Baja Mining Corp. (TSX:BAJ)(OTCQX:BAJFF) today announced that it
has filed and is mailing a second letter to shareholders. In the
letter, Baja responds to misleading statements by dissident
shareholder Mount Kellett Master Fund II A L.P., and highlights
Mount Kellett's failure to address seven critical facts in its
dissident circular. Baja cautions shareholders not to trust the
Mount Kellett wolf in sheep's clothing.
"While we're encouraged by the initial support that we have
received, we remind shareholders that Baja is being stalked by a
wolf that already holds nearly 20% of your company," said Giles
Baynham, Chairman. "To protect your investment, it is critical that
all shareholders - regardless of the size of your holdings in Baja
- carefully review the letter and vote only the GOLD proxy well in
advance of the fast-approaching March 30, 2012 deadline."
Baja's letters to shareholders, management information circular
and other proxy material, can be found on Baja's website:
http://www.bajamining.com/proxycontest, as well as under its SEDAR
profile.
Letter to Shareholders
March 1, 2012
Dear Fellow Shareholder,
Don't Trust The Mount Kellett Wolf In Sheep's Clothing.
Having reviewed the dissident circular issued by Mount Kellett
Master Fund II A L.P., your Board is more convinced than ever that
Mount Kellett has a hidden objective. Mount Kellett wants control
of your company without offering other shareholders a premium.
Your Board rejected Mount Kellett's demands for special status.
To avoid a proxy contest, your Board offered a fair compromise -
the opportunity to nominate two directors independent of Mount
Kellett. Mount Kellett rejected this fair offer, and is now
vilifying Baja's CEO John Greenslade.
Mr. Greenslade has devoted himself to the Boleo mining project
for 20 years, starting with the staking of the claims. Since then
he has played a critical and integral role in the advancement of
Boleo for the benefit of Baja and all of its shareholders. Mount
Kellett appeared on the scene after the hard work was done and
after other shareholders had taken the big risks.
Under Mr. Greenslade's leadership, Baja raised US$1.1 billion
for Boleo's construction during a period of troubled financial
markets, and has made significant progress toward creating an
operating mine at Boleo. There are 2,600 people currently hard at
work on the project and copper production is targeted for 2013.
Unlike Mr. Greenslade, Mount Kellett is no builder of mines. Its
founders are former Goldman Sachs bankers and traders who know how
to look out for themselves. One of the Mount Kellett founders,
nicknamed "Goldfinger," reportedly left Goldman Sachs after
receiving a bonus of $70 million because he thought he should have
been paid more. Now Mount Kellett professes that it wants nothing
more than to help Baja shareholders. Mount Kellett's real interest
is to help itself at your expense.
Mount Kellett's desire for control is not surprising - Mount
Kellett knows the value your Board is creating for all shareholders
by developing Baja's Boleo project, and wants to capture more of
that value for itself. Baja reached this conclusion after observing
Mount Kellett's actions prior to the proxy contest. Now you, as a
shareholder, can see it plainly for yourself.
Your Board detailed its concerns in Baja's Management
Information Circular. Mount Kellett has now substantiated these
concerns with the misleading and slanted information in its
dissident circular. Mount Kellett's silence on the key issues
speaks loudest about its true intentions.
Consider Mount Kellett's failure to address the following seven
facts:
1. Silence On Baja's Fair Offer To Appoint Two Directors
Independent Of Mount Kellett
Mount Kellett was silent on Baja's fair offer to appoint two
nominees who are independent of Mount Kellett. Why? Because Mount
Kellett wants its conflicted managing director Stephen Lehner on
the Board for opportunistic purposes that are not in the interest
of other Baja shareholders.
Had Mount Kellett accepted Baja's fair offer to appoint two
nominees independent of Mount Kellett, this expensive and
distracting proxy contest would have been avoided.
2. Silence On Mount Kellett's Offer Of A Predatory 15-day
"Standstill"
Mount Kellett has provided no rationale for its worthless,
rapid-expiry 15-day "standstill." Had the Board agreed, Mount
Kellett would have been free to launch a takeover just 15 days
after its managing director Stephen Lehner resigned from Baja's
Board. Given this highly perishable and predatory standstill, no
shareholder should believe Mount Kellett's protestations that it
isn't interested in control of Baja.
Mount Kellett wants the opportunity to act when it has the
greatest advantage over everyone else in terms of information,
timing and confidential Board strategy. This is a red flag that no
Baja shareholder should ignore.
Equally disturbing is Mount Kellett's misleading disclosure of
the standstill offer, not just once but twice. This is unacceptable
behavior, particularly in the middle of a proxy contest.
Mount Kellett first tried to deceive you about the standstill in
a news release on February 13, 2012. Mount Kellett tried to leave
the impression that the standstill was intended to protect
shareholders. Mount Kellett was deceptive because it omitted any
reference to the perfunctory, and therefore useless, 15-day expiry
date.
Mount Kellett tried to deceive you a second time in the
dissident circular and the related news release and letter to
shareholders, all issued on February 23, 2012. Once again, Mount
Kellett shamelessly presented the standstill as evidence that it
had no takeover designs. Once again, Mount Kellett omitted any
reference to the toothless 15-day expiration.
Between the two deceptions, Mount Kellett had ten days to
reconsider its approach. Instead of apologizing and correcting its
own record, it doubled up on the deception. That's the Mount
Kellett wolf in action on the most crucial issue of the entire
proxy contest-the hidden agenda. There should be no place for Mount
Kellett on Baja's Board.
3. Silence On Mount Kellett's Stealthy Accumulation Of Almost
20% Of Baja's Shares
Mount Kellett has remained silent on its failure to provide
fully transparent disclosure under Canada's Early Warning System
for its accumulation of 19.9% of Baja last year. Instead, Mount
Kellett rationalizes that its disclosure was within the law-a
matter that remains to be determined by the British Columbia
Securities Commission.
Baja shareholders should not be satisfied with Mount Kellett's
attempts to hide behind questionable legal technicalities to duck
its disclosure obligations. After all, Mount Kellett sets a higher
standard for Baja. For example Baja's stock option plan complied
with the law, but Mount Kellett was not satisfied. It wanted more.
And even when Baja's Board agreed to Mount Kellett's proposed
change, Mount Kellett was not satisfied and dismissed the change as
"window dressing."
If Mount Kellett was entitled to be stealthy by law, which Baja
does not for a moment concede, Mount Kellett should nevertheless
have governed itself by a higher standard. Mount Kellett should
have been fully transparent with shareholders because it would have
been the right thing to do.
Given that Mount Kellett's objective was to obtain a control
position, Mount Kellett should have alerted shareholders by way of
news releases and early warning report filings. In addition, Mount
Kellett should have reported all of its trades on SEDI after
reaching 10%. It still has made no SEDI filings.
Now it is up to the BC Securities Commission to decide if Mount
Kellett was entitled to use the less transparent alternative
monthly report system. And it is up to Baja shareholders, by your
votes, to decide if Mount Kellett fulfilled its transparency
obligations. Are these the kind of people you want sitting at the
Baja boardroom table?
4. Silence On Mount Kellett's "Strings-Attached" Financing Offer
And Its Efforts To Increase Its Baja Ownership To More Than 30%
Mount Kellett has remained silent about its demands for special
status. As detailed in Baja's circular, Mount Kellett sought
special rights in a "strings-attached" financing in 2010 to put it
ahead of other shareholders. In 2011 Mount Kellett twice sought
exemptions from Baja's Shareholder Rights Plan, the second time
only hours after having voted to approve it. Had your Board
accepted, Mount Kellett would have acquired a control position of
more than 30% of Baja with no premium to shareholders.
Your Board refused, and that is the real reason for this proxy
contest. Now Mount Kellett is pursuing control by other means, and
hopes to threaten and bully management and deceive shareholders
into supporting its opportunistic agenda.
5. Silence On Mount Kellett's Hypocrisy Regarding Governance
Mount Kellett failed to address the governance policy failings
of other companies in which it has invested, and of companies where
dissident nominee Lorie Waisberg serves on the board. Mount Kellett
is holding Baja to standards that it does not require of other
investments, and does not require of its nominee Mr. Waisberg.
Mount Kellett doesn't care about corporate governance-it cares
about getting its managing director Stephen Lehner on the inside of
Baja, where he can better pursue Mount Kellett's hidden agenda.
6. Silence On Mount Kellett's Plan
In December 2011, Mount Kellett promised a "vision for Baja" but
is silent on the details. The current Board, with John Greenslade
as CEO, has a plan, and shareholders have always known what that
plan is - to develop the Boleo project safely and quickly, for the
benefit of all shareholders. Baja has delivered on that plan,
thanks in large measure to Mr. Greenslade's many years of unfailing
dedication and drive.
Mount Kellett wants you to wait until the next annual meeting
before it reveals its competing "vision." A vote for Mount Kellett
is a blind vote for a self-described opportunist who has only its
own interest at heart.
7. Silence On Whether Mount Kellett's Nominee Mr. Waisberg Will
Be Overboarded
Mount Kellett was silent on whether its nominee Mr. Waisberg
will have too many board commitments. As a self-professed champion
of proxy advisor standards, Mount Kellett should have mentioned
that if Mr. Waisberg is elected as a director of Baja, he will be
on seven boards. That exceeds the maximum of six boards set by
proxy advisor ISS. Mr. Waisberg has not committed to resigning from
any other boards in order to comply with the ISS standard.
In the opinion of another proxy advisor, Glass Lewis, Mr.
Waisberg is overcommitted to audit committees. For this reason
Glass Lewis has recommended five withholds against him since 2010,
most recently in a report dated January 6, 2012. You wouldn't know
this from reading Mount Kellett's dissident circular. This fact was
disclosed only in Baja's information circular.
Beyond that, Mount Kellett was silent on the strong
qualifications of the two Baja directors whom Mount Kellett seeks
to replace. These two incumbent Baja directors are far more
qualified than Mount Kellett's nominees in terms of experience
related to mining, mine finance, and mineral development.
Mount Kellett's New Smokescreen
Mount Kellett's circular was tellingly silent on questions it
cannot and does not want to answer. Instead of addressing any of
the issues raised by Baja, Mount Kellett chose to develop a new
smokescreen: Catalyst Copper. Mount Kellett again attempted to
vilify Baja's reputable Board and CEO using false, anonymously
sourced information piled upon "suspect," "seems," and similar
conjectural terminology. Baja dissipated this smokescreen with the
facts included in its February 27, 2012 press release. Behind the
smoke lurks the same hidden agenda - control without a premium.
To assist shareholders in separating the facts from Mount
Kellett's misleading statements about Catalyst and other aspersions
in its circular, we provide Table 1 on the left.
Table 1: Mount Kellett vs. The Facts
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Mount Kellett Is Wrong The Facts
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Baja's independent directors are - John Greenslade is the only non-
qualified, capable and require no independent director on Baja's seven-
special scrutiny from Mount Kellett. person Board.
- All of Baja's directors are
experienced and successful
professionals with excellent
reputations. They understand and have
always upheld their fiduciary
obligations to Baja.
- Wolf Seidler, Chair of the Corporate
Governance Committee, is the
independent nominee of a large Baja
shareholder (one of Europe's largest
trading companies).
- At the last AGM, all Baja Directors
received close to unanimous support
from shareholders - including the
support of Mount Kellett.
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Baja directors are compensated - Mount Kellett never mentioned
reasonably. compensation as a concern prior to
launching its proxy contest, either
publically or privately.
- Baja officer and director
compensation is based on independent
market surveys which are summarized in
past management information circulars,
including the Baja circular delivered
in this proxy contest.
- Your Board has capped Baja options
and has recommended that shareholders
approve a Stock Option Plan compliant
within the guidelines of proxy advisor
ISS.
- Mount Kellett uses slanted examples
to begrudge the profit that Baja
option holders might earn in the event
that Baja's shares increase by up to
six-fold. Mount Kellett fails to
mention that all shareholders would
profit too, which is the point of
incentive stock options. Mount Kellett
should have provided the context that
its own $80 million investment in Baja
would be worth $480 million, a six-
fold gain, under the scenario it
created.
- If Mount Kellett was fair, it would
have similarly begrudged its own
nominee Lorie Waisberg, who serves on
five boards that don't have ISS-
compliant stock option plans. One of
these boards issued options to its
non-executive directors totaling
almost 6% of the shares outstanding,
four times the rate of 1.5% at Baja.
Mr. Waisberg alone has option grants
from this company totaling almost 2%
of the shares outstanding,
significantly more than the equivalent
percentage at Baja for all non-
executive directors combined.
- The option awards to Messrs.
Marland, Baynham and Prosalendis on
joining the Board at the AGM in May
2011 were equal to option grants
awarded to each of the other
independent directors on Baja's Board
prior to that AGM.
- Baja's three new directors received
just 6.6% of available options under
Baja's plan, not 43% as grossly
overstated in Mount Kellett's
circular. The grant to the new
directors is far less than the 13%
Baja used to attract or retain key
employees and executives in 2011,
including a new Chief Operating
Officer and a new VP Operations. Mount
Kellett was wrong to state otherwise.
- Overall, employees and management
have been granted 82% of the options
under the plan, while current non-
executive directors have been awarded
just 18%.
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John Greenslade's role at Catalyst - John Greenslade's dual role as CEO
Copper, a small exploration company, of Baja and Catalyst Copper is a
is not a problem for Baja matter of public record and was well-
shareholders. known to Mount Kellett long before it
acquired its Baja shares. Mount
Kellett never raised it as a concern
before its February 23, 2012 dissident
circular.
- Without checking with Baja or
Catalyst, Mount Kellett recklessly
published false, anonymously-sourced
information suggesting that Baja would
invest $38 million in Catalyst,
representing Baja's "spare cash." In
fact, Catalyst's financing, which
closed on Feb. 3, 2012, totaled just
$3.5 million and Baja did not
participate in it.
- Catalyst disclosed the completion of
its financing three weeks before Mount
Kellett issued its dissident circular.
And yet Mount Kellett failed to
mention that Catalyst's financing had
closed. Nor did Mount Kellett mention
that the financing total was just a
tiny fraction of the amount Baja alone
(according to Mount Kellett's
anonymous and mistaken source) was
supposedly planning to invest.
- Mount Kellett used the slanted and
fictitious example of a bid for
Catalyst at an arbitrary $0.50 per
share to further frighten Baja
shareholders. Mount Kellett failed to
justify (or even mention) the enormity
of the implied 285% premium to the
current Catalyst trading price.
- Mount Kellett failed to mention that
at such a price the transaction would
be subject to Baja shareholder
approval. In fact, even with no
premium to the Catalyst closing price
of $0.13 on February 29, 2012, a bid
for Catalyst would have a value of $36
million and would be subject to Baja
shareholder approval because it would
be worth more than 10% of Baja's
market value of $356 million.
- To allay any shareholder concern and
dissipate Mount Kellett's latest
smokescreen, Baja has committed to
seeking disinterested shareholder
approval for any investment in
Catalyst while John Greenslade is CEO
of both companies.
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A Million+ Reasons To Vote Only The GOLD Proxy
Buried on pg. 26 of the dissident circular, Mount Kellett has
advised that its proxy solicitation services will cost up to
approximately $225,000 and that:
"Mount Kellett intends to seek reimbursement from Baja for
out-of-pocket expenses, including proxy solicitation and legal
fees, incurred in connection with the Meeting."
Mount Kellett doesn't estimate its expenses, but based on the
cost of other proxy fights, Mount Kellett's out of pocket expenses
might be $1 million or more. So if it is successful Mount Kellett
will attempt to claim significant funds that otherwise would be
invested in the Boleo project. This is on top of what Mount Kellett
has forced Baja to spend to defend itself.
Don't Trust The Wolf In Sheep's Clothing. Vote Only Your GOLD
Proxy
Mount Kellett, ever the opportunistic wolf, is attempting to win
your confidence by hiding its true nature in sheep's clothing.
Mount Kellett is silent on the real issues. That silence speaks
volumes.
Your company's future is at stake. Every vote will count,
regardless of many shares you hold. Vote today to protect your
investment in Baja. Let us continue to work for the benefit of all
shareholders. Vote the GOLD proxy to keep Mr. Lehner and his ally
Mr. Waisberg off of the Baja Board.
Yours Truly
Giles Baynham, Chairman
Baja Mining Corp.
Voting Instructions
Baja urges shareholders to vote only the GOLD proxy AGAINST
Mount Kellett's director removal resolution, and AGAINST Mount
Kellett's Board expansion resolution. Vote WITHHOLD for the two
Mount Kellett nominees to the Board, Stephen Lehner (the managing
director of Mount Kellett) and Lorie Waisberg. Shareholders should
discard any blue proxy they may receive and should vote only their
GOLD proxy well in advance of the proxy voting deadline of March
30, 2012 at 10:00 a.m. (Vancouver Time).
About Baja
Baja Mining Corp. (TSX:BAJ)(OTCQX:BAJFF) is a mine development
company with a 70 percent interest in the Boleo
copper-cobalt-zinc-manganese Project located near Santa Rosalia,
Baja California Sur, Mexico. Baja is the project operator and a
Korean syndicate of industrial companies holds the remaining 30
percent. Boleo is funded, currently under construction and targeted
for copper commissioning in 2012, and copper production in early
2013. Boleo has 265 Mt of measured and indicated resources
(including 85 Mt of proven and probable reserves) and 165 Mt of
inferred resources. A March 2010 updated technical report to the
2007 definitive feasibility study, confirmed that Boleo could be
developed economically at an after-tax IRR of 25.6 percent (100
percent equity), with a minimum scheduled mine life of 23 years
(during which approximately 70 Mt of the noted proven and probable
reserves will be exploited), a NPV of US$1.3 billion (8 percent
discount rate), and an average life-of-mine cash cost of negative
US$0.29/lb for copper, net of by-product credits. Metal Prices were
based on SEC pricing guidelines (which at the time of the 2010
report were US$2.91/lb Cu, US$26.85/lb Co and US$1,175/tonne
ZnSO4H2O). For more information, please visit
www.bajamining.com.
On behalf of the Board of Directors of Baja Mining Corp.
John W. Greenslade, President & Chief Executive Officer
Forward-Looking Statements
This news release contains forward-looking statements.
Forward-looking statements are statements that relate to future
events or financial performance, including statements regarding
potential actions of the BC Securities Commission, anticipated
developments at the Company's projects and the projected
performance and economics of the Boleo Project. In addition,
estimates of mineral reserves and resources and NPV estimates may
be forward-looking statements because they represent estimates of
mineralization, costs, revenues and other factors that may be
encountered in the future. Forward-looking statements speak only as
of their date, are only predictions and are subject to known and
unknown risks, uncertainties and other factors, including without
limitation those described in Baja's most recent annual information
form filed under its profile at www.sedar.com and its most recent
annual report filed with the US Securities and Exchange Commission
("SEC") at www.sec.gov. All forward-looking statements in this news
release are qualified by these cautionary statements. These risks,
as well as risks that the Company cannot currently anticipate,
could cause the Company's or its industry's actual results, levels
of activity or performance to be materially different from any
future results, levels of activities or performance expressed or
implied by these forward-looking statements. Although the Company
believes that the expectations reflected in the forward-looking
statements included in this press release are reasonable, the
Company cannot guarantee future results, levels of activity or
performance. Except as required by applicable law, the Company does
not intend to update any of these forward-looking statements to
conform them to actual results.
Cautionary Note Regarding References to Resources and
Reserves
National Instrument 43 101 - Standards of Disclosure for Mineral
Projects ("NI 43-101") is a rule developed by the Canadian
Securities Administrators which establishes standards for all
public disclosure an issuer makes of scientific and technical
information concerning mineral projects. Unless otherwise
indicated, all reserve and resource estimates contained in this
press release have been prepared in accordance with NI 43-101 and
the guidelines set out in the Canadian Institute of Mining,
Metallurgy and Petroleum (the "CIM") Standards on Mineral Resource
and Mineral Reserves (the "CIM Standards").
United States shareholders are cautioned that the requirements
and terminology of NI 43-101 and the CIM Standards differ
significantly from the requirements and terminology of the SEC set
forth in the SEC's Industry Guide 7 ("SEC Industry Guide 7").
Accordingly, the Company's disclosures regarding mineralization may
not be comparable to similar information disclosed by companies
subject to SEC Industry Guide 7. Without limiting the foregoing,
while the terms "mineral resources", "inferred mineral resources",
"indicated mineral resources" and "measured mineral resources" are
recognized and required by NI 43-101 and the CIM Standards, they
are not recognized by the SEC and are not permitted to be used in
documents filed with the SEC by companies subject to SEC Industry
Guide 7. Mineral resources which are not mineral reserves do not
have demonstrated economic viability, and US investors are
cautioned not to assume that all or any part of a mineral resource
will ever be converted into reserves. Further, inferred resources
have a great amount of uncertainty as to their existence and as to
whether they can be mined legally or economically. It cannot be
assumed that all or any part of the inferred resources will ever be
upgraded to a higher resource category. Under Canadian rules,
estimates of inferred mineral resources may not form the basis of a
feasibility study or prefeasibility study, except in rare cases.
The SEC normally only permits issuers to report mineralization that
does not constitute SEC Industry Guide 7 compliant "reserves" as
in-place tonnage and grade without reference to unit amounts. In
addition, the NI 43-101 and CIM Standards definition of a "reserve"
differs from the definition in SEC Industry Guide 7. In SEC
Industry Guide 7, a mineral reserve is defined as a part of a
mineral deposit which could be economically and legally extracted
or produced at the time the mineral reserve determination is made,
and a "final" or "bankable" feasibility study is required to report
reserves, the three-year historical price is used in any reserve or
cash flow analysis of designated reserves and the primary
environmental analysis or report must be filed with the appropriate
governmental authority.
Contacts: Shareholders: Laurel Hill Advisory Group Toll-free
1-877-304-0211 or Collect: 416-304-0211assistance@laurelhill.com
Media: Longview Communications Alan Bayless
604-694-6035abayless@longviewcomms.ca Longview Communications Joel
Shaffer 416-649-8006jshaffer@longviewcomms.ca
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