The BC Securities Commission is accusing the CEO and three directors of Canaco Resources Inc. (TSX-V:CAN) of approving stock options without publicly disclosing material information.
The junior miner, which has assets in Africa, is taking exception to the allegations and says the BCSC is trying to “rewrite the rules” for determining what is material and what isn’t.
The commission has issued a May 29 notice of hearing. It alleges Canaco CEO Andrew Smith and directors Randy Smallwood, David Parsons and Brian Lock failed to publicly disclose assay results from its gold project in Tanzania before voting to grant stock options.
Under BCSC regulations, material facts or changes are those that would change the value of a company’s shares.
At issue is a series of infill drill results from December 2010 that were not reported prior to the granting of Canaco stock options.
Canao asserts it did not report the infill drill results because they did not add any value or grade to the property in question and were, therefore, immaterial.
Had the results turned up anything that would have increased the property’s value or the value of the company’s stock, Canaco would have been obliged to make those results public before offering the stock options.
Canaco contends that independent reviewers – including Micon International Ltd. – have confirmed that the infill results would not likely have increased the value of the deposit.
“The staff of the BCSC is proposing to rewrite the rules for determining materiality in a way we believe is unfair, contrary to the public interest and damaging for junior mining companies subject to BC jurisdiction,” Smith said in a news release. “We intend to oppose that effort and defend ourselves vigorously.”
The company claims the BCSC’s revision of materiality will put a chill on junior mining companies in B.C.
The BCSC asserts the drill results were material, and said the directors failed in their duty to report results before granting the stock options.
“They failed to act in the best interests of Canaco by voting in favour of grants of stock options to themselves with the knowledge that the market price upon which they were based did not take into account some or all of the assay results,” a BCSC notice states.
