Mining Company research board

[jetpilot1101]

1MB, this post is a bit lengthy. Could you please comment on the references this poster makes to 10b5-1 plans, rule 144 and the debt conversions by insiders? Thanks.

Thanks again for all of your help in aiding communications. I knew that Greg Chapin had entered into a 10b5-1 plan but it appears that Les and JJ also did by the text of Les's note. There is a rule in the '34 Act that forbids the use of "manipulative or deceptive" devices in the purchase or sale of securities including the sale of securities by "insiders", "control persons" or "affiliates" of a corporation. It's called Rule 10b-5. The SEC set up a "safe haven" plan to indemnify insiders from any insider trading allegations if they would voluntarily enter into a "10b 5-1 plan".

At the last meeting, Greg mentioned that he voluntarily entered into this "lockup" (over and above his Rule 144 restrictions) which states that he won't sell any shares I believe it was less than 20-cents per share for X% of his shares and Y% at higher levels on a certain scale up to and including several dollars per share. Management members do this because they're pretty much always in possession of "insider information" and thus susceptible to allegations of "insider trading".

The preferred share agreement they entered into totalled up the cash that these guys placed into the coffers as well as what they were owed for services rendered over the last 10 or so years. They are allowed to convert, over the course of 3 years, one third of their debt at the 5-cent level, one third at 10-cents and one third at the 20-cent level.

As far as judging the fairness of this agreement one would have to pull up a 10 year chart on Medinah and see at what price levels Medinah was trading at when these funds were placed into the coffers or these services were rendered. The standard methodology would be to do a "VWAP" analysis standing for "Volume Weighted Average Price". As you look at the 10 year chart from 2003 to 2013 would you agree that the first 5 year average share price was about 2-cents. Would you agree that the last 5 years averaged maybe 7 cents. Let's put the average PPS at perhaps 4.5-cents.

Would you agree that management's ability to convert their debt at 5, 10 and 20-cents seems fairly generous to shareholders? Remember, they're getting restricted shares that essentially are restricted by Rule 144 as well as these 10b5-1 plans. Another option would have been to sell restricted shares to a financier at a discount to that average level of 4.5-cents (since they were restricted). This money could have paid management a salary and kept management from having to cut checks. The problem with that would have been how many "extra" shares would be issued and outstanding by now if they'd have gone that route.

Believe it or not, we shareholders want to buy properties from a JJ type figure who is already handcuffed by Rule 144. We want to have "first dibs" on the best properties of the largest owner of sedimentary mining properties in all of Chile especially when we pay in restricted shares that can't be sold for a very long time. Those shares would go "to the back of the bus" for a long time and not become readily sellable "float". Believe it or not we want management to cut checks out of their own checkbook especially because of Rule 144 as well as 10b-5-1 plans.

Management can't expect the shareholders to know the ins and outs of Rule 144, Rule 10b-5, 10b-1-1 plans or nonvoting preferred shares for that matter. I have a head start because I've written several books on the securities laws vis-a-vis short selling abuses. I would caution people to hold back judgment on complex matters like these unless you have a thorough understanding of these laws as well as a contextual basis for rendering judgment. It is very easy to take pot shots at management when you know it wouldn't be prudent for them to answer you in a public forum.

As far as the recent accusations that JJ is getting a sweet deal because he maintains 49% ownership without lifting a finger or incurring expenses. I could not even attempt to estimate the value of the pro bono legal work JJ has provided for us in the course of maintaining 1,508 separate mining concessions. The agreement between JJ and Medinah Inc. North America obviously spells out who pays the property taxes and who incurs the various expenses racked up in Chile. All of the taxes are paid by JJ and a good chunk of related expenses. Every time somebody piggy backs onto one of our property titles (which happens all of the time in Chile) JJ has to file a suit with the proper tribunal to boot them off. Remember also that this guy gave up his law career in order to forward this obsession of his.

One other thought, if you can't come up with a half a dozen reasons why it would be insane for management to take out the pots and pans and start banging them together while proclaiming that we have the mother of all deposits then I think you better re-do your due dili on this particular company. Sometimes fulfilling your fiduciary duty of care to shareholders does not align with the immediate desires of shareholders in the ultra-short term.

I just got to thinking about Les's comment re: taking a bullet for JJ. Do you recall at the last meeting how the police protection was prominent and how we all got wanded and frisked on our way into the meeting. Take a look at where Les positioned himself when JJ was at the podium. Thanks again for your efforts rayfer!