Mayfair Gold Corp. (“
Mayfair” or the
“
Company”) (
TSX-V:
MFG; OTCQB:
MFGCF) provides the following disclosure to
supplement its management information circular dated May 6, 2024
(the “
Circular”) for the annual general and
special meeting of shareholders to be held on June 5, 2024 (the
“
Meeting”). Shareholders are encouraged to read
the Circular, which is available on www.sedarplus.ca, as well as
the Investor Resources section of the Company’s website at
https://mayfairgold.ca/investor-resources/, in conjunction with
this news release.
Amendments to Employment
Agreements
In March 2020, Mayfair entered into an agreement
to acquire the Fenn-Gib gold project in the Timmins region of
Ontario. In August 2020, the Board of Directors of Mayfair (the
“Board”), comprised of Henry Heeney and Sean Pi,
the two founders and promoters, approached Patrick Evans to offer
him the position of President and CEO of the Company. On acceptance
of the position, Mr. Evans approached a retired senior geologist,
Howard Bird, to offer him the position of Vice President,
Exploration. Mr. Bird, in turn, approached another retired senior
geologist, Paul Degagne, to offer him the position of Manager,
Exploration. Messrs. Bird and Degagne were persuaded to come out of
retirement on the understanding that they would be joining a strong
management team led by Patrick Evans, and a company that would have
a diverse and experienced Board.
In and around February 2024, management of
Mayfair expressed to Patrick Evans, the Chief Executive Officer of
the Company (the “CEO”) and members of the
Compensation Committee of the Company (the “Compensation
Committee”) that they were concerned that a change of
control may occur in respect of the Company. This concern was based
on several factors, including:
-
conversations between management and Darren McLean, a consultant of
Muddy Waters Capital LLC (“Muddy Waters”) in which
comments were made regarding November 2023 stock option
grants;
-
proposals made by Henry Heeney, a co-founder, former director and
insider of the Company to nominate to the Board:
-
Kyle McLean, the brother of Darren McLean. Kyle McLean is also an
investment advisor at Haywood Securities Inc.
(“Haywood”), who is the custodian of certain funds
directed by Muddy Waters; and
-
Mr. Heeney himself,
(collectively, the
“Heeney Nominations”) pursuant to the board
nomination rights agreement between the Company and 1191123 B.C.
Ltd. (a corporation controlled by Mr. Heeney) dated March 4, 2020
(the “Heeney Nomination Agreement”);
-
Mr. Heeney’s request that the Company have weekly meetings with
Kyle McLean, who was not a director or employee of the
Company;
- a proposal made by Kyle McLean that Paul Harbridge, the former
CEO of GT Gold Corp. which was also the subject to a proxy contest
involving Muddy Waters, be nominated to the Board; and
-
Sean Pi’s actions as chairman of the Governance Committee to
support the Heeney Nominations.
Kyle McLean has no previous experience managing
a mining company or serving as a director of a public company.
Henry Heeney also has no previous experience serving as a director
of a public company. The Company’s management and employees were
also concerned about the potential nomination of other or
additional directors who could be unqualified under the Heeney
Nomination Agreement and the board nomination rights agreement
between the Company and 1249495 B.C. Ltd. (a corporation controlled
by Sean Pi, a former founder and director of the Company) dated
March 4, 2020.
Management and the employees expressed concerns
to the Board that they did not wish to be in a position where they
would be pressured to work under the leadership of an inexperienced
or unqualified board and requested that the “change of control”
provisions in their respective employment agreements be updated to
address scenarios involving shareholders working together to effect
control of the Company, and instances where the current board
members were either replaced or no longer constituted a majority of
the Board.
Management and the employees requested that the
following language be inserted into the definition of “Change of
Control” (the “Change of Control Provisions”):
“A Change of Control
occurs following the sale of all or substantially all of the assets
of the Corporation; by or into another corporation, entity or
person; the acquisition by any Person or Persons acting together of
sufficient voting rights to affect the control of the Corporation;
any change in ownership of fifty percent (50%) or more of the
voting capital stock of the Corporation; or a change in the
composition of the Board that results in the current directors of
the Board constituting less than a majority members of the
Board”.
Given the actions by Darren McLean, Henry
Heeney, Kyle McLean and Sean Pi noted above, Mr. Evans and members
of the Compensation Committee took management’s concerns
seriously
It is the view of the Compensation Committee
that the continuity of the management team is critical to the
ongoing success of the Company. Mr. Evans and the Compensation
Committee were concerned that, without acceptable change of control
provisions in their employment agreements, there could be
departures by members of management or senior employees. Mr. Evans
and the Compensation Committee also were concerned that such
departures could have an immediate adverse impact on the Company
and its operations, adverse impacts on the Company’s important
relationships with First Nations, vendors, and other stakeholder
groups.
The Company’s track record of strong financial
performance and continued positive development of the Fenn-Gib
Project is largely attributable to the strength of the management
team. The Company’s recent achievements have been recognized by
investors, resulting in solid returns for our shareholders.
Including, for example:1
-
Superior share price performance. Over the past
year, the Company is among the top-performing gold stocks among
Canadian gold mining exploration and development companies. The
Company’s share price is up approximately 27%, compared to the
average of its peer group which are down approximately 19%. Notably
the Company’s share price has outperformed the increase in the
price of gold, which only saw a 17% increase during the same time
period.
-
Premier valuation. The Company has a price to net
asset value multiple of 0.56 which far exceeds its peer group
average of 0.26. Similarly, on an enterprise value per ounce basis,
the common shares of the Company (“Common Shares”)
trade at $72 per ounce which is well above the peer group average
of $39 per ounce.
-
Access to capital and share price resilience. The
Company has been successful in accessing equity capital to fund the
development of the Fenn-Gib Project, raising net proceeds of $23.4
million in 2023. At the closing share price as of the date of the
Circular of $2.44, the Common Shares are trading above the Common
Share issue price of $2.10 (November 11, 2023 private placement)
and $1.75 (June 8, 2023 private placement).
________________________1 The share price data
included in this news release for the Company and its peer group is
based on the information provided in the Circular.
Accordingly, the members of the Compensation
Committee determined that the requests of management were
reasonable, and that it would be in the best interests of Mayfair
to include the amended change of control language in their
employment agreements.
Between February 5, 2024 and February 27, 2024,
the following management personnel and employees executed amended
versions of their respective employment agreements, effective
January 1, 2024, which reflected annual salary increases and had
the effect of adopting the Change of Control Provisions, or
amending the previously included definition of “change of control”
included in their respective employment agreements to align with
the Change of Control Provisions:
-
Howard Bird, Vice President, Exploration;
-
Justin Byrd (through Aurous Consulting LLC), Chief Financial
Officer;
-
Matthew Evans, Vice President, Corporate Affairs;
-
Wallace Smith, Senior Geologist;
-
Paul Degagne, Exploration Manager at the Fenn-Gib Project;
-
Alexandra Gelinas-Dechene, Senior Geologist;
-
Ryan Hoefs, Senior Geologist; and
-
Ian Chappell, Senior Geologist.
On or about March 5, 2024, the employment
agreement for Mr. Evans, the CEO of the Company, was amended to
align the definition of “change of control” with the Change of
Control Provisions. Previously, Mr. Evans’ employment agreement,
entered into on August 12, 2020, negotiated with Henry Heeney and
Sean Pi, had a broader definition for “change of control” than the
Change of Control Provisions of the other management personnel and
employees. Accordingly, the amendments to Mr. Evans’ employment
agreement served to narrow the scope of circumstances where a
“change of control” would apply.
There have been no changes or amendments to the
Change of Control Provisions or any other provisions of the
relevant employees’ employment agreements applicable to a “change
of control” following March 5, 2024.
Settlement Agreement
On or about April 19, 2024, the Company received
letter correspondence from Carson Block, a partner at Muddy Waters,
stating that Muddy Waters and certain investment funds managed by
it, had obtained support agreements from shareholders comprising at
least 50.68% of the outstanding voting share capital of Mayfair
(the “April 19 Letter”) in support of Muddy
Waters’ efforts to reconstitute the Board (the
“Reconstitution”). The April 19 Letter enclosed
support agreements (the “Support Agreements”)
signed by Kyle McLean, William Smith, a broker at Haywood, and
Michael Simpson, an investment advisor at Haywood who both share a
commission pool with Kyle McLean, Mireille Potentier (Michael
Simpson’s spouse), Henry Heeney, 1249487 B.C. Ltd. (a corporation
controlled by Henry Heeney’s mother), and 1249495 B.C. Ltd. (a
corporation controlled by Mr. Pi) (collectively, the
“Supporting Shareholders”). The Supporting
Shareholders have extensive family, business and financial
relationships with Muddy Waters or each other, over and above the
Support Agreements.
On or about May 1, 2024, as a direct consequence
of Muddy Waters’ repeated threats of litigation and demands that
the Company not honour its employment contracts with its employees,
Patrick Evans (CEO), Justin Byrd (CFO), Howard Bird (Vice President
of Exploration) and certain other employees listed above (the
“Terminating Employees”) delivered notices (the
“Terminating Notices”) to the Board terminating
their respective employment agreement. The Terminating Employees
took the position that the actions of Muddy Waters and the
Supporting Shareholders as detailed in the April 19 Letter and
Support Agreements constituted a change of control in accordance
with the Change of Control Provisions in the respective employment
agreements (the “Change of Control Event”).
That same day, Harry Pokrandt, the Chair of the
Board, wrote to the Terminating Employees requesting they hold
their Terminating Notices in abeyance until the Company could meet
with them to discuss a solution which would avoid disruption to the
Company’s operations. The Terminating Employees agreed.
Over the next several days, counsel to the
Company and counsel to the Terminating Employees drew up terms of a
settlement agreement whereby the Terminating Employees agreed to
hold in abeyance their Terminating Notices and continue their
employment with the Company up to the Meeting. The proposed
settlement agreement included, among others, the following
terms:
-
“Trust Release Condition” means a change in the
composition of the Board at the Meeting that results in the current
directors constituting less than a majority of the members of the
Board;
-
the Company shall deliver the aggregate amount of C$3,998,585, such
amount representing the aggregate termination payments payable in
respect of the Change of Control Event pursuant to the employment
agreements into a non-interest bearing trust account (the
“Change of Control Payment”);
-
each Terminating Notice shall be held in abeyance, and shall have
no legal effect upon their respective employment agreements,
pending fulfillment of either:
-
the Change of Control Payment being released by the trustee to the
employees in their respective portions immediately following the
passing of a motion or series of motions at the Meeting whereby the
Trust Release Condition is satisfied; or
-
if the Trust Release Condition is not satisfied, following the
election of the Board at the Meeting, each Terminating Employee
shall immediately provide written notification to the trustee and
the Company indicating if: (i) their Terminating Notice is to have
immediate effect as a result of the Change of Control Event; or
(ii) their Terminating Notice is to be rescinded with immediate
effect,
-
each Terminating Employee shall release the Company from any and
all claims and proceedings of every nature and kind whatsoever in
connection with the Settlement Agreement.
The settlement agreement, effective May 6, 2024,
was agreed to by the Terminating Employees and the Company
following a meeting of the Board held on May 6, 2024 (the
“Settlement Agreement”).
The Board considered the following actions of
Muddy Waters in light of the Terminating Employees position in
respect of the Change of Control Event:
-
Muddy Waters’ acquisition of shares on April 11, 2024, after it had
entered into a voting support agreement with Henry Heeney;
-
the relationship between Muddy Waters and Henry Heeney, including
the voting support agreement, would likely be viewed by a court
that these shareholders were acting together;
-
Henry Heeney’s statements to Mr. Pokrandt that that he was a “price
taker” in respect of the Reconstitution and that Mr. Heeney had to
“go along with” anything Muddy Waters proposed;
-
the combined Muddy Waters voting representation with Mr. Heeney’s
shareholding surpassed 20% of the voting rights and may have been
sufficient to affect control within the meaning of the change of
control provisions;
-
the additional Support Agreements provided by Muddy Waters
indicating in excess of 50% of the Company’s outstanding voting
capital; and
-
Muddy Waters’ demand that the Board resign immediately and be
replaced by Muddy Waters’ nominees.
The Board also obtained and considered a
reasoned legal opinion from Borden Ladner Gervais LLP, its
independent counsel, in respect of the Terminating Notices and
whether the Change of Control Event qualified as a change of
control pursuant to the Change of Control Provisions, dated May 6,
2024.
The Board ultimately determined that there was
some level of risk that, despite the language of the Change of
Control Provisions, the Change of Control Event may not qualify as
a change of control under the Terminating Employees’ employment
agreements.
However, the Board determined that a change of
control, as defined in the Terminating Employees’ employment
agreements, would occur if a majority of the current Board were not
re-elected at the Meeting.
This left the Board with essentially three
options to proceed:
-
accept the Terminating Notices and make the Change of Control
Payment;
-
dispute the Terminating Notices and refuse to make the Change of
Control Payment; or
-
come to an agreement with the Terminating Employees that would see
them maintain their positions until at least the Meeting.
The Board considered the first two options not
to be in the best interests of the Company as each would involve
the immediate departure of the Company’s senior management and many
of its key employees. For example, if the Terminating Employees
terminated their employment (regardless of whether the Change of
Control Payment was made), there would be:
-
an immediate adverse impact on the Company, its operations, and its
ability to comply with ongoing disclosure obligations under
securities laws and stock exchange requirements;
-
a potential adverse impact the Company’s ability to recruit future
employees;
-
no ability to coordinate a smooth transition to a new management
team;
-
shareholder concerns, adverse impacts on the Company’s share price
with no warning to the shareholders or the market, and no
opportunity for the Company’s stakeholders to adjust their
investment in light of a change to the management team resulting
from Muddy Waters’ actions; and
-
adverse impacts on the Company’s important relationships with First
Nations, vendors, and other stakeholder groups, all of whom had
already expressed serious concerns over Muddy Waters’ actions;
and
-
the cost of potential litigation with the Terminating Employees if
the Terminating Notices were disputed.
The Settlement Agreement, on the other hand,
retains senior management and key employees through the Meeting,
allows for a smoother transition of management, provides
shareholders and the market with an opportunity to consider the
changes to management resulting from Muddy Waters’ actions, and
allows the Company an opportunity to maintain, and if necessary,
transition its relationships with First Nations, vendors, and other
stakeholder groups.
Patrick Evans abstained from the Board’s vote on
whether to accept the Settlement Agreement, given his interest in
the Settlement Agreement. The other Board members voted unanimously
in favour of the Settlement Agreement.
Proxy Contest
The Board advises shareholders to vote the WHITE
Proxy or voting instruction form well in advance of the deadline at
2:00 p.m. (Pacific time) on June 3, 2024, in connection
with the upcoming Meeting. Shareholders who have any questions
relating to the Meeting or about the completion and delivery of the
WHITE Proxy or voting instruction form, may contact Alliance
Advisors, LLC by telephone at 844-858-7380 or email at
Mayfair@allianceadvisors.com.
Additional details relating to the matters to be
voted upon at the Meeting and the Board’s recommendations are
included in the Circular, which is available on www.sedarplus.ca,
as well as the Investor Resources section of the Company’s website
at https://mayfairgold.ca/investor-resources/.
Scientific and Technical
Information
Scientific and technical information contained
in this news release has been derived, in part, from the Company’s
technical report titled “National Instrument 43 101 Technical
Report Fenn–Gib Project, Ontario, Canada” with an effective date of
April 6, 2023 and reviewed and approved by Tim Maunula, an
independent “qualified person” pursuant to National Instrument
43-101 – Standards of Disclosure for Mineral Projects.
About Mayfair
Mayfair Gold is a Canadian mineral exploration
company focused on advancing the 100% controlled Fenn-Gib gold
project in the Timmins region of Northern Ontario. The Fenn-Gib
gold deposit is Mayfair’s flagship asset and currently hosts an
updated NI 43-101 resource estimate with an effective date of April
6, 2023 with a total Indicated Resource of 113.69M tonnes
containing 3.38M ounces at a grade of 0.93 g/t Au and an Inferred
Resource of 5.72M tonnes containing 0.16M ounces at a grade of 0.85
g/t Au at a 0.40 g/t Au cut-off grade. The Fenn-Gib deposit has a
strike length of over 1.5km with widths ranging over 500m. The gold
mineralized zones remain open at depth and along strike to the east
and west. Recently completed metallurgical tests confirm that the
Fenn-Gib deposit can deliver robust gold recoveries of up to
94%.
ON BEHALF OF THE BOARD OF DIRECTORS
For further information contact:Patrick Evans,
President and CEOPhone: (416) 670-5114Email:
patrick@mayfairgold.caWeb: www.mayfairgold.ca
Media contact:John Vincic, Oakstrom
AdvisorsPhone: (647) 402-6375Email: john@oakstrom.com
For information on voting:Alliance Advisors,
LLC Phone: 1-844-858-7380Email: Mayfair@allianceadvisors.com
Forward Looking Statements
This news release contains forward-looking
statements and forward-looking information within the meaning of
Canadian securities legislation (collectively,
“forward-looking statements”) that relate to
Mayfair’s current expectations and views of future events.
Forward-looking statements and may involve estimates, assumptions
and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in such forward-looking
statements. No assurance can be given that these expectations will
prove to be correct and such forward-looking statements included in
this news release should not be unduly relied upon. These
statements speak only as of the date of this news release.
Forward-looking statements are based on a number
of assumptions and are subject to a number of risks and
uncertainties, many of which are beyond Mayfair’s control, which
could cause actual results and events to differ materially from
those that are disclosed in or implied by such forward- looking
statements. Mayfair undertakes no obligation to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required
by law. New factors emerge from time to time, and it is not
possible for Mayfair to predict all of them, or assess the impact
of each such factor or the extent to which any factor, or
combination of factors, may cause results to differ materially from
those contained in any forward-looking statement. Any
forward-looking statements contained in this news release are
expressly qualified in their entirety by this cautionary
statement.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this news release.
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