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Cordoba Minerals (CDB.v): Right to reply

After posting the mail sent by Robert W. Allen regarding Cordoba Minerals (CDB.v) yesterday, as well as adding a second post with my personal opinion on the hole 63 delay, I received the following from CDB yesterday. It's a mail that CDB CEO Mario Stifano sent to Robert Allen as a reply to his complaints. I've been given permission by Stifano to reproduce it here and that's good for me, right of reply is something IKN has always appreciated. Read on:



On behalf of Cordoba, its management and shareholders, it is necessary that I respond to your patently false and libelous statements. As CEO of Cordoba and one of Cordoba’s largest individual shareholders, I must ensure that all shareholders understand the transaction and do not rely on the libelous claims you are making which are based on an inaccurate set of facts.

I will set the record straight in this response.

The key point for all shareholders is that this transaction is neutral with respect to HPX’s current San Matias ownership, and is not at all negative to shareholders as you are stating. We have estimated that if the sole focus of the joint venture was to complete a feasibility study for the Alacran Deposit, it could be completed for approximately C$10 million. Under the previous joint venture structure, Cordoba’s existing shareholders would retain a 35% interest in San Matias upon HPX delivering a feasibility study. The transaction and concurrent financing will allow existing Cordoba shareholders to retain an effective 43% interest in San Matias – approximately 20% more than the ownership under the previous joint venture structure.  In fact, if Cordoba had raised over USD$30 million it would still have a greater than 35% interest in San Matias. 

I have to state that the details of the HPX joint venture have been made by Cordoba on numerous occasions. There is nothing new, or undisclosed, in what I am stating.

Cordoba entered into the joint venture with HPX in 2015. This has delivered significant shareholder value to Cordoba as HPX spent over $30 million on the project in less than 3 years, even though the option agreement only required HPX to earn a 51% interest at San Matias by spending $19 million over 7 years.  HPX has therefore been extremely supportive of the San Matias project, and this has been reflected in share price growth that benefits all shareholders.

The joint venture does not, contrary to your assertion, require that HPX carry the San Matias project to feasibility. HPX does not have a sole funding commitment to feasibility. HPX holds an option, and in fact HPX can require Cordoba to fund its 49% interest in the project going forward.  If Cordoba had to raise half of the cost of any exploration program, existing Cordoba shareholders would indirectly be diluted down from their current 49% economic interest in San Matias. As a result, your concerns about future dilution are unfounded. HPX has the right under the transaction, which is the same right that it currently holds, to maintain its pro-rata ownership interest in Cordoba.  That has not changed.

HPX also currently owns approximately 36% of the Cordoba common shares. HPX will exchange its current approximately 69% controlling economic interest in San Matias (consisting of a 51% direct stake in San Matias and its 36% direct share ownership interest in Cordoba) for an approximate 67% share ownership interest in Cordoba following completion of the concurrent financing.  HPX is not increasing its economic benefit in San Matias as a result of the transaction. Again, this transaction is neutral to HPX.

I will also correct your statements on Cordoba’s drilling results. Simply put, there is no material fact or change that has not been publicly disclosed and therefore your claim of illegal insider dealing has no basis in fact or law. Cordoba issued drill results on May 17, 2017 and not before PDAC as you have claimed.  Cordoba will be issuing additional drill results when all the assays are finalized for the remaining holes at Alacran and compiled and appropriate for public dissemination.  

Finally, I will address your governance assertions and allegations of management impropriety. The independent directors on the Board have positively endorsed the transaction as it is in the best interest of shareholders.  Haywood has also provided a positive fairness opinion on its terms.  Cordoba has a very strong independent Board.  Our independent board members include Tony Makuch, who is CEO of Kirkland Lake Gold, Ignacio Rosado who is CEO of Volcan, David Reading former CEO of European Goldfields and Bill Orchow former CEO of Kennecott USA.  These are highly experienced Board members, independent of HPX, and each of whom recommended that the shareholders approve the transaction. 

In addition, the renowned governance advisory firm, International Shareholder Services, which makes recommendations for institutional funds, has come out in support of the transaction. If it had concerns, it would have stated so.

As well, rather than receiving significant payouts in the transaction, Cordoba management has agreed to waive their change of control provisions under their contracts, which would otherwise have been triggered as part of the transaction. We as management are as committed as the Board and HPX to delivering significant shareholder value, and by waiving our rights, have taken steps to put the interests of the Company ahead of our own. That is proper governance.

Why are all of these positive recommendations being made?

It is because this is a transaction that stands up to scrutiny when examined in a factually accurate manner as it is an independently reviewed transaction that is in the best interests of shareholders.

On the contrary, your request that shareholders vote against the transaction is not founded in fact or any objective independent assessment, and is more likely based on your personal grudges against Cordoba for entering into a joint venture you opposed, aggressively fought against and failed.   

Cordoba’s partnership with HPX has delivered significant shareholder value, while you decided to exit your shares at the lowest point of Cordoba’s share price in 2015.  (The recipients of your email should know that you sold the vast majority of your Cordoba shares in 2015 at the lowest point in the market and (amongst other things) as a result, you have not had board representation since 2015.)  Fortunately, we have strong supportive shareholders who recognize the potential of our San Matias Copper Gold project and the benefit of having HPX as our largest shareholder.

I am also attaching a letter that I sent to shareholders explaining the benefits of the transaction.


Mario Stifano