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Fancamp Special Committee Formally Launches Forensic Investigation Into Breaches of Fiduciary Duty and Multiple Apparent Incidents of Misconduct by Disgruntled Director Mr. Peter H. Smith

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·9-min read
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  • Special Committee Intends to Engage Third Party Forensic Accountant to Assist with Investigation

  • Shareholders Have a Right to Know the Extent of Mr. Smith’s Misconduct and Potential Securities Law Violations Before They Vote

Fancamp Exploration Ltd. ("Fancamp" or the "Corporation") (TSX Venture Exchange: FNC) today announced that its special committee of directors (the "Special Committee"), who are disinterested in the proposed business combination with ScoZinc Mining Ltd. ("ScoZinc") (the "Transaction") and independent from Mr. Peter H. Smith, has formally launched a forensic investigation into numerous and apparent ongoing incidents of misconduct by Mr. Smith, a disgruntled director and former President and CEO, who recently had his consulting agreement terminated for cause by the Corporation.

In anticipation of the successful defense against Mr. Smith’s costly and wasteful proxy fight, the Special Committee is conducting an investigation into Mr. Smith’s past conduct, both disclosed and undisclosed, that it believes will shed light on significant misconduct to benefit Mr. Smith to the detriment of Fancamp shareholders. As part of this process, the Special Committee intends to engage a third-party forensic accountant to assist with this investigation. The Special Committee also intends to report its findings as they become available.

While the Corporation is disappointed that it has had to take this step, the seriousness of these issues and Mr. Smith’s continued obstruction and refusal to hand over information belonging to the Corporation despite several requests, has left it no choice. The Corporation believes that Mr. Smith’s continued stonewalling is a blatant self-serving attempt to conceal damaging facts about his actions and hinder the progress of the Corporation until the Corporation has held its AGM.

The Special Committee has not limited the scope of the investigation in any way and directed all current officers and directors to cooperate with the investigation. Additionally, through its legal counsel, the Corporation has sent a notice to Mr. Smith, requesting that he fully cooperate with the investigation. The Corporation has also demanded that Mr. Smith ensures none of the information in question is destroyed, and to preserve all records – hard copies and electronic – and to provide the Corporation with confirmation of his cooperation.

Need for Special Investigation Caused by Mr. Smith’s Continued Disregard for Proper Governance and Obstruction
Mr. Smith was asked to step down as President and CEO in August 2020 for failing to create any shareholder value under his tenure and for taking several actions which were not in the best interest of Fancamp or its shareholders. Since his departure, Fancamp has both uncovered and faced a string of gravely serious and problematic actions taken by Mr. Smith against the Corporation, including but not limited to:

1. Obstructing business by withholding information and corporate materials in his possession from management

  • For 30 years, Mr. Smith personally kept all of the Corporation’s documents and took personal possession of Fancamp’s office rather than enter into a proper lease agreement. When he was asked to step down, Mr. Smith prevented access to both the office and documents by any Fancamp personnel.

  • This caused delays in the technical review process, forced Fancamp to incur additional expenses, and prevented the Corporation from providing proper updates to shareholders.

  • To this day, despite multiple requests to hand over information, management and shareholders still do not know what Mr. Smith is hiding.

2. Failing to comply with applicable legislation by disclosing non-public material information

  • Mr. Smith blatantly disclosed confidential information on the December 31, 2020 private placement, the Transaction, and information regarding Ernst & Young LLP’s ("Ernst & Young") fairness opinion (the "Opinion") on the Transaction, despite the agreement with Ernst & Young stating that the Opinion may not be disclosed in public filings.

  • Read how Mr. Smith breached his fiduciary duty to Fancamp shareholders here and here.

3. Defying common governance and accountability practices, such as obtaining Board approval prior to spending shareholders’ money, initiating multi-million-dollar projects, and providing budgets

  • Mr. Smith spent C$600,000 on an expenditure in Virginia, U.S. – without the knowledge or approval of the Board – for geological activities which had no underlying mineral property, forcing the Corporation to write off all of the expenses.

  • Mr. Smith also refused to follow due process or exercise caution while selling shares of Champion Iron Limited ("Champion"). Instead, Mr. Smith incurred excessive, value-destroying expenses. Between May 2018 and July 2020, Mr. Smith sold over 4.8 million shares of Champion at low prices for C$6.8 million, then quickly squandered the proceeds, leaving the Corporation with net current liabilities of $564,597 when he departed as President and CEO.

4. Repeatedly making false assertions against the Corporation

  • Mr. Smith falsely asserted there were conflicts of interest with Messrs. Ashwath Mehra and Mark Billings, when Mr. Mehra disclosed his interest in ScoZinc in a timely manner and recused himself from voting, and Mr. Billings resigned from ScoZinc’s board and was not involved in the negotiations around the Transaction while he was a director of ScoZinc.

  • Mr. Smith also falsely asserted that Messrs. Mark Haywood (President and CEO of ScoZinc) and Christopher Hopkins (director at ScoZinc) will control the Board once the Transaction closes.

  • Shareholders should read the facts here.

5. Failing to keep the Board and the market informed of the results of the Corporation’s previous exploration programs

  • In a clear contrast to the unfocused approach by Mr. Smith, and in line with industry best practices, on April 27, 2021, Fancamp provided the previously undisclosed results of past exploration programs.

The Corporation is disappointed in the actions of Mr. Smith and troubled by his continued refusal to cooperate with the Corporation’s efforts to move its business forward and investigate his actions. Under corporate law, a director has a duty to act honestly and in good faith, with a view of the best interests of the Corporation. Rather, these initial discoveries, coupled with his ongoing apparent misconduct, have forced the Corporation to pursue a formal forensic investigation.

The Corporation also has strong reason to believe there are even further instances of misconduct and self-dealing by Mr. Smith, including but not limited to:

  • Numerous excessive staking exercises without proper agreements or prior knowledge and approval of the Board

  • Working with a close associate who lied on invoices to provide payments to their spouse and personal vehicle

  • Hiring and directly paying an assistant who was privy to significant and valuable information of the Corporation, then preventing access to the employee

  • Disclosing non-public material information to supporting shareholders to fuel a smear campaign against the Corporation and its management

With a formal forensic investigation underway, the Corporation continues to reserve all of its legal rights in connection with Mr. Smith and will consider any such measures as are appropriate on behalf of its shareholders, including through the courts if necessary and claim from Mr. Smith all damages incurred by the Corporation as a result of his misconduct.

Advisors
Lavery, de Billy, L.L.P. is serving as legal advisor to Fancamp. Kingsdale Advisors is acting as strategic shareholder and communications advisor to Fancamp. Koffman Kalef LLP is serving as legal advisor to the Special Committee.

About Fancamp Exploration Ltd. (TSX-V: FNC)
Fancamp is a growing Canadian mineral exploration corporation dedicated to its value-added strategy of advancing mineral properties through exploration and development. The Corporation owns numerous mineral resource properties in Quebec, Ontario and New Brunswick, including gold, rare earth metals, strategic and base metals, zinc, chromium, titanium and more. Fancamp is also building on the industrial possibilities inherent in dealing with some of these materials, notable being the development of its Titanium technology strategy. It has recently announced the acquisition of ScoZinc, a Canadian exploration and mining corporation that has full ownership of the Scotia Mine and related facilities near Halifax, Nova Scotia, as well as several prospective exploration licenses in surrounding regions. The Corporation is managed by a new and focused leadership team with decades of mining, exploration and complementary technology experience.

Forward-looking Statements
This news release includes certain forward-looking statements which are not comprised of historical facts. Forward-looking statements include estimates and statements that describe both companies’ future plans, objectives or goals, including words to the effect that both companies or their respective management expects a stated condition or result to occur. Forward-looking statements may be identified by such terms as "believes", "anticipates", "expects", "estimates", "may", "could", "would", "will", "foresees" or "plan". Since forward-looking statements are based on multiple factors, assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Although these statements are based on information currently available to Fancamp, Fancamp provides no assurance that actual results will meet the management’s expectations. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially or simply fail to materialize from those expressed or implied by such forward-looking information. Forward-looking information in this news release includes, but is not limited to, the Corporation’s annual general meeting, objectives, goals or future plans, statements, potential mineralization, exploration and development results, the estimation of mineral resources, exploration and mine development plans, timing of the commencement of operations, estimates of market conditions, future financial results or financing opportunities. There can be no assurance that forward-looking statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Fancamp’s expectations include, among others, political, economic, environmental and permitting risks, mining operational and development risks, litigation risks, regulatory restrictions, environmental and permitting restrictions and liabilities, the inability of both companies to satisfy the conditions precedent to complete the Transaction, the inability to obtain the necessary regulatory and third-party approvals for the Transaction, the inability of Fancamp to raise capital or secure necessary financing in the future, as well as factors discussed in the section entitled "Risks and Uncertainties" in Fancamp’s management’s discussion and analysis of Fancamp’s financial statements for the period ended January 31, 2021. Although Fancamp has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210512005680/en/

Contacts

For Further Information
Rajesh Sharma, Chief Executive Officer

+1 (604) 434 8829
info@fancamp.ca

Debra Chapman, Chief Financial Officer
+1 (604) 434 8829
info@fancamp.ca

Media Contact
Hyunjoo Kim
Director, Communication, Marketing & Digital Strategy
Kingsdale Advisors
Phone: 416-867-2357
Cell: 416-899-6463
Email: hkim@kingsdaleadvisors.com

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