http://www.mineweb.co.za/mineweb/view/mineweb/en/page66?oid=94707&sn=Detail

Battle lines drawn for Clifton Star's gold

Board room management of another highly prospective gold project in Quebec, with which Osisko has just negotiated a jv, is currently under siege by its biggest shareholder.

Author: Lawrence Williams
Posted: Friday , 18 Dec 2009

LONDON -

The prospects for the Val d'or/Roun/Noranda region of Quebec's resurgence as a significant gold mining area again have been regenerated by the success of Osisko in defining a 6 million ounce plus ore reserve on its Malartic property there as well as other major prospects. One such property in the area, which rumour suggests could be even bigger and higher grade than Osisko's Malartic - but which is still awaiting sufficient work to prove up the magnitude of the resource - looks to be becoming the subject of a major battle for control between the controlling company, Clifton Star's, wide grouping of shareholders and it's one significant external holder, Mineralfields Fund Management, which owns a little over a third of Clifton Star which it gained from the provision of flow-through finance for exploration funding.

It appears that Mineralfields is seeking to replace three of the five Clifton Star directors with its own nominees in an attempted boardroom coup which appears to have been launched covertly without any prior consultation with the Clifton Star management.

The attempted coup comes just as Clifton Star has negotiated a major joint venture agreement with Osisko on its Duparquet Township properties, some 90km to the northwest of Osisko's Malartic project. Under the terms of the jv agreement, Osisko will earn a 50% interest by investing $70 million over a 4-year period, including a firm commitment of $15 million in 2010. It will act as operator of the jv during the earn-in period and thereafter as long as it holds a minimum 50% interest in the jv. Clifton Star announced an NI 43-101 resource of a little over 2 million ounces of gold on the Beattie and Donchester prospects on the Duparquet property in September, but exploration there remains at a relatively early stage.

The Duparquet project area area encompasses three past producing mines: Beattie, Donchester, and Duquesne , and two other properties - Cental Duparquet and Dumico- all with known gold resources. These properties are all located in close proximity to the Porcupine Destor Fault Zone, and cover about 8 km of strike length. A substantial 100,000 m drill programme has been being undertaken on these in the past year.

In an announcement on December 14th, Clifton Star rescheduled its Annual General Meeting from that day until the end of the month once it became aware of Mineralfields' attempted coup which would undoubtedly have been successful as management would not have had time to mobilise any serious shareholder resistance to Mineralfields' proposals at such short notice. It now has a little breathing space, but may be facing an uphill battle given the size of the Mineralfields holding, although it is cautiously optimistic that it may be able to rally sufficient support to ward off the bid to replace the majority of the board.

What the attempted coup will do for Mineralfields' reputation is a little uncertain. It obviously feels it has the right, given its large holding, to force changes on Clifton Star, but this seems to be counter to its general hands-off relationship with the management of companies in which it invests which, in turn, has made it an attractive partner for small mining companies looking to raise capital. Perhaps it is the manner with which the attempted coup was made which will raise warning flags - but then such is the nature of modern day finance whereby institutional stakeholders often seem to wish to make their influence in mining company management decisions more overt.

Clifton Star's own statement on the postponement of the meeting was as follows: The board recently became aware of a covert dissident proxy campaign mounted by its largest shareholder, Mineralfields Fund Management Inc., aimed at replacing three of the company's five board nominees with three of their own nominees, without any prior notification to, or discussion with, company management, and without any prior notification to shareholders or the market generally.

Postponement of the meeting was in the company's best interests, in order to avoid the disenfranchisement of its shareholders, and to ensure that all shareholders are given an equal opportunity to make an informed decision on the election of the board.

The Nov. 2, 2009, record date for voting at the meeting remains unchanged, however, the deadline for the delivery of completed forms of proxy will be up to the time of the meeting, on Dec. 30, 2009."

Other comment on the issue is largely uncomplimentary to the Mineralfields move feeling that, given the boost to Clifton Star's stock price by the Osisko jv announcement, the move by the Fund was effectively an opportunistic attempt to enable it to make short term decisions on the future of Clifton Star for the benefit of the Fund rather than for the company's shareholders. This may not be the case, but Mineralfields may have a hard time convincing the other Clifton Star investors of this.