IMM investors and ownership issues

The Companies Involved in Attempting to re-open the Idaho-Maryland Mine

Emgold

  • Emgold is one of four companies that comprise the Lang Mining Group.

In June 2005 Frank Lang resigned as an officer of Emgold and Chairperson of the Emgold Board of Directors. In April and May 2006 he gave public notice that he would sell up to four million of his seven-plus million common shares of Emgold stock. In June 2006 he left the Emgold Board of Directors.

As of June 30, 2008, Mr. Lang had not redeemed almost four million (3,948,428) Class A Convertible Preference Shares of Emgold stock, given to him five years before to satisfy a debt. These shares do not include any voting privileges, and may only be redeemed if Emgold has adequate funds to redeem them and to continue operations at the same time.

  • None of the four companies owned by Lang Mining Group have actually extracted precious metals.

Emgold is a Canadian a “junior exploratory mining company” traded on the TSX Venture Exchange in Toronto with what are called "penny stocks." John Woods of Stockwatch in Vancouver was quoted as saying that junior companies who take a mine to production are extremely few.

  • Since March 2005, Emgold has carried out “non-brokered” placement of shares three times, outside the jurisdiction and control of the U.S. Securities Exchange Commission (SEC).

In June 2005 Galaxy Fund, based in the British Virgin Islands, purchased over 14 million units (14,880,000) of Emgold capital consisting of one common share and one warrant each. In November 2005, Galaxy Fund announced its intention to sell almost three million (2,480,000) of its Emgold common shares.

Emgold made similar offerings in September and November 2006, but no record was found regarding who purchased these units. In December 2006, Emgold reorganized and “spun off” Golden Bear Ceramics, and reduced the amount of units it was trying to sell.

In December 2006, a Cayman Islands-based “hedge fund” called RAB Special Situations (Master) Fund Limited reported holding seven million Emgold Common shares and warrants. April, September, and October 2007, RAB Special Situations reported decreases of over 95 million (95,120,540) common shares and warrants. As of April 2008, RAB Special Situations owned over 31 million shares of Emgold voting stock (31,120,540) – almost 20 percent (19.89%) – the only “person” who controlled more than 10 percent of the voting stock at that time. May 2008 they reported an additional decrease of 424,500 Emgold shares and warrants.

The shares sold in 2005 to Galaxy Fund went for .50 cents per unit. The non-brokered, private placement shares offered in December 2006 were sold for .11 cents per unit.

September 2008 RAB Capital announced that it was freezing redemptions from RAB Special Situations for three years, after risks taken in speculating on resource and commodity pricing led to a 48 percent loss of investors’ monies and the fund’s value decreased by more than one-third.

  • Emgold has shown consistent losses as a company and its stocks have consistently decreased in value.

The most recent “Interim Consolidated Financial Statements” issued by Emgold reported that “As of June 30, 2008, the Company has no source of operating cash flow and has an accumulated deficit of $41,101,751…” with a loss of $2,346,568 for the same six-month period.

On one hand, Emgold publicly indicates that they plan to go to production on the mine by themselves and seek investment capital rather than a larger company to sell the actual operation of the mine. However, Dave Watkinson – Chief Operating Officer (COO) of Emgold, President of Idaho-Maryland Mining Company (IMMC) and Vice President of Operations for Golden Bear Ceramics – has also publicly stated that if a good offer came along for Emgold’s rights to the Idaho-Maryland Mine, that Emgold would sell.

  • Emgold itself expresses “substantial doubt” about its ability to continue as a company.

The same June 30, 2008 interim financial report stated that:

“The Company’s continuing operations and the underlying value and recoverability of the amounts shown for mineral property interests are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of its mineral property interests and on future profitable production or proceeds from the disposition of the mineral property interests or other interests.

“The Company’s current financial position and forecast cash flow requirements for the next year to meet its mineral property requirements and corporate requirements indicate that there is substantial doubt about the ability of the Company to continue as a going concern.

“The Company’s ability to continue operations is contingent on its ability to obtain additional financing. Management is confident that it will be able to secure the necessary financing; however there is no assurance that management will be successful in achieving this objective.”

Golden Bear Ceramics (GBC)

  • Golden Bear Ceramics (GBC) was a wholly-owned subsidiary of EMgold until it was “spun off” in 2007.

In a December 2006 press release which was “not for distribution to U.S. Wire Services or Dissemination in the U.S.,” Emgold announced a plan by its Board of Directors to restructure its interest in GBC, so that the two companies could focus on the mineral interests of Emgold and the development of the “recycling, stone and ceramics business.”

This separation included the separation of all Golden Bear operations from those of Emgold, and the separate raising of funds by each company “without further dilution of share holdings in the other.” GBC’s intention at the time of this report was to develop the commercialization of the Ceramext technology, which will be available for use by Emgold if and when they are able to re-open the Idaho-Maryland Mine.

Emgold retained 20% of the GBC shares, and transferred 80% to a “newly incorporated subsidiary company (“Newco”) in consideration for Newco’s commitment to reimburse Emgold in respect of the funding provided to date” to GBC. This subsidiary does not appear in subsequent public documents posted for Emgold on the www.sedar.com website.

David Watkinson, President and Chief Operating Officer of Emgold and President and Chief Executive Officer of the Idaho-Maryland Mining Corporation, also serves as a Vice-President for GBC. Former Emgold Director William Witte, David Sinitsin, Ian Chang, and Shannon Ross are also currently officers with GBC. Ross Guenther, inventor of the Ceramext equipment, methods, and composition process which converts mine waste into sellable ceramic products, was elected to the Emgold Board in 2005 and resigned in 2006.

Carl Frahme, currently the Director for Product Development and Marketing at GBC, served as a consultant to Ceramext LLC and the Idaho-Maryland Mining Corporation (IMMC) to prepare the Preliminary Assessment for the City of Grass Valley, and as an employee of IMMC prior to joining GBC.

  • GBC’s commitment to the Grass Valley community hinges on the opening of the Idaho-Maryland Mine.

A June 3, 2007 report in the Sacramento Bee reported GBC officials as saying that the company would prefer a manufacturing site in the Central Valley and will consider a production plant in Nevada County only if the mining operation is approved. This report also noted that GBC needs to raise $35 million to build the production plant.

  • The profitability of GBC’s Ceramext product, and its ability to utilize the waste from the mine, have been key arguments for the viability and logistical practicality of re-opening the mine. However, the scalability and marketability of GBC’s product is unknown.

A 2005 economic viability study by the consulting group Bay Area Economics for the City of Grass Valley, calls the Ceramext process and “unproven technology.” It recommends that, due to potential challenges of producing ceramic tiles with mine tailings in a way that safely utilizes ALL of the tailings without releasing the poisons used to process the ore, the City should 1) have a contingency plan for the disposal of mine tailings and 2) conduct a market study for tile production.

In response to this report, GBC President and CEO Brian Witte indicated in a Yubanet interview that tailings may have to be stored on-site for a couple years, but a subsequent Yubanet article indicated that there is currently no place on the site for this storage. Trucking the tailings away was also discussed in these articles as an option, but they would have to be hauled to Nevada and this option would significantly decrease the number of jobs created by GBC in the community.

GBC asserts that “When we reach full production and achieve certification for material content claims, construction projects can earn LEED credits using our products.” (LEED stands for Leadership in Energy and Environmental Design, a green building rating system developed by the U.S. Green Building Council.) However, GBC was not allowed to display the Ceramext product at the 2007 West Coast Green Conference and Exhibition – an event dedicated to “green innovation, building, design and technology” with over eleven thousand attendees in 2007 --  due to its current links with the re-opening of the Idaho-Maryland Mine. In a March 2007 interview, West Coast Green spokesperson stated that this was due to “certain issues related to the potential reopening of a hard rock mine in Grass Valley” which “prompted a review of all factors contributing to the final product to be offered by their company.” He continued: “West Coast Green reserves the right to exclude products from our tradeshow floor that do not meet our stringent green criteria, which include external factors such as materials sourcing, community impact and indirect environmental concerns.”

Information provided on this page was obtained from:

  • Emgold corporate documents retrieved the Emgold Mining Corporation Company Profile available from http://www.sedar.com, the System for Electronic Document Analysis and Retrieval (SEDAR) developed for the Canadian Securities Administrators.
  • The website of Galaxy Fund (http://www.galaxyfunds.net)
  • The website of RAB Special Situations is not open to U.S. citizens, but through a search engine I was able to obtain their 2007 report at http://www.rabspecialsituations.com/pdf/RAB_Special_Situations_2007_FINAL.pdf
  • Articles dated March 7 and March 20, 2005, November 21, 2006, and March 12, 2007, retrieved from http://www.yubanet.com/regional
  • Bay Area Economics (2005). Economic Viability Study: Proposed Idaho-Maryland Mine Project Grass Valley, California. Retrieved from CityofGrassValley web site GrassValleyMineFeasibilityStudy071805.pdf
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