MIL (Investments) SARL, a company wholly owned by Jean-Raymond Boulle and certain other dissidents, filed on Nov. 1, 2002, a dissident proxy circular and form of proxy proposing the election of Jean-Raymond Boulle, Rod Baker, Mark Collins, Stephen F. Malouf and Gregg Sedun to the board of directors of Diamond Fields International (DFI) at the annual general meeting to be held on Nov. 21, 2002.
Mr. Boulle is one of the original founders of Diamond Fields Resources Inc., the predecessor company of DFI, and was chairman and chief executive officer of Diamond Fields Resources Inc. from 1994 to 1996 before it was sold to Inco Ltd. in a transaction valued at over $4-billion. He also served on the board of directors of Inco, as part of Inco’s acquisition of Diamond Fields Resources’ Voisey’s Bay nickel project. Mr. Boulle, or companies in which he holds significant interests, are active in exploration and mining projects in several countries in Africa, including Congo, Sierra Leone, Madagascar and Angola.
DFI is at a crossroads in its efforts to develop its current assets and it is MIL’s belief that a new DFI board of directors and management will have more success in building DFI and increasing value for its shareholders.
What are the intentions of Mr. Boulle and the new board of directors?
The current goals of Mr. Boulle and the new board include:
negotiating a resolution of the South African lawsuit with Trans Hex in order to restart DFI’s Namibian diamond production and once again create cash flow for DFI;
establishing a realistic schedule for further underwater geophysical mapping and sampling to further expand the resource at DFI’s Namibian marine concession and bring resources already defined into a reserve category fit for mining, a process current management of DFI has woefully neglected;
acquiring additional proven mining projects to further improve DFI’s cash flow;
obtaining an extension of the promissory note of $2-million (U.S.) due to MIL in order to cure DFI’s default and its potential insolvency;
carrying out discussions with the Overseas Private Investment Corp. to evaluate DFI’s financing options;
reviewing and reducing DFI’s current administrative costs, including rationalization of offices in Vancouver, South Africa and Namibia;
listing DFI on the Alternative Investment Market (AIM) to take advantage of the multibillion-pound London mining market which will help to improve the much undervalued share price; and
promoting company growth in a rational and determined way by maximizing the benefits of early cash flow and minimizing shareholder dilution and debt.
Why does DFI need a new board?
The current board of directors and management of DFI have no real interest in DFI. DFI officers and directors as a group own less than 2 per cent of DFI shares with a commitment to the company of only approximately $140,000 (U.S.) ($225,000 (Canadian)), less money than the chief executive officer receives in annual salary alone. Compare this with the 25-per-cent ownership of DFI held by Mr. Boulle with many millions of dollars invested. It should also be noted that Mr. Waldron, the current chief executive officer, was gifted over 200,000 shares of DFI by MIL and therefore, unlike the rest of the shareholders of DFI, has not personally invested any significant capital in DFI and can therefore hardly consider himself aligned with other DFI shareholders.
The current board and management have failed to increase shareholder value. Under the current board and management:
DFI’s share price has declined by approximately 90 per cent;
DFI’s cash flow has evaporated;
DFI has failed to adequately disclose to the public, that because DFI no longer has any cash flow, the Overseas Private Investment Corp. has advised the current board and management that DFI must raise approximately $3.5-million in working capital as a condition of OPIC agreeing to finance DFI’s acquisition of its own mining vessels;
the current board and management are planning to raise this working capital by an equity sale diluting DFI shareholders by up to 25 per cent, at a time when the shares are already undervalued; and
the current board and management intend to mortgage all of the assets of the company including all of its Namibian offshore diamond concession and diamond resource and in addition incur debt of up to $15-million (U.S.) to purchase a new mining vessel at a time when several mining vessels currently owned by other producers sit idle. The current board and management then plan to immediately operate their own mining ship without any meaningful prior experience in sea diamond mining, a policy that has bankrupted other companies.
What have the current board and management done for DFI and its shareholders?
Contributions by the current board and management
The current board and management have not invested any meaningful amount of capital in DFI, nor have they raised any capital from other investors, brought any joint venture partners to DFI or accessed any substantial contributors who have added value to DFI. Current management has never made a discovery or acquisition of a world-class nature and DFI is now led by a chief executive officer with no previous mining or African experience. Mr. Boulle, on the other hand, has invested $7-million (U.S.) in DFI, was responsible for the original acquisition of DFI’s properties and finally assisted in arranging business relationships with partners such as Trans Hex and Diamond Tenders for DFI.
Compensation
The current board and management are paying themselves generously at the expense of shareholders while DFI’s working capital declines as the part-time chief executive officer’s salary was more than doubled during the fiscal year 2002, the chief financial officer’s salary was increased by 45 per cent and the compensation to the head of operations quadrupled.
Corporate governance
The Toronto Stock Exchange corporate governance guidelines state that every board should implement a process for assessing the effectiveness of the board as a whole. It is DFI’s position that it does not have a formal process for assessing the effectiveness of the board. If it did, it would undoubtedly have to issue failing grades for continuing performance as reflected in the stock market’s assessment, consisting of a decline to a low of 15 cents, a drop of approximately 90 per cent in value since the beginning of the fiscal year 2002, a year in which management saw fit to increase its compensation by extraordinary amounts.
The new board has a track record of success
Unlike the present chief executive officer, Mr. Boulle has a proven record of experience and success in mining and in Africa, including an early successful career with De Beers, the world’s largest diamond company. He also founded America Mineral Fields Inc. (AMZ) a TSX-listed company which has raised approximately $40-million to date and negotiated a majority interest in a world-class copper-cobalt project in the Congo and a diamond project in Angola. The second largest shareholder of AMZ is Umicore, formerly Union Miniere, a large, 100-year-old mining company. Mr. Boulle is not a director or officer of AMZ. Mr. Boulle also owns a Sierra Leone titanium mine with $1.8-billion (U.S.) in proven reserves and over $1-billion (U.S.) in inferred resources, formerly producing a third of the world’s natural rutile. Mr. Boulle plans to reopen the mine and is in advanced negotiations with OPIC and Sysmyn (EC) on its financing. Mr. Boulle is also the largest shareholder of Madagascar Resources which has made a world-class discovery of titanium (ilmenite). He was assisted in these efforts by various members of the proposed new board.
While serving as chairman and chief executive officer of Diamond Fields Resources Inc. (DFR), DFI’s predecessor, Jean Boulle was principally responsible for DFR’s acquisition of the Voisey Bay project and the Namibian offshore concession which now forms the core of DFI’s portfolio. His injection of $7-million in financing for DFI in recent years has ensured the survival of the company. The current board and management have neither put money into DFI nor raised any. Clearly Mr. Boulle’s interests are aligned with shareholders and, unlike the current board and management, job preservation is not his principal motive. The joint venture agreement with Trans Hex was initiated by the efforts of Mr. Boulle and was overseen by another MIL-proposed nominee, Mr. Collins, who was responsible for overseeing the joint venture as chief operating officer of DFI. The very successful marketing of DFI’s production through Diamond Tenders, and the attendant working capital was arranged and underwritten by Mr. Boulle. Now, under current board and management, DFI is embroiled in litigation half a world away in South Africa in the country of the defendant Trans Hex, which has resulted in the project being idle, cash flow stopped and the operations subject to a lawsuit.
The new board will deliver for shareholders
The members of the new board have excellent and varied experience in their respective fields with each being independently successful in their own right. Of the nominees, three (Mr. Boulle, Mr. Baker and Mr. Sedun) were former directors of the predecessor company Diamond Field Resources, a company which was ultimately sold to the benefit of shareholders in a transaction valued at over $4-billion. Several have worked together effectively on other mining company boards. Most importantly, they share Jean Boulle’s passion to build another great mining company. Mr. Collins and Mr. Baker have direct experience in Africa and in diamonds as qualified diamond geologists. Mark Collins brings a wealth of experience with such major mining companies as RTZ and Anglo American, as well as smaller Canadian companies such as Southern Era Resources. Mr. Malouf has been retained by the government of the Congo to assist in a number of mining-related matters as well as being a director of AMZ. Mr. Sedun, a former director of Diamond Fields Resources, and a founding director of AMZ, brings his extensive corporate financing experience to the group, having been a corporate attorney in that field for approximately 15 years prior to running a venture capital firm for the last six years. The new board believes DFI is the base for building a great company and will seek out other excellent assets to complement the one DFI currently controls with a view to building and increasing shareholder value.
It is time for DFI’s shareholders to regain control of their company. For further information as to how shareholders can vote their proxies, contact Mr. Sedun at (604) 687-9931 or Mr. Malouf at (214) 969-7373.
