December 14, 2011
Mosquito Refutes Dissident Allegations
VANCOUVER, British Columbia, Dec. 13, 2011 /PRNewswire/ — Mosquito Consolidated Gold Mines Limited (Mosquito – TSX Venture: MSQ, OTC-QX: MQCMF) wishes to give clarity to the misleading information being issued by the dissident group that includes present Directors of Mosquito, Mr. Hongxue Fu and Mr. Shaun Dykes neither of which is being nominated by the company for re-election at the upcoming Annual General Meeting. The unsupported and unfounded allegations levelled at the management of Mosquito and its 100% owned subsidiary must be addressed.
CLAIM: Mosquito only spent 17.42% of $11 million raised on CuMo
It appears that the dissident group’s primary concern is the claim that of $11million raised by Mosquito, only 17.42% has been spent on the CuMo project over the past 15 months. Mosquito management has no way to know how these figures were generated but they do not bare any resemblance to fact. According to publicly available audited financial statements:
- since the acquisition of the CuMo deposit in 2004 and up to June 30th, 2011 (last audited financials) Mosquito has invested $12,992,229 in exploration at CuMo.
- From June 2008 to June 2009 $3,754,000 was spent on exploration by Mosquito.
- From June 2009 to June 2011 total share capital raised was $10,292,297. During this 2 year period, Mosquito’s exploration expenses on CuMo totalled $6,127,584.
In the documents sent out by the dissident group the cover sheet presents a pie chart allegedly showing that of $11million spent by Mosquito only 17.42% was spent on CuMo. This is not factual. Mosquito has directed over 60% of all funds raised during this period towards exploration of CuMo and these calculations are supported by audited financial statements.
Point by Point Rebuttal
In response to the news release issued by the Dissident Group on December 12, 2011, Mosquito management has taken excerpts from that release, which appears in italics below. Management’s responses are included below each italicized point.
No answer to our concern that “Over 60% of money raised by Mosquito in the period from March 1, 2010 to June 30, 2011 has been spent on Kirkness, not the world-class asset, CuMo.
- At March 31, 2010 the exploration balance of money spent at CuMo stood at $9,408,359, the total explorations spent up toJune 30th, 2011 was $12,992,229. For a total spent in the period of $3,583,870.
- During this period Mosquito raised $3,897,384 which equates to 92% of that amount being spent on CuMo by both Kirkness and Mosquito.
- In addition to the exploration costs, approximately $300,000 was spent on support infrastructure for CuMo, including a shop, warehouse, crew accommodations and land located in Garden Valley, Idaho (headquarters of the CuMo Project).
- Mosquito also has made a $400,000 option payment that is part of $800,000 paid on a total $1,200,000 purchase price for patented mineral claims.
- When these funds ($710,000) are added to the $3,583,870, the total spent on the CuMo Project in this period was$4,293,870 or 110% of funds raised during this period.
- These figures come directly from the consolidated financial statements and include spending by both Mosquito and its wholly owned subsidiary, Kirkness Drilling. These financial statements were filed for the periods detailed and can be found on Sedar.com for confirmation. These figures are far removed from the unfounded and unsupported allegations of the Dissident Group.
No explanation as to why Kirkness Diamond Drilling loses so much money, why Mr. McClay appointed his son as President of Kirkness, and why Mr. McClay is not willing to sell Kirkness to allow Mosquito to focus on CuMo.
As stated in the Incumbent management’s press release of December 9th 2011, much of the project-related expenses for CuMo are incurred through Kirkness, which is the in-house and wholly owned drilling contractor of the Company. Kirkness represents a valuable subsidiary business which will likely generate significant cost savings during the next phase of exploration and development at CuMo.
No explanation of why Kirkness has 127 trucks when a drilling company of this size should have 30 to 40 trucks or why Mosquito owns an airplane and a truck “limo”.
- Kirkness has 74 pickup trucks in its asset inventory list – not 127;
- Of those, 21 have been written off and have no residual value;
- 19 of them have been depreciated to less than $5,000 and are used primarily for back-up or spare parts,
- the remaining 34 trucks, which are valued at between $5,000 and $20,000 comprise the fleet of service vehicles which are necessary for activities at CuMo and at other projects where Kirkness is engaged in contract diamond drilling.
The aircraft which Mosquito owns is an important asset. The aircraft, purchased for $130,000 in 2007, is capable of transporting 5 passengers on a trip from Vancouver B.C. to Boise, Idaho (nearest centre to CuMo) in 2.5 hours at a fuel cost of around $600. Commercial air travel, due to the lack of a direct flight between the two cities, can typically take as long as 12 hours and cost from $800 (coach) to $2000 (business) return. The use of private aircraft and executive ground transportation for shuttling staff, potential investors and financing partners to and from project sites is not uncommon in the junior mining marketplace. The Sprinter truck described in the dissenter’s information as a “limo” is a van with executive seating and in no manner should be described as a “limo”. The rationale for purchase was to transport larger groups of potential investors to Mosquito’s projects.
No meaningful response to our concern that many of the drilling jobs that money-losing Kirkness does are for companies in which Mr. McClay’s family seems to have interests or some relationship.
Kirkness is actively pursuing contract diamond drilling work for profit, which is to the benefit of Mosquito and its shareholders. Mr. McClay has used his network of contacts in the mining business to help secure projects for Kirkness. Kirkness is presently cash flow positive and would have been profitable if it were not for the losses suffered and concessions granted to IEMR. Kirkness also employs its drills at CuMo at cost or a small loss which enables Mosquito to continuously explore and develop for much reduced costs than other mining companies.
No response to our concern that Mr. McClay is not the right person to raise much-needed financing for the CuMo Project and take it to the next stage of development.
Incumbent management is seeking to add Mr. Paul Kessler to the company’s board. Mr. Kessler is a respected financier who has a history of financing and helping turn around companies with large scale project having the capital requirements of CuMo. Also nominated is David Voiticky, who has a background as an Investment Banker with Goldman Sachs and is experienced in large scale institutional level financings.
Incumbent management feels that the board slate nominated for election at the Annual General Meeting has the skills and depth and is capable and ready to secure financing and advance the CuMo project in a manner that will greatly benefit Mosquito shareholders.
Most importantly, no commitment to focus exclusively on CuMo and no plan for getting the financing in place to develop this great project!
It is the incumbent management’s primary focus to continue to finance the Company and significantly advance the CuMo project. The CuMo deposit has been actively explored and advanced since its acquisition by Mosquito in 2004. Mosquito’s incumbent management has never waivered in its commitment to develop the CuMo Deposit.
Management describes Mr. Dykes as the “outgoing Exploration Manager”. Not only is this an inappropriate way to inform Mr. Dykes of his impending termination but, more importantly, there is no mention as to the succession plan.
Incumbent management feels that in light of the unsupportable and completely false accusations levelled at the President and other Directors and other actions contrary to the Company’s best interest, that no alternative is left but to replace Mr. Dykes. Incumbent management have met with highly qualified candidates with experience in geology, permitting and project management and will select the appropriate candidates after this year’s AGM.
To the Dissident Group’s remaining concerns regarding board independence and qualifications, incumbent management summarily dismisses these as “sour grapes” from a disgruntled employee. The suggestion that Mr. McClay has, in his back pocket, a former Chief of Staff of the United States Air Force, and a former vice president of Goldman-Sachs, is both distasteful and shows the dissident’s lack of business maturity.
YOUR VOTE IS IMPORTANT, REGARDLESS OF HOW MANY SHARES YOU OWN.
Voting is a quick and simple process. To be sure your vote is counted, your proxy must be received by 10:00 a.m. (Pacific Time) on December 14, 2011. Due to limited time available, we strongly recommend voting by telephone or internet no later than 24 hours before the deadline.
Shareholders who wish to vote their shares or require any assistance in voting their Management proxy are encouraged to call Mosquito’s Proxy Solicitation Agent, Georgeson at:
North American Toll Free Number: 1-866-413-8828
Please discard any BLUE proxy or related materials you may have received from the Dissidents and vote using only the control number on Management’s proxy.
On Behalf of the Board
MOSQUITO CONSOLIDATED GOLD MINES LTD.
About Mosquito Consolidated Gold Mines
Mosquito Consolidated Gold Mines Limited is a mining exploration and development company with a diverse portfolio of high potential precious and base metals projects, located in North America. The Company’s primary focus is developing its Idaho-based CuMo project, one of the world’s largest molybdenum deposits. For more information, please visitwww.mosquitogold.com
THIS NEWS RELEASE WAS PREPARED BY MANAGEMENT WHO TAKES FULL RESPONSIBILITY FOR ITS CONTENTS. THE TSX-VENTURE EXCHANGE does not accept responsibility for the adequacy or accuracy of this release.
This news release includes certain statements that express management’s expectation or estimates of future performance and may be deemed “forward-looking statements”. These forward-looking statements include plans, estimates, forecasts and statements as to management’s expectations regarding the CuMo Project. These forward-looking statements involve assumptions, risks and uncertainties and actual results may vary materially. For these reasons shareholders should not place undue reliance on such forward-looking information.
United States residents are cautioned that some of the information that may be published by Mosquito may not be consistent with United States Securities and Exchange Commission disclosure rules and may be materially different from what the Company is permitted to disclose in the United States and therefore United States residents should not rely on such information.
MOSQUITO CONSOLIDATED GOLD MINES LTD.
Mosquito Consolidated Gold Mines Limited : 1-800-667-0873
SOURCE Mosquito Consolidated Gold Mines Limited