DRX to launch control bid for troubled McFinley Mines

Dissatisfied with the lack of progress at McFinley’s Bateman Twp. gold project near Red Lake, Ont., DRX has called for a special shareholders meeting to vote on changes in the McFinley board of directors.

In a move that DRX Chairman Robert Clarke said is designed to protect his company’s 8.7% stake in McFinley, he will ask to be nominated as a successor to McFinley Chairman and President William Cummins.

At the Toronto meeting, Clarke will also seek to gain control of the McFinley board by having directors Robert Holmes and John Campbell replaced by DRX’s vice-president operations James Martin and vice- president finance Rudi Fronk.

“We are disappointed by the lack of progress at the Bateman Twp. project,” said Clarke who is also planning to go ahead with an exchange offer for the McFinley stock it doesn’t already own.

“I’ve had my people up to see it and we aren’t satisfied with the approach that is being taken,” he said. His dissatisfaction centres around Cummins’ management style and the length of time it is taking McFinley to complete a 15,000-ton bulk sample that was supposed to be finished in September.

After spending $25 million, McFinley has successfully outlined 890,000 tons of grade 0.21 oz gold per ton but the erratic nature of the gold mineralization has forced the company to conduct a bulk test to determine what the project’s operating grades will be.

Cummins has never attempted to conceal the problems that he is facing in Red Lake. But he says it is lack of working capital rather than the nugget like nature of the gold mineralization that has prevented his company from making more progress.

He said DRX’s failure to complete a $2.4-million private placement combined with a faulty ball mill and a legal dispute with contractor Dominion Bridge has stretched McFinley’s finances almost to the limit. Cummins is attempting to secure a $3.35-million rights offering to pay Dominion Bridge (who constructed the mill) and complete the bulk test. He called the DRX announcement an attempt to grab the company cheaply. McFinley shares were trading recently at 80 cents on the Toronto Stock Exchange, compared to $4 when DRX made its initial investment in the company.

But Clarke said it isn’t just the lack of progress at Bateman Twp. which has prompted him to call for a shareholders’ meeting. When director Ray Mongeau resigned last month to spend more time running Golden Shield Resources, the McFinley board lost its only geologist.

“I felt I should either be active or get off the board,” said Mongeau. He said he was rarely consulted by Cummins even though he has considerable experience in the Red Lake camp.

“Bill has got to let go of the reins a little bit,” he said.

Mongeau’s resignation, according to Clarke, has left the board without the mining brainpower it needs to develop a difficult project like Bateman Twp. “We have got to have a board that brings a balance of experience to the decision making process,” said Clarke. He claims that Cummins doesn’t pay enough attention to outside opinion. “A lot of people feel Bill has had his chance,” said Clarke.

Meanwhile Mongeau told The Northern Miner that even if McFinley completes the bulk test, it may not be enough to determine whether or not the company has a mine on its hands. “It’s a very difficult property and they still need to spend a lot of money to search for some big targets,” he said.

Reached at his office in Toronto, Cummins said he hasn’t received any official word from DRX on the takeover plan. “Anyone is free to make an offer for the company,” he said. “It is up to shareholders to decide.”

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