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Snow Lake investor battle brings raw energy to Manitoba lithium project 

Snow Lake Resources’ lithium project in Manitoba. Credit: Snow Lake Resources

A shareholder rift over millions of dollars in executive pay at Snow Lake Resources (NASDAQ: LITM) is rattling the explorer’s plans to develop a lithium project in northwest Manitoba.

Management postponed a shareholder’s meeting today until January after an investors’ group that controls 42% of the company said it would try to vote out chief executive officer Philip Gross, chief operating officer Derek Knight and chief financial officer Mario Miranda.

Shorecrest Group, a Toronto-based advisor representing the Concerned Shareholders of Snow Lake, accuses Gross and the board of directors of enriching themselves with more than C$6 million for just seven months of service, according to company documents. The board tried to raise millions more in cash by diluting shares by 55% in a proposed stock sale in September that was blocked by a provincial court injunction.

“The existing collaborating directors have continued to burn through millions of dollars of the company’s money to keep their jobs,” Shorecrest wrote in a proxy circular for the aborted meeting.

“They have hired multiple expensive law firms and proxy advisory firms to purposefully delay this meeting for over four months, to entrench themselves and try to stop shareholders from having a fair and democratic say in imposing proper governance and making management accountable.”

At stake is a project for what may be the world’s hottest commodity. Demand for lithium to make batteries for electric vehicles and other modern technologies is forecast to accelerate for decades. End users like Tesla, GM and other automakers are scrambling for supplies and Snow Lake already has a supply agreement with LG Energy Solution of South Korea. However, the site’s remote location about 700 km north of Winnipeg may be a stumbling block for development.

Snow Lake defended the meeting postponement by calling the shareholders group dissidents engaged in potentially illegal proxy vote gathering, potentially misleading statements and trying to organize their own meeting, which would lack quorum, at a different location from Snow Lake’s offices.

Australian probe

It also said the Australian Securities and Investments Commission served Snow Lake with a request for information concerning an investigation into a potential breach of restrictions by people Snow Lake believes are joint actors with the shareholders’ group. Snow Lake didn’t name them.

Deferral is needed to sort out the claims and inform shareholders, Snow Lake said.

“Any purported meeting of shareholders prior to the meeting on January 17, 2023 will be invalid, as will any business purportedly conducted thereat,” Snow Lake said in a statement today. “The board of directors urges shareholders to disregard the dissidents’ ongoing inappropriate efforts to mislead shareholders and the market.”

The project includes the Thompson Brothers and Grass River spodumene pegmatite deposits. The project hosts an indicated resource of 9 million tonnes grading 1% Li2O for 91,200 tonnes, and an inferred resource of 2 million grading 0.98% Li2O for 19,300 Li2O tonnes. Drilling this year returned multiple drill samples showing more than 2.1% Li2O in intervals from 1.6 metres to 8.8 metres in length.

The Concerned Shareholders coalesce around Mordechai Kimelman — who spun Snow Lake out of his company Nova Minerals (ASX: NVA) in 2018 — and his wife and parents, according to the group’s circular. Kimelman was found guilty last year of insider trading regarding Nova and barred from managing corporations for five years. But he served no time of an 18-month sentence because he was remorseful and didn’t gain personally from the transactions, the group said.

Snow Lake set the meeting for this week after Shorecrest in June requested it. The advisor says the explorer lacks the authority to postpone the meeting and won’t tolerate the board’s “blatant disregard for its statutory and fiduciary responsibilities.”

Company documents show Gross is set to be paid C$4.2 million in salary and stock options this year while the company spent $4.4 million on exploring and analyzing its lithium asset. Board members approved so-called golden parachutes with more than $2.4 million in compensation if they’re voted out, the advisor says.

In September, Snow Lake agreed to supply LG Energy Solution with lithium hydroxide over 10 years after production starts in 2025. The project aims to produce 160,000 tonnes of 6% lithium spodumene a year over a decade, enough to power 5 million electric vehicles.

Shares in Snow Lake fell 6.5% to C$2.15 each on Thursday in Toronto, within a 52-week range of C$1.51 and C$10.50, valuing the company at C$38.5 million.