HR, kudos to you and MG for taking a stand and writing this letter. I sincerely hope that management takes it seriously.
From: Medinah Minerals Shareholders To: Board of Directors Medinah Minerals
Subject: Termination of July 11, 2012 Purchase Agreement for the Alto de Lipangue Mining Claims
Gentlemen,
Based on a comprehensive review and discussion of the publicly available information and events related to Medinah Minerals’ Alto de Lipangue (ADL) purchase agreement partner, Amarant Mining, and its principal investor, Mr. Johan Ulander, we the undersigned shareholders recommend the following course of action to be taken by Medinah’s Board of Directors as soon as contractually permissible:
1. Should Amarant fail to perform according to any stipulation in the ADL Purchase Agreement, it would be in the best interests of the company to rescind the ADL purchase agreement with no further contractual extensions, renegotiations or other considerations. As such, any offers of funding by Amarant and its affiliates that amount to anything less than the complete and timely initial tranche of $18 million combined with the currently outstanding $5.4/$5.7 million from the sale of the 10% of Alluvia Mining shares and Amarant’s required $5.0 million minimum for drilling and exploration should be refused.
We believe this course of action is prudent and necessary for the following reasons:
a) Amarant and Mr. Ulander have demonstrated an inability to progress development of the ADL project, leaving Medinah no closer to developing and monetizing this asset than it was at the last shareholder meeting more than 14 months ago.
b) Amarant has failed to commence drilling and exploration of the ADL project in a timely fashion and now has no chance of meeting the purchase agreement deadline without the benefit of an extension.
c) Amarant has failed to make any significant tangible financial commitments towards completing the ADL purchase agreement.
d) It is apparent that Amarant and Mr. Ulander misrepresented themselves to Medinah’s Board of Directors regarding their ability to purchase and develop the ADL project.
e) Amarant and Mr. Ulander have made multiple promises on executing terms of the purchase agreement that they have failed to accomplish.
f) Amarant and Mr. Ulander have a history of either non-performance or under-performance with a number of other partners they have entered purchasing agreements with (e.g. Huakan International Mining, Hanson Industries, Mineral Invest, Global Gold Corporation, etc.); all to the detriment to those companies. From these examples, it should be clear that Medinah would suffer, and is suffering, similar fates as these companies have with their Amarant-related transactions.
g) Amarant has failed in its contractual obligation to repurchase 10% of Alluvia Mining shares for the $5.4/$5.7 million purchase price. To that extent, it is important to inform or remind the Board of Directors of the failed share buyback agreement between Mr. Ulander’s Dubai-based Al Madina real estate venture and Global Investment House for shares in HITS Africa, an Al Madina subsidiary telecom company. The agreement is similar in concept and structure to the share buyback agreement between Amarant and Medinah for Alluvia Mining. After failing to honor the $10 million buyback terms of that agreement, Al Madina lost in arbitration after 3 years of appeals and has yet to pay this debt. Mr. Ulander’s history in this regard should not be ignored given Amarant’s failure to buy back the Alluvia Mining shares thus far.
h) Currently the collateral shares of Alluvia Mining are illiquid with no assessable market value and little appreciable progress with the company to believe it will have significant value in the near future. The originally contemplated Alluvia Mining IPO has been delayed while the company is attempting to list on smaller exchanges which do nothing to enhance liquidity or shareholder value.
i) Mr. Ulander’s criminal history of fraud in Finland has raised great concern by shareholders regarding the reputation and the business ethics of Medinah’s ADL purchasing partner and affiliated companies, currently and in the foreseeable future of the current contract.
j) Amarant and Mr. Ulander could be facing possible criminal charges and lawsuits as a result of their improper, potentially illegal, activities involving transactions through IGE Resources and Mineral Invest. These actions were deemed serious enough to cause both KPMG and Baker-Mackenzie, two of the highest regarded organizations in their respective fields, to cease doing business with Amarant. Any potential legal fallout in these matters will likely further hinder Amarant’s ability to fund and develop ADL and/or satisfy their obligations with regards to the purchase agreement.
k) Amarant has posted false/misleading information on their website regarding the ADL purchase agreement as to the nature of their ownership interest. They have also posted information regarding exploration of the ADL which demonstrated their lack of competence and understanding of the project.
l) We are concerned about their geologist’s experience with exploring gold/copper porphyry systems, as well as their experience with doing business in Chile as evidenced by their failure to obtain required permits in a timely manner to start drilling.
m) Based on their actions and inactions with regard to ADL, their other mining projects and the IGE Resources fallout, Amarant has lost all credibility with Medinah shareholders, and likely with the mining investment community. There seems to be little chance that credibility could be restored.
n) Amarant's purported consortium for the ADL project is highly suspect as it is becoming increasingly more difficult to imagine any legitimate non-affiliated companies that would partner with Amarant going forward considering their tarnished record. Certainly Amarant’s reputation at this point increases the risk that consortium members pull out of the ADL project which could further hinder the timely development of the property.
2. As soon as is contractually permitted, Medinah Minerals should pursue a new purchase agreement and/or joint venture with a reputable major mining company that has the demonstrated financial resources and industry expertise to properly develop Alto de Lipangue without delay.
3. If legally necessary and appropriate, the shares of Alluvia Mining should be returned to Amarant Mining if maintaining possession of these shares would otherwise cause protracted delays in moving forward with a new purchasing partner.
4. The terms of the new agreement should reasonably represent the current market value of the property as determined by viable partners. As what has become very obvious, a 15% free carried interest commands little value if the purchasing partner lacks the ability to develop Alto de Lipangue.
5. Any new contract should require a sizeable amount of cash up front upon signing so that the potential partner is financially committed to the ADL project. This was an edict that the BOD had expressed to the shareholders after the original ADL joint venture had dissolved in September, 2011. However, this demand was obviously relented somewhere during the negotiation process with Amarant as evidenced by the 15 months without a payment. It is critical to Medinah shareholders that the company and the ADL project are not strung along without a financial commitment by its ADL partner for a third time.
6. The Board of Directors should regularly update shareholders regarding progress in obtaining a new ADL agreement in the most transparent way possible and not enter into a non-disclosure agreement that prevents the company from providing shareholders with information that is critical towards accurately assessing the current value of their investment. While we understand the need for non-disclosure agreements during the negotiation process, at the time the contract is signed and announced, the contractual milestones should be made public and not be encumbered by the terms of an NDA. One of the greatest causes of shareholder anxiety and discontent has been the company’s inability or unwillingness to share critical contractual milestones, leaving shareholders with no reasonable guidance to assess the status and expectations of their investment. This lack of disclosure has contributed significantly to the declining share price over the last 15 months.
In summary, after 15 months of non-performance, it has become clear that undergoing any kind of business venture with Amarant Mining and Mr. Ulander has been and will be a liability to Medinah and our investment. The current share price reflects this liability towards an ADL asset which should otherwise be richly valued by the market. Based on Amarant’s and Mr. Ulander’s history to date, we feel that extending the ADL purchase agreement any further to accommodate the deficiencies in Amarant Mining would be an unnecessary risk and would cause further delays to the detriment of the company. The sooner Medinah Minerals can extricate itself from this situation, the better it will be for the company, its shareholders, the Board of Directors and the Alto de Lipangue project.
We hope that the Board of Directors takes our collective concerns expressed above under serious consideration.
