Rembrandt directors facing lawsuit

Now that Rembrandt Gold Mines (ASE) has a 100% interest in the Polaris Taku gold property in northwestern British Columbia, International Precious Metals (IPM) is proceeding with plans to sue several parties, including the directors of the company.

IPM is a major shareholder of Rembrandt and opposed the 1992 attempt to merge the company with Canarc Resource (VSE). Canarc offered Rembrandt shareholders one common share for each 3.5 Rembrandt shares tendered. The company acquired 1.9 million shares of Rembrandt under the offer, bringing Canarc’s total holding up to 3.4 million shares, or about 63% of the company.

The shares tendered under the offer included 1.5 million shares issued under a private placement earlier that year.

Canarc also acquired 1.5 million warrants under the offer which, had they been exercised, would have given the company 71% of Rembrandt’s issued shares. The company subsequently petitioned the Supreme Court of British Columbia for approval of the merger, but the judge disallowed it after hearing arguments from IPM.

IPM’s principal objection to the arrangement was that it is unfair to minority shareholders since it undervalues Rembrandt’s assets and effectively extinguishes the obligations of Suntac to earn a 60% interest in the property. Suntac, which is now wholly owned by Canarc, was required to complete a feasibility report on the Polaris-Taku project by Aug. 1, 1993. Suntac did not meet the deadline and the property is now wholly owned by Rembrandt. IPM also argued that the directors of the company behaved improperly by approving a private placement of 1.5 million units (including a share and a warrant) at Rembrandt’s annual meeting on June 30, 1992.

IPM alleged the purchasers of the private placement effectively saw themselves buying shares in Canarc and therefore should not be considered minority shareholders.

In any event, Canarc was not successful in satisfying the court that the proposed arrangement is fair and reasonable to the minority shareholders. As a result, the petition for approval of the merger was dismissed. IPM recently received court approval to begin legal action in the name of Rembrandt against certain past and present directors of Rembrandt and certain purchasers of shares and share purchase warrants in Rembrandt, as well as against Canarc.

IPM alleges the directors of Rembrandt breached their fiduciary responsibilities by causing the 1.5 million units of the company to be improperly issued, or issued at a price so low as to be unfair to Rembrandt. Bradley Quam, chairman of IPM, said he hopes to get the 1.5-million share placement reversed. He is also seeking unspecified damages against Canarc, the directors of Rembrandt and the group which bought the 1.5-million unit placement.

The action is in process although no court date has been set. At last report, Polaris-Taku had a preliminary resource of 2.4 million tons grading 0.43 oz. gold per ton.