Dundee's Confused Assertions
Formation's management and board is, and has always been, fully committed to listen and take input in the best interests of all its shareholders. This includes Dundee with whom we have had a number of discussions regarding their concerns. In fact, since their initial investment in 2010, we had a standing offer to Dundee for two seats on Formation's board reflecting their position as our largest shareholder. Dundee has never followed up on the two board seat offer but has now commenced a public campaign seeking the same two seats. In that campaign, Dundee makes a barrage of complaints and accusations, liberally mixing partial facts, contradictory statements, opinion and speculation. Yet, they also support all of Management's resolutions for the meeting. One is forced to ask, what is their true motivation?
Instead of a strategic plan executed by highly experienced mining executives, Dundee's so called "plan" involves asking you to trust them to figure something out. They want you to believe that they can somehow defy market fundamentals. Don't let Dundee's rhetoric influence your vote. By looking at what they are really saying, one readily sees the inaccuracies and false information:
-- Dundee asserts that: "In our view the mine, mill and refinery are the wrong project at the wrong time in the wrong place". However they believe disposing of the sunshine refinery which is a non-core asset is a wrong decision. The truth is that the cobalt mine is where the high purity cobalt is and located in the largest cobalt consuming country. Where would Dundee move it? Not even Dundee can move a proven mine deposit. The only thing that has changed is cobalt prices. When Dundee invested in your Company, cobalt was trading in the US$20 - $21 per pound range compared to a low of US$10.50 per pound which is now is on the rebound as per the chart below. Formation cannot control world cobalt prices and neither can Dundee. The chart below illustrates Dundee's incorrect claims and fallacious arguments. To view the chart, please visit the following link: http://media3.marketwire.com/docs/617fco_chart.pdf-- Dundee says "In our view the cobalt mine was barely economic from the beginning and is certainly not economic now". Cobalt prices are outside our control but we have acted in the right strategic manner. Compare this to Dundee's vague plan to "figure it out".-- Dundee wants to "cancel" our sale of the Sunshine precious metals refinery claiming the sale price is depressed and/or "turn it into a profitable enterprise". The facts are that this is a non-core asset for the cobalt project. The decision to sell is the right one and a profitable one. The proposed sale of the refinery to certain entities that are associated or affiliated with Waterton Global Resource Management, Inc. for US$9 million, if completed, will serve to strengthen the Companies treasury. In addition, Formation has received an unsolicited proposal from Sunshine Silver Mines Corporation to purchase the subsidiary of Formation that owns the refinery and certain other assets for US$12.0 million. We have also determined that it would be better to build a purpose built, stand-alone cobalt refinery going forward than to retro-fit the Sunshine facility. That determination was made over a year ago as was reflected in the Company's July 12, 2012 news release where it announced "the engineering and procurement of a dedicated, continuous process hydrometallurgical circuit to process cobalt concentrate" would better serve the Idaho Cobalt Project.