered and records office at 1600 - 925 West Georgia Street,
Vancouver, British Columbia, Canada V6C 3L2, in either case prior to 5:00 p.m.,
Vancouver time, on Monday, May 3, 1999.
DATED at Spokane, Washington, this 6th day of April, 1999.
BY ORDER OF THE BOARD OF DIRECTORS,
Steven W. Banning
President and Chief Executive Officer
<PAGE>
GOLDEN QUEEN MINING CO. LTD.
- -------------------------------------------------------------------------------
PROXY STATEMENT AND INFORMATION CIRCULAR
- -------------------------------------------------------------------------------
Dated as of April 6, 1999
IN THIS PROXY STATEMENT AND INFORMATION CIRCULAR, ALL REFERENCES TO "$"
ARE REFERENCES TO UNITED STATES DOLLARS AND
ALL REFERENCES TO "C$" ARE REFERENCES TO CANADIAN DOLLARS.
GENERAL PROXY INFORMATION
SOLICITATION OF PROXIES
THIS PROXY STATEMENT AND INFORMATION CIRCULAR IS FURNISHED IN CONNECTION WITH
THE SOLICITATION OF PROXIES BY THE MANAGEMENT OF GOLDEN QUEEN MINING CO. LTD.
(THE "COMPANY") FOR USE AT THE ANNUAL AND EXTRAORDINARY GENERAL MEETING (THE
"MEETING") OF HOLDERS OF COMMON SHARES OF THE COMPANY TO BE HELD ON WEDNESDAY,
MAY 5, 1999 AT THE TIME AND PLACE AND FOR THE PURPOSES SET OUT IN THE
ACCOMPANYING NOTICE OF ANNUAL AND EXTRAORDINARY GENERAL MEETING. This Proxy
Statement and Information Circular and the accompanying Notice of Annual and
Extraordinary General Meeting and form of proxy are expected to be mailed to
shareholders of the Company on or about April [ ], 1999.
The cost of solicitation will be borne by the Company. The solicitation will be
made primarily by mail. Proxies may also be solicited personally or by telephone
by certain of the Company's directors, officers and regular employees, who will
not receive additional compensation therefor. In addition, the Company will
reimburse brokerage firms, custodians, nominees and fiduciaries for their
expenses in forwarding solicitation materials to beneficial owners. The total
cost of proxy solicitation, including legal fees and expenses incurred in
connection with the preparation of this Proxy Statement and Information
Circular, is estimated to be $12,000.
VOTING BY PROXIES
The form of proxy accompanying this Proxy Statement and Information Circular
confers discretionary authority upon the proxy nominee with respect to any
amendments or variations to matters identified in the Notice of Annual and
Extraordinary General Meeting and any other matters which may properly come
before the Meeting. As at the date of this Proxy Statement and Information
Circular, management is not aware of any such amendments or variations, or any
other matters to be presented for action at the Meeting.
If the instructions in a proxy given to management are certain, the shares
represented by proxy will be voted or withheld from voting in accordance with
the instructions of the shareholder as specified in the proxy with respect to
the matter to be acted on. IF A CHOICE IS NOT SO SPECIFIED WITH RESPECT TO ANY
SUCH MATTER, THE SHARES REPRESENTED BY A PROXY GIVEN TO MANAGEMENT ARE INTENDED
TO BE VOTED IN FAVOUR OF THE MATTERS REFERRED TO IN THE FORM OF PROXY
ACCOMPANYING THIS PROXY STATEMENT AND INFORMATION CIRCULAR. A SHAREHOLDER HAS
THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A SHAREHOLDER) TO ATTEND AND ACT
FOR HIM AND ON HIS BEHALF AT THE MEETING OTHER THAN THE PERSONS DESIGNATED IN
THE FORM OF PROXY AND MAY EXERCISE SUCH RIGHT BY INSERTING THE NAME IN FULL OF
THE DESIRED PERSON IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY AND STRIKING
OUT THE NAMES NOW DESIGNATED.
<PAGE>
REVOCABILITY OF PROXIES
In addition to revocation in any other manner provided by law, a shareholder
executing the enclosed form of proxy has the power to revoke it by instrument in
writing executed by the shareholder or his attorney authorized in writing or,
where the shareholder is a corporation, by a duly authorized officer or attorney
of the corporation. The instrument of revocation must be delivered to the
registered and records office of the Company, at the address specified in the
Notice of Annual and Extraordinary General Meeting, at any time up to and
including the last business day preceding the date of the Meeting or any
adjournment thereof, or to the chairman of the Meeting on the day (but prior to
the commencement) of the Meeting or any adjournment thereof.
VOTING SECURITIES AND CERTAIN OWNERS AND MANAGEMENT
As at March 30, 1999, there were 34,796,641 outstanding common shares of the
Company ("Common Shares"), each of which carries the right to one vote at
meetings of the shareholders of the Company. Holders of the outstanding Common
Shares whose names are entered on the register of shareholders of the Company at
the close of business on March 30, 1999, the record date, will be entitled to
attend in person or appoint a proxy nominee to attend the Meeting and such
persons will be entitled to vote on a show of hands and, on a poll, will be
entitled to one vote for each of the Common Shares held on that date.
Pursuant to the British Columbia Company Act (the "Company Act") and the
Company's Articles, the affirmative vote of a majority of the votes cast by the
holders of Common Shares represented in person or by proxy at the Meeting is
required for the election of directors and the approval of all other matters
presented for action at the Meeting. Pursuant to the requirements of The Toronto
Stock Exchange (the "TSE"), the affirmative vote of a majority of the votes cast
by certain "disinterested" shareholders represented in person or by proxy at the
Meeting is required to approve the private placement of the special warrants
described under the heading "Item 3. Approval of Private Placement of Special
Warrants and Broker Warrants".
Abstentions and broker non-votes will be treated as present for purposes of
obtaining a quorum with respect to all matters to be considered at the Meeting,
but will not be counted for or against any of the proposals to be voted upon at
the Meeting.
The following table sets out, as at March 30, 1999, the names of, and number of
Common Shares beneficially owned by, or over which control or direction is
exercised by, persons known to the Company to own, or exercise control or
direction over, more than five percent of the outstanding Common Shares; the
names of, and number of shares beneficially owned by, or over which control or
direction is exercised by, each director and officer of the Company; and the
number of shares beneficially owned by, or over which control or direction is
exercised by, all directors and officers as a group. At such date, an aggregate
of 37,066,641 Common Shares were outstanding or deemed to be outstanding
pursuant to presently exercisable options, warrants and conversion rights.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF OWNERSHIP
(ALL DIRECT BENEFICIAL
OWNERSHIP UNLESS
NAME OF OWNER OTHERWISE NOTED) PERCENT OF CLASS
- ------------- ------------------------------ ----------------
<S> <C> <C>
Steven W. Banning (1), (2) 1,062,000 2.87%
Bernard F. Goodson (3) 100,000 0.27%
Richard W. Graeme (4) 200,000 0.54%
Gordon C. Gutrath (1), (5) 220,000 0.59%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF OWNERSHIP
(ALL DIRECT BENEFICIAL
OWNERSHIP UNLESS
NAME OF OWNER OTHERWISE NOTED) PERCENT OF CLASS
- ------------- ------------------------------ ----------------
<S> <C> <C>
Jerrold W. Schramm (1), (6) 115,000 0.31%
Chester Shynkaryk (1), (7) 414,508 1.12%
Edward G. Thompson (1), (8) 213,300 0.57%
- ----------------------------------------------------------------------------------------------------------
All directors and executive officers as a 2,324,808 6.27%
group (seven persons) (9)
- ----------------------------------------------------------------------------------------------------------
Harris Clay(10) 2,974,939 8.03%
Landon T. Clay(11) 3,279,122 8.85%
Goodman & Company(12) 5,621,800 15.17%
</TABLE>
(1) Currently a director of the Company.
(2) Includes presently exercisable options to purchase 1,000,000 Common Shares.
(3) Includes presently exercisable options to purchase 100,000 Common Shares.
(4) Includes presently exercisable options to purchase 200,000 Common Shares.
(5) Includes presently exercisable options to purchase 115,000 Common Shares.
(6) Includes presently exercisable options to purchase 115,000 Common Shares.
(7) Includes presently exercisable options to purchase 200,000 Common Shares.
(8) Includes presently exercisable options to purchase 155,000 Common Shares.
(9) See notes 2 through 8 above.
(10) Consists of: 1,599,472 shares held directly by Mr. Harris Clay; 577,250
shares held by Arctic Coast Petroleum Ltd., with which Mr. Clay is
affiliated for the purposes of disclosure required by United States
securities laws; and 798,217 shares held by the estate of an individual
of which Mr. Clay is the executor.
(11) Consists of: 2,671,095 shares held directly by Mr. Landon Clay; 4,663
shares held by the LTC Corp. Profit Sharing and Retirement Plan, of which
Mr. Clay is a trustee; 26,114 shares held by LTC Corp., with which Mr. Clay
is affiliated; 577,250 shares held by Arctic Coast Petroleum Ltd., with
which Mr. Clay is affiliated for the purposes of disclosure required by
United States securities laws. In addition, Mr. Clay is related to three
charitable trusts, The Landon T. Clay Charitable Lead Trust Dated 11/30/83,
The Landon T. Clay Charitable Lead Trust II and The Monadnock Charitable
Lead Annuity Trust, which hold in aggregate 6,439,842 shares. As Mr. Clay
has no beneficial interest in and does not, directly or indirectly,
exercise control or direction over any of the trusts, he expressly
disclaims any interest therein.
(12) Goodman & Company is a Canadian investment dealer. The shares noted in the
table are held by various funds that are managed by Goodman & Company.
ITEM 1. ELECTION OF DIRECTORS
Each of the persons whose name appears in the table below is proposed by the
management of the Company to be nominated for election as a director of the
Company to serve until the next annual general meeting of the shareholders or
until he sooner ceases to hold office. Pursuant to the Company Act, a majority
of the directors of the Company must be ordinarily resident in Canada and at
least one director must be ordinarily resident in British Columbia.
The following information concerning the respective nominees has been furnished
by them.
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME, POSITION AND RESIDENCE AGE BUSINESS EXPERIENCE SINCE
- ---------------------------- --- ------------------- -----
<S> <C> <C> <C>
STEVEN W. BANNING(1) 47 Mr. Banning has been the President and Chief December 1995
President, Chief Executive Officer Executive Officer of the Company sincer 1995.
and Director From 1986 through 1995, he was employed by
Greenacres, Washington Pegasus Gold Inc., last serving as its Vice
President, Operations. Mr. Banning graduated
from Montana College of Mineral Science &
Technology in 1974 with a degree in mineral
dressing engineering.
GORDON C. GUTRATH(1) 61 Since November of 1995, Mr. Gutrath has also August 1987
Director served as the Chairman of Queenstake Resources Ltd.,
Vancouver, British Columbia which he founded in 1977. Previously, he served as
its President from 1977 until November 1995.
Mr. Gutrath is a professional geologist and a
registered professional engineer in British Columbia.
He graduated from the University of British Columbia
in 1960 with a degree in geology.
JERROLD W. SCHRAMM(2) 38 Mr. Schramm is partner in the law firm of Lawson February 1996
Director Lundell Lawson & McIntosh, a position he has held
North Vancouver, British Columbia since February 1994. He was an associate with the
firm from August 1987 to January 1994. He
obtained an undergraduate degree in commerce
from the University of British Columbia in
1983 and a law degree from the University
of Toronto in 1986.
CHESTER SHYNKARYK(2) 54 Mr. Shynkaryk served as the President of the November 1985
Director Company from 1985 to 1995. Since 1996, he has
Richmond, British Columbia also served as the President of Visionary
Mining Corporation, a mineral
exploration company.
EDWARD G. THOMPSON(1), (2) 62 Mr. Thompson was elected Chairnman of the board November 1994
Director of directors of the Company on January 29,
Toronto, Ontario 1997. Since 1990, he has also served as the
President of E. G. Thompson Mining Consultants
Inc., which he owns. Mr. Thompson graduated
from the University of Toronto in 1959 with a
degree in mining geology and in 1960 earned a
degree in economic geology.
</TABLE>
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
An advance notice of meeting inviting nominations for election as directors, as
required by section 111 of the Company Act, was published in The Vancouver Sun
newspaper on March 12, 1999. Copies of such advance notice of meeting have been
delivered to certain regulatory authorities as required by the regulations under
the Company Act.
ITEM 2. APPOINTMENT OF AUDITORS
BDO Dunwoody were appointed the auditors of the Company on November 13, 1996 and
presently serve in such capacity. At the Meeting, management of the Company will
propose the reappointment of BDO Dunwoody as auditors of the Company to hold
office until the next annual general meeting of
<PAGE>
shareholders of the Company and will also propose that the directors be
authorized to fix the remuneration to be paid to the auditors.
ITEM 3. APPROVAL OF PRIVATE PLACEMENT OF
SPECIAL WARRANTS AND ISSUANCE OF BROKER WARRANTS
PRIVATE PLACEMENT OF SPECIAL WARRANTS
On March 15, 1999, the Company completed a private placement of an aggregate of
13,250,000 special warrants at a price of C$0.40 per special warrant for
aggregate proceeds of C$5,300,000, subject to the receipt of the shareholder
approval being sought at the Meeting. Each special warrant will entitle its
holder to receive, upon exercise and without any additional payment, one Common
Share, provided that if receipts for a final prospectus qualifying the
distribution of the Common Shares issuable upon the exercise of the special
warrants have not been issued by the relevant securities regulatory authorities
by July 13, 1999, each special warrant will be exchangeable, at the option of
the holder, for 1.1 Common Shares. The number of Common Shares issuable upon the
exercise of each special warrant is also subject to customary "anti-dilution"
provisions, as provided for in the special warrant indenture governing the
issuance of the special warrants. Dundee Securities Corporation ("Dundee"),
the Company's agent in respect of the private placement, received a cash fee
of C$185,500 for its services as an agent and "broker warrants" entitling
Dundee to purchase an aggregate of up to 463,750 Common Shares for a period
of up to two years following the closing of the private placement at a price
of C$0.60 per Common Share.
The TSE has approved the private placement, subject to shareholder approval as
described below and the fulfilment of other customary conditions.
The following table sets out the purchasers of the special warrants, the number
of special warrants purchased and the total purchase price:
<TABLE>
<CAPTION>
NUMBER OF SPECIAL
NAME OF PURCHASER WARRANTS PURCHASED TOTAL PURCHASE PRICE
- ----------------- ------------------ --------------------
<S> <C> <C>
BGR Precious Metals Fund Inc. 2,800,000 C$1,120,000
Landon T. Clay 3,350,000 C$1,340,000
Harris Clay 3,000,000 C$1,200,000
Jonathan Chace Clay 350,000 C$ 140,000
Continental Casualty Company 3,750,000 C$1,500,000
---------- -----------
Total: 13,250,000 C$5,300,000
</TABLE>
Twenty percent of the net proceeds from the issuance of the special warrants
were released to the Company upon closing the private placement and the
remaining net proceeds are presently held in escrow. One-half of the escrowed
funds will be released to the Company if the shareholder approval being
sought at the Meeting is received and the remaining escrowed funds will be
released to the Company when receipts for the final prospectus have been
obtained from relevant securities regulatory authorities.
Pursuant to the requirements of the TSE, the private placement requires
approval by a majority of the votes cast at the Meeting, other than votes
cast by Landon T. Clay, Harris Clay, Jonathan Chace Clay, BGR Precious Metals
Fund Inc. ("BGR"), Continental Casualty Company ("Continental") or Dundee, or
any of these parties' associates, affiliates or insiders (the holders of such
shares not being so excluded from voting being hereinafter referred to,
collectively, as the "Disinterested Shareholders"). To the knowledge of
management, the number of Common Shares beneficially owned by such parties,
which will not be counted for the purpose of determining whether the required
level of shareholder approval has been obtained, is 11,522,158.
The terms of the TSE's approval of the private placement provide that, in the
event that shareholder approval is not obtained, the Company may either (i)
issue a maximum of 6,550,000 special warrants to BGR and Continental and a
maximum of 1,000,000 special warrants to Landon T. Clay, Harris Clay and
Jonathan Chace Clay (collectively, the "Clays"); or (ii) issue to BGR and
Continental up to 4,750,000
<PAGE>
special warrants in the aggregate and 3,000,000 special warrants to the Clays.
In the event that shareholder approval is not obtained, the purchasers of the
special warrants have the right to require the Company to refund any or all of
their original subscription amounts upon tendering their special warrant
certificates to the Company.
Management of the Company believes the completion of the private placement of
special warrants is in the best interests of the Company and its shareholders.
The proceeds of the private placement are intended to be used to fund a drilling
program to increase reserves at the Company's Soledad Mountain Project and for
general corporate purposes. Given the current state of the gold equity market,
the Company has no readily available alternative source of funds. In the event
that the private placement is not approved by shareholders, there can be no
assurance that the purchasers of the special warrants will not exercise their
rights to require the Company to refund all or a significant portion of their
subscription amounts. In such circumstances, given the relative unavailability
of funds for junior exploration and development companies in the current gold
equity market, the Company may have to place the Soledad Mountain Project on
"care and maintenance" status before the end of 1999.
In order that the Company may complete the private placement of the special
warrants, the Company requests that the Disinterested Shareholders pass a
resolution in the following terms:
"RESOLVED that the completion by the Company of a private placement of
13,250,000 special warrants, each such special warrant exercisable
for one common share of the Company, all as described in the Proxy
Statement and Information Circular of the Company dated as of
April 6, 1999, is hereby ratified, confirmed and approved."
Such resolution requires the approval of a simple majority of the votes cast
by the Disinterested Shareholders, in person or by proxy, at the Meeting.
The board of directors unanimously recommends that the Disinterested
Shareholders vote in favour of the ratification, confirmation and approval of
the private placement of the special warrants.
ISSUE OF BROKER WARRANTS
At the completion of the private placement of the special warrants, the Company
paid Dundee a cash fee of C$185,500 for its services as agent in connection with
such private placement.
In addition, the Company has agreed, subject to shareholder approval, to
issue to Dundee broker warrants which will entitle Dundee to purchase an
aggregate of up to 463,750 Common Shares for a period of two years following
the closing of the private placement at a price of C$0.60 per Common Share.
The number of Common Shares issuable upon exercise of the broker warrants was
determined as 3.5% of the number of Common Shares issuable upon exercise of
the special warrants.
Under the terms of the TSE's approval of the issue of the broker warrants to
Dundee, shareholder approval is required for the number of broker warrants
which are issuable in respect of greater than 10% of the number of special
warrants elected to be purchased by Continental, with any excess broker
warrants being subject to shareholder approval and the fulfillment of other
customary conditions of the TSE. Given that Continental has the right to
require the Company to refund any or all of its original subscription amount,
the number of broker warrants to be issued to Dundee cannot be determined
prior to the Meeting. Accordingly, the Company requests that shareholders
approve the issuance by the Company to Dundee of broker warrants to purchase
up to 463,750 Common Shares of the Company, or such lesser number of broker
warrants in respect of which shareholder approval is required by the TSE.
The Company has agreed with Dundee that it will not complete any sale of
special warrants to purchasers if it has not received shareholder approval for
the issuance to Dundee of the broker warrants in respect of such sale of special
warrants to such purchasers.
In order that the Company may complete the issue and delivery to Dundee of
the broker warrants, the Company requests that the shareholders pass a
resolution in the following terms:
"RESOLVED that the issuance by the Company to Dundee Securities
Corporation of "broker warrants" to purchase up to 463,750 common
shares of the Company at a price
<PAGE>
of C$0.60 per share for a period of two years, all as described in
the Proxy Statement and Information Circular of the Company dated as
of April 6, 1999, is hereby approved."
Such resolution requires the approval of a simple majority of the votes cast
by the shareholders, in person or by proxy, at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE IN
FAVOUR OF THE RATIFICATION, CONFIRMATION AND APPROVAL OF THE ISSUE AND
DELIVERY BY THE COMPANY OF THE BROKER WARRANTS.
ITEM 4. ADVANCE SHAREHOLDER APPROVAL OF THE
ISSUANCE OF A NUMBER OF SHARES BY PRIVATE PLACEMENT
THAT EXCEED 25% OF THE COMPANY'S ISSUED SHARE CAPITAL
The Company's Soledad Mountain Project property is held (through its United
States subsidiary) under a variety of agreements, including 64 mining leases,
two exploration agreements with options to purchase and five purchase
agreements that are in various stages of completion.
The various property purchase agreements to which the Company is a party
typically require payment by the Company of the purchase price over an
extended period of time. The leases to which the Company is a party typically
require a payment in the form of advance minimum royalties. Under such
agreements, the Company is required to pay an aggregate of approximately
$262,000 during the balance of 1999 and an aggregate of approximately
$395,000 in 2000.
During the next 12 month period in an effort to conserve cash reserves,
management of the Company intends to propose to certain parties to whom
payments are required to be made under the property purchase agreements and
leases that they accept Common Shares in lieu of cash payments. The Company
desires to have the flexibility to conduct one or more private placements for
this purpose which would result in an aggregate of up to 2,000,000 Common
Shares being issued or issuable, representing an aggregate of up to 5.7% of
the Company's issued and outstanding Common Shares as at March 31, 1999.
Under the rules of the TSE, the aggregate number of shares of a listed company
which are issued or made subject to issuance (that is, issuable under a share
purchase warrant or option or other convertible security) by way of one or more
private placement transactions during any particular six-month period must not
exceed 25% of the number of shares outstanding (on a non-diluted basis) prior to
giving effect to such transactions (the "TSE 25% Rule"), unless there has been
shareholder approval of such transaction.
In the event that the private placement of the special warrants is completed,
the application of the TSE 25% Rule would restrict the ability of the Company to
issue any shares by way of private placement until September 16, 1999 (that is,
after six months after the completion of the issue of the special warrants).
The TSE has a working practice that it will accept advance approval by
shareholders in anticipation of private placements that may exceed the TSE 25%
Rule, provided such private placements are completed within 12 months of the
date such advance shareholder approval is given.
Any private placement made by the Company under the advance approval being
sought at the Meeting will be subject to the following additional
restrictions:
(i) it must be substantially with parties at arm's length to the Company;
(ii) it cannot materially affect control of the Company;
<PAGE>
(iii) it must be completed prior to September 16, 1999; and
(iv) it must comply with the private placement pricing rules of the TSE which
currently require that the issue price per Common Share must not be lower
than the closing market price of the Common Shares on the TSE on the
trading day prior to the date notice of the private placement is given to
the TSE less the applicable discount as follows:
<TABLE>
<CAPTION>
MARKET PRICE MAXIMUM DISCOUNT
------------ ----------------
<S> <C> <C>
C$0.50 or less 25%
C$0.51 to C$2.00 20%
Above C$2.00 15%
</TABLE>
(For these purposes, a private placement of unlisted convertible
securities is deemed to be a private placement of the underlying listed
securities at an issue price equal to the lowest possible price at which
the securities are convertible by the holders thereof).
In any event, the TSE retains the discretion to decide whether or not a
particular placement is "substantially" at arm's length or will materially
affect control in which case specific shareholder approval may be required.
In order that the Company may enter into private placements prior to
September 16, 1999 that will result in it issuing and/or making issuable such
number of its Common Shares, taking into account any shares that may be
issued upon exercise of any warrants, options or other rights granted in
connection with the private placements, that will exceed the TSE 25% Rule,
the Company requests that its shareholders pass a resolution in the following
terms:
"RESOLVED, that the issuance by the Company in one or more private
placements prior to September 16, 1999 of such number of securities
as would result in the Company issuing or making issuable up to
2,000,000 Common Shares, all as described in the Proxy Statement
and Information Circular of the Company dated as of April 6, 1999,
is hereby approved."
Such resolution requires the approval of a simple majority of the votes cast
by those shareholders of the Company who, being entitled to do so, vote in
person or by proxy at a general meeting of the Company.
In the event the resolution is not passed, the TSE will not approve any private
placements that result in the issuance or possible issuance of a number of
shares which exceed the TSE 25% Rule, without specific shareholder approval.
THE BOARD OF DIRECTORS BELIEVES THE PASSING OF THE PROPOSED RESOLUTION IS IN
THE BEST INTERESTS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE IN FAVOUR OF SUCH RESOLUTION.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets out the annual compensation, long term compensation and
all other compensation paid during the Company's financial years ended December
31, 1998, December 31, 1997 and December 31, 1996 to: Steven W. Banning, the
President and Chief Executive Officer of the Company, Richard W.
<PAGE>
Graeme, the Vice-President--Operations of the Company and Bernard F. Goodson,
the Vice-President--Administration and Controller of the Company (collectively,
the "Named Executive Officers").
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------------------------------
SECURITIES UNDER
OPTIONS
NAME AND PRINCIPAL POSITION FINANCIAL OTHER ANNUAL GRANTED(2)
YEAR ENDED(1) SALARY BONUS COMPENSATION (#)
- ------------------------------- ------------------ --------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Steven W. Banning Dec. 31, 1998 $220,000 -- $3,600(3) --
President and Dec. 31, 1997 220,000 -- 3,600(3) --
Chief Executive Officer Dec. 31, 1996 118,333 -- 2,100(3) 190,000(4)
Richard W. Graeme Dec. 31, 1998 $125,000 -- -- --
Vice-President--Operations Dec. 31, 1997 125,000 -- -- --
Dec. 31, 1996 64,167 -- -- --
Bernard F. Goodson Dec. 31, 1998 $86,000 -- $3,600(3) --
Vice-President-- Dec. 31, 1997 86,000 -- 3,600(3) --
Administration and Controller Dec. 31, 1996 46,669 -- 2,100(3) --
- ------------------------------- ------------------ --------------- --------------- ---------------- ------------------
</TABLE>
(1) The first two years shown in the foregoing table for each of the Named
Executive Officers covers the years ended December 31, 1998 and
December 31, 1997. The third year shown in the table is for the
seven-month period ended December 31, 1996.
(2) Represents options to purchase Common Shares granted during the year.
(3) Represents automobile allowances paid to Mr. Banning and Mr. Goodson.
(4) On June 2, 1998, the exercise price of all options greater than C$1.00
was reduced to C$1.00. See "Table of Option Repricings".
TABLE OF AGGREGATED OPTIONS EXERCISED DURING THE FINANCIAL YEAR ENDED
DECEMBER 31, 1998 AND FINANCIAL YEAR-END OPTION VALUES
The following table sets out certain information with respect to options to
purchase Common Shares exercised by the Company's Named Executive Officers
during the financial year ended December 31, 1998 and options held by them at
the end of such year.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT IN-THE-MONEY OPTIONS
SECURITIES DECEMBER 31, 1998 AT DECEMBER 31, 1998
ACQUIRED ON AGGREGATE VALUE (#) (C$)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) (C$) UNEXERCISABLE UNEXERCISABLE(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Steven W. Banning -- -- 1,000,000/0 --/--
- ----------------------------------------------------------------------------------------------------------------
Richard W. Graeme -- -- 200,000/0 --/--
- ----------------------------------------------------------------------------------------------------------------
Bernard F. Goodson -- -- 100,000/0 --/--
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The closing price of the Common Shares on the TSE on December 31, 1998
was C$0.52. None of these options were in-the-money at such date and,
accordingly, none of such options had any value.
TABLE OF OPTION REPRICINGS
At a meeting held on January 28, 1998, the board of directors of the Company
determined to reduce to C$1.00 per share the exercise price of all options held
by directors, officers and employees of the Company and its subsidiary which had
previously been granted with exercise prices in excess of C$1.00
<PAGE>
per share. The repricing of the options received the requisite approval from
the TSE and the Company's shareholders at the Annual and General Meeting held
on June 2, 1998. The Company's directors determined that the repricing of the
options was appropriate in light of current market conditions. Given
prevailing historical low gold price levels, the directors were concerned
that the outstanding options did not provide the incentive intended to be
provided by such options. In particular, the directors considered that the
advanced stage of the Company's Soledad Mountain Project, which has now
received all required construction permits, and the Company's successful
efforts in defining substantial project reserves, warranted this action to
ensure that the individuals who have contributed to the Company's success
were encouraged to remain with the Company at this critical stage while it
continues its efforts to obtain project financing and commence production.
The following table sets out certain information with respect to the repricing
of options to purchase Common Shares held by the Company's executive officers
during the financial year ended December 31, 1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
LENGTH OF
MARKET PRICE OF ORIGINAL
SECURITIES SECURITIES AT EXERCISE PRICE OPTION TERM
UNDER TIME OF AT TIME OF REMAINING AT
OPTIONS/SARS REPRICING OR REPRICING OR NEW EXERCISE DATE OF
DATE OF REPRICED OR AMENDMENT AMENDMENT PRICE REPRICING OR
NAME REPRICING AMENDED (#) ($/SECURITY) ($/SECURITY) ($/SECURITY) AMENDMENT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Steven W. Banning June 2, 1998 680,000 C$0.68 C$1.35 C$1.00 30 months
130,000 C$0.68 C$1.51 C$1.00 33 months
190,000 C$0.68 C$2.43 C$1.00 40 months
- --------------------------------------------------------------------------------------------------------------------------
Richard W. Graeme June 2, 1998 200,000 C$0.68 C$1.51 C$1.00 33 months
- --------------------------------------------------------------------------------------------------------------------------
Bernard F. Goodson June 2, 1998 100,000 C$0.68 C$3.00 C$1.00 36 months
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
TERMINATION OF EMPLOYMENT, CHANGE IN RESPONSIBILITIES AND EMPLOYMENT CONTRACTS
During its financial year ended May 31, 1996, the Company, through its
subsidiary, entered into employment agreements with Mr. Banning, Mr. Graeme
and Mr. Goodson. Such agreements have subsequently been amended in certain
respects. Each of such agreements, as amended, provides for the payment of
salary and bonuses, the granting of certain options to purchase Common Shares
and the provision of certain benefits, including those offered to employees
generally.
In addition, such agreements, as amended, also contain certain provisions
relating to the compensation of the employee in the event of termination of
employment (other than for cause). If the Company terminates an employee's
employment for any reason other than for cause, the Company is required to
pay the employee an amount equal to 24 months' salary in the case of each of
Mr. Banning, Mr. Graeme and Mr. Goodson. The employee may terminate his
employment upon six months' prior written notice to the Company.
The agreements, as amended, also provide that if there is a "change in
control" (as defined in the agreements) of the Company and the employee's
employment is subsequently terminated (unless such termination is for cause
or by the employee for other than "good reason" (as defined in the
agreements)), the employee is entitled to receive a lump sum severance
payment equal to two times the employee's then current annual base salary in
the case of each of Mr. Banning, Mr. Graeme and Mr. Goodson. In addition, all
benefits then provided to the employee will be continued for a period of 24
months after termination. Any existing stock options then held by the
employee will vest immediately and may be exercised by the employee at any
time within three months following the date of his termination.
<PAGE>
COMPOSITION OF THE COMPENSATION COMMITTEE
The members of the Compensation Committee during the year ended December 31,
1998 were Edward G. Thompson, Chairman, Chester Shynkaryk and Jerrold W.
Schramm. Mr. Shynkaryk was President of the Company until December 1, 1995 and
has served as the Secretary of the Company since such time. Mr. Schramm is a
partner of the law firm of Lawson Lundell Lawson & McIntosh, the Company's
counsel.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the board of directors is responsible for
reviewing and approving the remuneration of the senior management of the
Company, including the President and Chief Executive Officer, and other
executive officers. The guiding philosophy of the Compensation Committee in the
determination of executive compensation is ensuring that the Company is able to
attract the best possible candidates for management positions, given the high
level of competition for competent management in the mining industry, and to
align the interests of management with those of the Company's shareholders.
The Company's executive compensation policies are designed to recognize and
reward individual contribution, performance and level of responsibility and
ensure that the compensation levels remain competitive with other precious
metals development and mining companies. The key components of total
compensation are base salary and incentives.
The Compensation Committee uses industry compensation data as a basis for
determining appropriate base salary ranges for the executive officers. Within
these ranges, the base salaries of the executive officers are established to
reflect the individual executive's proven and expected contribution and
responsibility.
Stock options are granted to executive officers to align the financial interests
of management with the interests of shareholders of the Company and to encourage
executive officers to focus on strategies and results that enhance shareholder
value in the longer term. The number of options to purchase Common Shares
granted to each individual will depend largely on his level of responsibility
and contribution to the Company's performance.
The Compensation Committee considers, on an ongoing basis, the appropriateness
and effectiveness of the Company's executive compensation policies, given
prevailing circumstances.
Submitted by the Compensation Committee.
EDWARD G. THOMPSON (Chairman)
JERROLD W. SCHRAMM
CHESTER SHYNKARYK
PERFORMANCE GRAPH
The following line graph and table illustrate the annual percentage change in
the cumulative total return on the Common Shares, assuming an initial investment
of $100, as compared to the TSE Gold and Precious Metals Index, for the period
from May 31, 1994 to December 31, 1998:
<PAGE>
[OBJECT OMITTED]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
May 31, May 31, May 31, December December December
1994 1995 1996 31, 1996 31, 1997 31, 1998
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Company 100.0 210.0 508.3 466.7 150.0 160.0
---------------------------------------------------------------------------------------------------------------------
TSE Gold and Precious Metals Index 100.0 101.3 128.8 110.3 62.3 57.8
---------------------------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION OF DIRECTORS
The Company does not pay directors' fees. While the Company has no written
policy or standard arrangements in this regard, it is currently the policy of
the Company to grant options to purchase Common Shares to its directors under
the Company's 1996 Stock Option Plan (the "Plan"). Generally, each director is
initially granted options to purchase an aggregate of 90,000 Common Shares and
such additional number of Common Shares as may be appropriate in particular
circumstances given other responsibilities assumed by the director in the
Company's affairs and contributions made by such director to the Company.
Additional options are granted from time to time to the extent deemed
appropriate.
The Plan provides for the issuance of options to purchase Common Shares to the
directors, officers and employees of the Company and its subsidiaries. The Plan
is administered by the Compensation Committee of the board of directors of the
Company. The Plan provides that a maximum of 3,300,000 Common Shares will be
reserved, set aside and made available for issuance pursuant to options granted
from time to time under the Plan, provided that, under the terms of the Plan, no
person is entitled to be granted options to purchase Common Shares constituting
more than 5% of the number of outstanding Common Shares.
The Plan provides that the exercise price of each option granted shall not be
less than the market price of the Common Shares on the TSE when the option is
granted. The Plan provides that all options granted under such plan will expire
not later than five years after the date of grant and, unless otherwise
specifically determined at the time of the grant of any option, all options
granted under the Plan expire 39 months after the date on which they are
granted.
Options granted to employees of the Company and its subsidiaries under the Plan
will vest, as to one-third of the number of Common Shares issuable upon the
exercise of the options granted, on the date of grant and, as to an additional
one-third of such number of Common Shares, on each of the next two anniversaries
of such date. Options granted under the Plan to other persons vest immediately
on the date of grant.
Options granted under the Plan are not transferable, other than by will or other
testamentary instrument or the laws of succession. The Plan provides that where
an optionee is dismissed, removed or otherwise ceases to be a director, officer
or employee of the Company or its subsidiaries (other than for cause or as a
result of his or her retirement or death), all unexercised options held by such
person terminate on the
<PAGE>
earlier of 60 days after the optionee ceases to be a director, officer or
employee of the Company or its subsidiaries or the normal expiry date of such
unexercised options. Under the Plan, an optionee who retires at or after the age
of 60 or after 20 years of employment by the Company or any of its subsidiaries
may exercise vested options held by him or her at the date of retirement in
accordance with the terms of such options as though the optionee had not
retired. Options held by an optionee under the Plan at the time of his or her
death will terminate on the earlier of one year after the date of death of the
optionee or the normal expiry date of such options. In the event that an
optionee is dismissed as a director, officer or employee of the Company or one
of its subsidiaries for cause, all unexercised options held by such person
immediately terminate.
The following table sets out certain information with respect to options to
purchase Common Shares granted to the directors of the Company, other than the
Company's Named Executive Officers, since the commencement of the Company's
financial year ended December 31, 1998 and not previously disclosed in the
Company's Proxy Statement and Information Circular dated as of April 27, 1998.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
MARKET VALUE
% OF TOTAL OF
OPTIONS SECURITIES
SECURITIES GRANTED TO UNDERLYING
UNDER ALL EMPLOYEES EXERCISE OPTIONS ON
OPTIONS IN THE OR BASE THE DATE OF
GRANTED FINANCIAL PRICE GRANT
NAME OF DIRECTOR (#) YEAR (C$/SHARE) (C$/SHARE) DATE OF GRANT EXPIRATION DATE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chester Shynkaryk 75,000 100% C$0.50 C$0.50 January 19, 1999 January 19, 2004
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
There are no other arrangements under which directors of the Company were
compensated by the Company during the year ended December 31, 1998 for their
services in their capacity as directors and, without limiting the generality of
the foregoing, no additional amounts are payable under any standard arrangements
for committee participation or special assignments, except that the Articles of
the Company provide that the directors are entitled to be paid reasonable
travelling, hotel and other expenses incurred by them in the performance of
their duties as directors. The Company's Articles also provide that if a
director is called upon to perform any professional or other services for the
Company that, in the opinion of the directors, is outside of the ordinary duties
of a director, such director may be paid a remuneration to be fixed by the
directors and such remuneration may be either in addition to or in substitution
for any other remuneration that such director may be entitled to receive.
The aggregate direct remuneration paid or payable by the Company and its
subsidiary (the financial statements of which are consolidated with those of the
Company) to the directors and senior officers of the Company during the
financial year ended December 31, 1998 was $438,200.
Since January 1, 1998, options to purchase an aggregate of 200,000 Common Shares
were granted to the directors and senior officers of the Company as a group at
exercise prices ranging from C$0.50 per share to C$1.00 per share. During the
same period, no options to purchase Common Shares held by directors and senior
officers of the Company were exercised. During the period from January 1, 1998
to March 31, 1999, the closing price of the Common Shares on the TSE ranged from
a low of C$0.36 per share to a high of C$0.60 per share.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
AND CORPORATE REIMBURSEMENT INSURANCE
The Company has purchased insurance for the benefit of the directors and
officers of the Company and its subsidiary against any liability incurred by
them in their capacity as directors and officers, subject to
<PAGE>
certain limitations. The premium, which currently amounts to $45,000 annually,
is paid by the Company.
The policy provides coverage, to a maximum total liability in any policy year of
$4,000,000, in respect of insured losses incurred by the Company, its subsidiary
and each director and officer of the Company and its subsidiary. Certain claims
are subject to a deductible of $75,000 applicable with respect to all losses
resulting from the same event or related events. The Articles of the Company
provide that the Company will indemnify each director of the Company, and the
Secretary of the Company, from and against, among other things, all costs,
charges and expenses incurred by them in an action to which they are made a
party by reason of being or having been a director, or the Secretary of the
Company, as the case may be. The Articles also provide that the Company may
indemnify, among others, directors of the Company's subsidiary and other
officers of the Company and its subsidiary. Any such indemnification pursuant to
the Company's Articles is subject to the limitations set out in the Company Act.
REPORT ON CORPORATE GOVERNANCE
During 1995, the TSE adopted a requirement that listed corporations report
annually to their shareholders on their corporate governance practices and
policies in relation to the guidelines (the "Guidelines") set out in the "Report
of The Toronto Stock Exchange Committee on Corporate Governance" published in
December 1994 and now incorporated in the TSE's listing requirements. The
following is an explanation of the Company's system of corporate governance in
relation to the Guidelines.
MANDATE AND RESPONSIBILITY OF THE BOARD
The board of directors of the Company (the "Board") is responsible for
supervising management in carrying on the business and affairs of the Company.
Directors are required to exercise their powers with reasonable prudence in the
best interests of the Company. The Board has expressly confirmed its commitment
to the principles set out in the Guidelines and has accepted and confirmed its
responsibility for overseeing management's performance in the following
particular areas as set out in the Guidelines:
- - the strategic planning process of the Company;
- - identification and management of the principal risks associated with the
business of the Company;
- - planning for succession of management;
- - the Company's policies regarding communications with its shareholders
and others;
- - the establishment by the Company of, and compliance with, appropriate
environmental policies; and
- - the integrity of the internal controls and management information system
of the Company.
In carrying out its mandate, the Board relies primarily on management to provide
it with regular detailed reports on the operations of the Company and its
financial position. The Board reviews and assesses these reports and other
information provided to it at meetings of the full Board and its committees.
Mr. Banning is a member of the Board, giving the Board direct access to
information on his areas of responsibility. Other management personnel attend
Board meetings on request to provide information and answer questions.
The reports and information provided to the Board on a regular basis discuss the
Company's operations with respect to the exploration and development of the
Soledad Mountain Project and include such matters as the drilling program,
permitting process, property acquisitions, staff additions and changes,
financing and investor relations activities, expenditures and results of
operations and the procedures followed to monitor and manage the risks
associated with the Company's operations. At least semi-annually, management
reports to the Board on its strategic and business plan, performance relative to
that plan and any changes in the plan. From time to time, members of the Board
may be involved with management in developing recommendations to the full Board
on particular issues such as acquisitions
<PAGE>
or financings. Certain areas of the Board's responsibility are delegated to
regular or special committees of the Board which report back to the full Board
on their considerations.
COMPOSITION OF THE BOARD
The Guidelines recommend that a board of directors should be constituted with a
majority of individuals who qualify as "unrelated directors". An unrelated
director is defined as a director who is independent of management and is free
from any interest and any business or other relationship which could, or could
reasonably be perceived to, materially interfere with the director's ability to
act with a view to the best interests of the corporation, other than interests
and relationships arising from shareholding. Based on this definition, the Board
has determined that four of the Company's five directors qualify as unrelated
directors. Mr. Banning, the President and Chief Executive Officer, is a related
director. Although Mr. Schramm is a partner in a law firm that provides legal
services to the Company, the Board takes the view that Mr. Schramm is an
unrelated director, for the purposes of the Guidelines, on the basis that such
relationship could not reasonably be perceived to materially interfere with his
ability to act with a view to the best interests of the Company. The Board does
not have a "significant shareholder" within the meaning of the Guidelines.
The Chairman of the Board, Edward G. Thompson, is not a member of management of
the Company.
COMMITTEES OF THE BOARD
The Board has had two standing committees: the Audit Committee and the
Compensation Committee. These committees are comprised entirely of unrelated
directors with the exception of the Audit Committee, of which the President and
Chief Executive Officer is a member. The Company does not have an Executive
Committee.
The Audit Committee reviews and recommends for approval by the Board the
Company's annual and six-month interim financial statements and all external
financial reporting. It also reviews and follows up on major findings of
financial audits to ensure the Company has an effective system of internal
controls. The Audit Committee has direct access to the Company's external
auditors to discuss and review specific issues as appropriate.
The Compensation Committee has responsibility for matters relating to executive
and director compensation and planning for the succession of management of the
Company.
The Board as a whole takes responsibility for developing the Company's approach
to corporate governance issues, including, among other things, the Company's
response to the Guidelines. The Board as a whole assesses and will make any
changes necessary to improve Board effectiveness and will consider and, if
deemed advisable, establish a formal process of identifying, recruiting,
appointing, re-appointing and providing ongoing development for directors.
DECISIONS REQUIRING APPROVAL OF THE BOARD
Although the Board has delegated responsibility for the day to day management
of the Company to the President and Chief Executive Officer, there are
certain significant decisions which require the prior approval of the Board.
These include decisions with respect to major capital expenditures, the
appointment of and compensation for officers of the Company, the adoption and
amendment of incentive plans, share issues and repurchases, financing
arrangements and material acquisitions and divestitures. Significant
disclosure documents are also subject to Board review and approval.
<PAGE>
RECRUITMENT OF NEW DIRECTORS AND ASSESSMENT OF BOARD PERFORMANCE
The Board recruits new directors as needed from time to time. Any appointment of
a new director requires Board approval and is subject, ultimately, to approval
by the shareholders of the Company at the next annual general meeting of
shareholders of the Company. The Board is responsible for evaluating the
effectiveness of the Board and the performance of directors.
SHAREHOLDER FEEDBACK AND CONCERNS
Under the direction of the President and Chief Executive Officer, the Company
undertakes a comprehensive investor relations program. The scope of the program
includes presentations to and meetings with institutional investors, discussions
with individual shareholders and the maintenance of an ongoing dialogue with
gold industry analysts and other stakeholders. Regular reports with respect to
these matters are made to the Board by the President and Chief Executive
Officer.
BOARD'S EXPECTATIONS OF MANAGEMENT
The process of setting the Board's expectations of management begins with the
development of a strategic plan for the Company. Once the strategic plan has
been approved by the Board, it is management's responsibility to successfully
implement the plan. Management reviews periodically with the Board its progress
to date on the implementation of the strategic plan. On an annual basis,
management also prepares an operating and financial plan for the upcoming year
against which short term performance is measured. Performance in relation to the
annual plan and other short term objectives is reviewed with the Board on a
regular basis.
In the Board's opinion, the current corporate governance practices of the
Company are adequate and appropriate for a company at its stage of development
and are consistent with both the spirit and intent of the Guidelines. The Board
will continue to review, and change where necessary, its approach to corporate
governance.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
TRANSACTIONS WITH LANDON T. CLAY AFFILIATES. On March 19, 1996, the Company's
subsidiary issued two debentures in the aggregate principal amount of
$1,000,000 to The Landon T. Clay Charitable Lead Trust II and The Landon T.
Clay Charitable Lead Trust dated 11/30/83. The debentures carried interest at
a rate of 9.5% per annum and, by their terms, matured March 19, 1998. Each
such debenture was convertible into Common Shares, at the option of the
holder, at a conversion price of C$2.00 ($1.46) per share, subject to
customary "anti-dilution" provisions set out in the debenture instruments.
On January 28, 1998, the Board of the Company approved a reduction of the
conversion price of the debentures to C$0.68 per share, reflecting the market
price of the Common Shares at such time. Following the approval of the TSE,
the debentures were converted into an aggregate of 2,017,941 Common Shares
(as compared to the 686,100 Common Shares that would have been issued if the
debentures were exercised in full at the original exercise price).
In May 1998, the Company completed a private placement of 5,236,000 Common
Shares at a price of C$0.68 ($0.47) per share of which 800,000 Common Shares
were issued to The Landon T. Clay Charitable Lead
<PAGE>
Trust, 600,000 Common Shares were issued to The Landon T. Clay Charitable
Lead Trust II, 2,000,000 Common Shares were issued to The Monadnock
Charitable Lead Annuity Trust and 800,000 Common Shares were issued directly
to Landon T. Clay.
See also "Item 3. Approval of Private Placement of Special Warrants and Issuance
of Broker Warrants".
TRANSACTIONS WITH LAWSON LUNDELL LAWSON & McINTOSH. Jerrold W. Schramm, a
director of the Company, is a partner of the law firm of Lawson Lundell Lawson &
McIntosh, counsel to the Company. During the years ended December 31, 1998,
December 31, 1997 and the seven month period ended December 31, 1996, the
Company paid Lawson Lundell Lawson & McIntosh $46,649, $104,749 and $133,841 for
legal services rendered on behalf of the Company and its subsidiary. No members
of the firm of Lawson Lundell Lawson & McIntosh other than Mr. Schramm owned any
Common Shares, or rights or options to purchase such shares, at December 31,
1998.
YEAR 2000
An issue exists for all companies that rely on computers as the year 2000
approaches. The year 2000 problem is the result of the past practice in the
computer industry of using two digits rather than four to identify the
applicable year. This practice can result in incorrect results when computers
perform arithmetic operations, comparisons or data field sorting involving
years later than 1999. The Company has reviewed its business and processing
systems and determined that the majority of the systems, consisting mostly of
microcomputers and financial and computer aided design applications, are
already year 2000 compliant. The Company continues to work with internal
staff and outside consultants to address the scope of the year 2000 issue and
implement necessary solutions.
The Company is also making inquiries of its suppliers on which the current
development activities and potential operations of the business are
critically dependent to determine their year 2000 readiness. An analysis of
the responses from suppliers and vendors received so far indicates
substantial compliance with year 2000 issues, so that any effect of a third
party's non-compliance is expected to be immaterial to the Company as a whole.
In the last year, the Company has expended approximately $2,000 on its year
2000 review, included with general and administrative expense. It has
budgeted $2,000 over the next year to upgrade, gather information, and
further integrate its business systems in order to avoid disruption of its
operations, liquidity, and financial condition due to the year 2000 problem.
AVAILABILITY OF DOCUMENTS
The Annual Report of the Company dated December 31, 1998 accompanying this
Information Circular contains, among other things, the Company's audited
consolidated financial statements for the financial year ended December 31,
1998, the auditor's report on such statements and Management's Discussion and
Analysis of Results of Operations. Additional copies of the Annual Report and
this Proxy Statement and Information Circular, as well as the most recent
interim financial statements subsequent to the Company's annual financial
statements, may be obtained upon request from the Vice-President -
Administration and Controller, Suite 211-A, Green Flag Building, 104 South
Freya, Spokane, Washington, 99202.
The contents and sending of this Proxy Statement and Information Circular have
been approved by the board of directors.
BY ORDER OF THE BOARD OF DIRECTORS,
Steven W. Banning
President and Chief Executive Officer
<PAGE>
GOLDEN QUEEN MINING CO. LTD.
PROXY
THIS PROXY IS SOLICITED BY THE MANAGEMENT OF GOLDEN QUEEN MINING CO. LTD. ("THE
COMPANY") FOR USE AT THE ANNUAL AND EXTRAORDINARY GENERAL MEETING OF
SHAREHOLDERS OF THE COMPANY TO BE HELD ON MAY 5, 1999 AND ANY ADJOURNMENT
THEREOF.
I, the undersigned, hereby appoint Steven W. Banning or failing him, Chester
Shynkaryk, or instead of either of them,
____________________________________________________, as proxy nominee, with
full power of substitution, to attend, vote and act on my behalf in respect
of all (or ______________ ) of the common shares of the Company ("Common
Shares") registered in my name or designated in a duly executed omnibus
proxy, as the case may be, at the Annual and Extraordinary General Meeting
(the "Meeting") of shareholders of the Company to be held on May 5, 1999 and
at any adjournment of that Meeting. I direct that such Common Shares shall be
voted, or withheld from voting, as specified below (and, if not so specified,
to be voted for the following):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. TO ELECT AS DIRECTORS: For Withhold Vote
Steven W. Banning / / / /
Gordon C. Gutrath / / / /
Jerrold W. Schramm / / / /
Chester Shynkaryk / / / /
Edward G. Thompson / / / /
2. TO APPOINT BDO DUNWOODY AS AUDITORS: For Withhold Vote
/ / / /
3. TO AUTHORIZE THE DIRECTORS TO FIX THE REMUNERATION OF THE AUDITORS: For Against
/ / / /
4. TO APPROVE A PRIVATE PLACEMENT BY THE COMPANY OF AN AGGREGATE OF For Against
13,250,00 SPECIAL WARRANTS, ALL AS DESCRIBED IN THE PROXY STATEMENT / / / /
AND INFORMATION CIRCULAR OF THE COMPANY DATED AS OF APRIL 6, 1999:
5. TO APPROVE THE ISSUE BY THE COMPANY TO DUNDEE SECURITIES CORPORATION For Against
OF "BROKER WARRANTS" TO PURCHASE UP TO 463,750 COMMON SHARES, ALL AS / / / /
DESCRIBED IN THE PROXY STATEMENT AND INFORMATION CIRCULAR OF THE
COMPANY DATED AS OF APRIL 6, 1999:
6. TO APPROVE THE COMPLETION OF CERTAIN PRIVATE PLACEMENTS OF AN For Against
AGGREGATE OF UP TO 2,000,000 COMMON SHARES BY THE COMPANY IN LIEU / / / /
OF REQUIRED PAYMENTS UNDER PROPERTY PURCHASE AGREEMENTS AND LEASES
ALL AS DESCRIBED IN THE PROXY STATEMENT AND INFORMATION CIRCULAR
OF THE COMPANY DATED AS OF APRIL 6, 1999:
</TABLE>
Signed this _____ day of _________________________, 1999.
- ---------------------------------------------------------
(Signature of Registered Holder of Common Shares)
- ---------------------------------------------------------
(Print Name)
If this proxy is not dated, it is deemed to bear the date that it was mailed to
the shareholder.
<PAGE>
THIS IS YOUR PROXY.
PLEASE COMPLETE AND RETURN IN THE ENVELOPE PROVIDED.
<PAGE>
INSTRUCTIONS:
1. IF YOU ARE UNABLE TO ATTEND THE MEETING BUT WISH TO BE REPRESENTED, YOU
HAVE THE RIGHT TO APPOINT A PERSON, WHO NEED NOT BE A SHAREHOLDER OF
THE COMPANY, TO ATTEND AND VOTE ON YOUR BEHALF. IF YOU USE THIS FORM OF
PROXY, BUT WISH TO APPOINT SOME PERSON OTHER THAN STEVEN W. BANNING OR
CHESTER SHYNKARYK AS YOUR PROXY NOMINEE, YOU MUST STRIKE OUT THEIR NAMES
AND INSERT THE NAME OF THAT OTHER PERSON IN THE BLANK SPACE PROVIDED.
That person must then attend the Meeting in order to vote on your behalf.
2. You should indicate your choice on the various items listed by checking
the appropriate boxes. IF NO CHOICE IS SPECIFIED, YOUR SHARES WILL BE
VOTED IN FAVOUR OF: THE ELECTION OF THE NOMINEES OF MANAGEMENT AS
DIRECTORS; THE APPOINTMENT OF BDO DUNWOODY AS AUDITORS; THE
AUTHORIZATION OF THE DIRECTORS TO FIX THE REMUNERATION OF THE AUDITORS;
THE APPROVAL OF A PRIVATE PLACEMENT OF AN AGGREGATE OF 13,250,000
SPECIAL WARRANTS; THE APPROVAL OF THE ISSUANCE OF 463,750 BROKER
WARRANTS; AND THE APPROVAL OF THE COMPLETION OF CERTAIN PRIVATE
PLACEMENTS OF COMMON SHARES BY THE COMPANY IN LIEU OF REQUIRED PAYMENTS
UNDER PROPERTY PURCHASE AGREEMENTS AND LEASES, ALL AS DESCRIBED IN THE
PROXY STATEMENT AND INFORMATION CIRCULAR OF THE COMPANY DATED AS OF
APRIL 6, 1999.
3. To be valid, this proxy must be dated and signed by you, as the
registered holder of Common Shares, or as a person named as a proxy
nominee in respect of the Meeting in an omnibus proxy containing a
power of substitution pursuant to applicable securities laws, or your
attorney. If the registered holder or the person named in an omnibus
proxy is a corporation, this proxy must be signed by an authorized
officer or attorney of the corporation.
<PAGE>
GOLDEN QUEEN MINING CO. LTD.
(the "Company")
TO REGISTERED AND NON-REGISTERED SHAREHOLDERS:
National Policy Statement No. 41 - Shareholder Communication, provides
shareholders with the opportunity to elect annually to have their names added to
a supplemental mailing list in order to receive quarterly financial statements
of the Company. If you wish to receive such statements, please complete and
return this form to:
MONTREAL TRUST COMPANY OF CANADA
4TH FLOOR, 510 BURRARD STREET
VANCOUVER, BRITISH COLUMBIA
V6C 3B9
The undersigned hereby certifies that he/she/it is a beneficial owner of shares
in the Company and hereby requests that the Company add his/her/its name to the
supplemental mailing list.
- --------------------------------------------------------------------------------
NAME (PLEASE PRINT)
- --------------------------------------------------------------------------------
NUMBER STREET
- --------------------------------------------------------------------------------
CITY PROVINCE POSTAL CODE
- --------------------------------------------------------------------------------
SIGNATURE
DATED THIS ________________ DAY OF ________________, 1999.
