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EOX's War on Shareholders

Bob Moriarty
Jul 27, 2010

Over the past 9 years since we started 321gold in the summer of 2001 I've seen a lot of management styles. I've seen crooks and conmen, charlatans by the score. But the War on Shareholders recently declared by EurOmax's management, and I use the term management loosely, is a first. The "management" is literally trying to destroy shareholders by destroying the company.

I spent almost a week in Eastern Europe back in October visiting the major projects of EurOmax (EOX-V). I talked about it here. The stock was $.43 when I wrote the piece. After making the sale of a project in China a year ago, the company had $.13 a share in cash. Thanks to our kind "management," those same shares are now trading at $.11, less than the cash on hand back in the good old days.

I'll try to lead you though what I think has happened and what is going on. My tour was done with John Menzies who was the President and CEO of the company when I was there. Back then the company was actually spending money on advancing properties.

My view of the projects I saw was that they hold world-class potential. No one involved has ever indicated they felt my view was somehow wrong. But as good as Menzies was at picking up world-class projects, he wasn't good at advancing them. The Board asked for his resignation in January after he kicked the can on three projects and advanced nothing. They moved CFO Chris Serin into the position of interim CEO. The company didn't actually say anything about Menzies status other than Serin was appointed interim CEO. If the company has a President it isn't obvious from the website. And it seems zero progress has been made in 6 months in hiring a permanent CEO.

What "management" has accomplished in financial (spending) terms is quite remarkable. Last July the company had just short of $15 million in the treasury. That was down to $10.3 million by September as Menzies kicked cans. And down to $8.2 million by year-end and down to $6.6 million at the end of the March quarter. You would think that a company blowing money faster than a drunken sailor would accomplish something to benefit shareholders. But you would be wrong.

Indeed, on May 6, the company announced completion of drilling at Kazandol where they accomplished a 48 hole, 2,342-meter drill program. Lucky us, the company was kind enough to warn us that assays were expected by May of 2010 at which time they would be announced. They must be on the Julian calendar because in my calendar, May comes before July. It even comes before June and no results have been released. I wonder if drill results are material events. If so, they would be required to release them.

The "management" is really good at releasing material events promptly. For example, they announced a material event on July 9, 2010 when they said "Macedonia had rejected the Company's application for an extension of its Ilovitza 4 permit, which expired on May 11, 2008." That was such an important issue that they even sued their biggest shareholder because a foundation he donated stock to, had sold shares in EOX.

So on July 9, 2010 EOX announced a material change report. Oops, it wasn't a material change on April 28 when the company released its Annual Report. On page 7 they clearly said, "the Ilovitza 4 permit is expected to be the subject of a tender in 2010." I don't think it's really a material change if you put it in your Annual Report but I'm just a shareholder. And shareholders don't count for much.

When I look at things like thumb tacks or paper clips, it's easy to think, "I could have come up with that." But there are complex things that are certainly beyond my capacity. For example, I could never come up with the concept of suing my biggest shareholder.

EurOmax hit a high of $.55 this year. Currently, it's $.11. "Management" has participated in an 80% decline in the value of the shares. But it's all the fault of the biggest shareholder. Who would have thought of that?

According to the same Annual Report released on April 28, 2010, a company that has a bean counter as an interim CEO lost $1.34 million on currency bets. Some bean counter he must be. And they spent $1.26 million on General Administration and blew through $253,000 on stock based compensation.

Wait a minute; aren't these clowns supposed to be in the mineral exploration business? Oh, there it is, there it is on page 6 of the Annual Report. They spent the blistering sum of $493,000 on "Foreign Exploration and Development Expense." That's pretty slick. In a company that spent $3.4 million in a year, $493,000 went to exploration. Wow!

The latest quarterly report would gag a maggot. Foreign currency losses were down to only $279,642 for the quarter. General Administration is up to $674,649, 50% of what they blew through the entire year, last year and stock based compensation is up to $169,133 in comparison to $253,000 for all of last year. That's one quarter.

But wait, they must have spent something on exploration, there it is, they spent $65,583 in the quarter. Let's see, if they continue at this rate, the company will be broke in a little over a year but will have $260,000 to spend in a year kicking cans. Do you see what I mean about gagging a maggot? As a shareholder, I was sick when I read it. $65,583 for exploration? The biggest scams in Vancouver or Toronto spend more than that for exploration in a quarter.

On behalf of all the shareholders, EOX management has decided they should best use shareholder money to sue their biggest shareholder. This was the guy who put the deal together that allowed them the opportunity to blow through over $8.3 million in the next nine months. They are suing him to recover a maximum of $214,015. What do you want to bet that suing him will cost shareholders a whole lot more than $214,015?

I looked at their announcement in astonishment. Granted, I am not a lawyer but didn't anyone think of asking for a second opinion? Was this not as obviously insane as it appears? It's a tempest in a teaspoon at The Mad Hatter's Tea Party.

They announced the suit on July 14th. On July 8, a single week before suing a shareholder for "The Crime of The Century," the company announced receipt of a dissident circular proposing a vote to replace the entire board. Image that! Shareholders actually replacing incompetent management.

"Management" has managed to postpone the annual meeting and shareholder vote for yet another month. Currently scheduled for August 24th. I know how I will vote and I highly suggest all shareholders think about the company and what is in their best interests and vote that way.

Blaming the victim is pretty common today. But what this board has done is so unethical and so irrational that if there are any honest directors on the board, they have a moral, legal, and ethical responsibility to resign. The actions of this board are not in the best interests of shareholders.

In the end, the shareholders own the company and should determine just who it is who manages that company. I don't care if the shareholders vote to install the monkeys at the San Diego zoo as the board, they couldn't be as big a bag of wankers as the present board.

We do own a lot of shares, and we are madder than wet hens and as such are biased. EurOmax's contract for advertising ended on July 23rd. And until management is replaced with something more friendly towards shareholders, EurOmax will not be advertisers.

EurOmax Resources Ltd
EOX-V $0.11 (July 26, 2010)
EOXFF-OTCBB 119 million shares
EurOmax website


Bob Moriarty
President: 321gold

321gold Ltd