John McConnell, president, director and CEO of Victoria Gold Corp, told the News he thinks the 250 million new shares represents a great deal for all shareholders. (Crystal Schick/Yukon News file)

Yukon investor fumes after Victoria Gold issues new shares

250 million shares part of deal to finance construction, CEO says

Victoria Gold issued 250 million new shares in a move that will dilute the investments of existing shareholders by less than 50 per cent, says John McConnell, CEO of Victoria Gold.

McConnell told the News March 13 he thinks the move represents a great deal for shareholders. At least one of those shareholders disagrees, though.

Ron Randell moved to the Yukon 40 years ago to work as an oiler at the Anvil Mine. He bought shares in Victoria Gold five years ago. He said he felt duped when he found out about the new shares.

“It’s underhanded. It’s dirty. It’s disrespectful,” said Randell. He referred to an article, published in the December issue of Northern Miner, about Victoria Gold developing the Eagle mine.

In it, McConnell said the company wouldn’t “do a bad deal.”

“Minimizing dilution of our existing shareholders is the goal,” he told Northern Miner at the time.

McConnell told the News that issuing new shares is part of Victoria Gold’s recently announced project to finance the Eagle mine.

The company began construction on the mine, located near Mayo, last summer, but had trouble with funding.

On March 8, Victoria Gold said it had secured $505 million in funding by entering into agreements with Orion Mine Finance, Osisko Gold Royalties Ltd., and Caterpillar Financial Services Limited.

McConnell said the 250 million shares were sold at premium prices to Orion and Osisko, which will own 150 million and 100 million of the new shares, respectively.

He repeated that the goal of Victoria Gold is always to minimize dilution for shareholders, and said he thinks the company has done a better job of it than most.

“I’m one of the largest shareholders and I’m not unhappy,” he said. “But there’s a cost to financing the development of a gold deposit.”

That’s particularly true of one as large as Victoria Gold is planning, McConnell said.

“I mean, you know, in production, we will be the largest private sector employer in the Yukon. We’ll be creating probably in the order of 700 to 800 contractors working onsite this year. There’s not a project that even comes close to that in the Yukon.”

By the end of March, he said there will be 100 employees working at the mine. That number will peak in July.

Randell, 65 and retired now, still doesn’t like the situation. He said he doesn’t like feeling like he has no control. He said if share values had fallen due to rises and falls in the market, that would be one thing.

“It’s like there was a footstool and they just kicked the stool right out from under us. So we’re left now kind of holding the bag,” he said.

Randell said it’s the last time he’ll invest in a mining company.

Victoria Gold is the second time he’s done so. The first time was with the Aurcana Corporation — a Canadian-owned silver mine in Texas.

He said the same thing happened there. The company issued new shares that diluted the value of his. He said if he sells them now, he’ll lose his initial investment in the company. Instead, he’ll likely just give them to his grandchildren and steer clear of buying shares in the future.

“There’s no trust there anymore.… I’ve been burnt twice now.”

Contact Amy Kenny at amy.kenny@yukon-news.com

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