I THINK MINING

Over the weekend I wrote of the pressures on mining companies to perform or face loss of investors or customers or both.  Here is a story of pressure that can be brought for non performance by employees and class-action law suite lawyers. The website LawyersandSettlements reports in dry tone:

Atlas Mining Company has been accused of securities fraud. If you are a current or former employee …. you may be included in this possible Atlas Mining Company 401K or Employee Retirement Income Security Act (ERISA) class action.  Under ERISA, Atlas Mining Company employees can file a lawsuit against the company for putting stock options at risk. Atlas Mining Company employees have a claim if they can prove their employer violated its fiduciary duty to its employees. Fiduciary duty refers to a company’s responsibility to the people who invest in it. If an employer puts the company’s interest ahead of the investors’, it has broken its fiduciary duty

Details of this and other law suites comes from CNNMoney.com

On October 19, 2007, Saxena White P.A. filed suit on behalf of shareholders against Atlas Mining Company in the United States District Court for the District of Idaho……. Saxena White P.A. has offices in Boca Raton, San Francisco, and Boston, and specializes in prosecuting securities fraud and complex class actions on behalf of institutions and individuals.

The lawsuit charges Atlas and certain of its officers and directors with violations of the Securities Exchange Act of 1934 by issuing a series of materially false and misleading financial statements. On October 9, 2007, Atlas announced that it would restate its financial statements for each of the reporting periods from 2004 through the current fiscal quarter as the result of improper revenue recognition practices. In addition, Atlas announced it was suspending all activities at its Dragon Mine pending further review. These announcements caused Atlas’ stock price to fall over 50% on October 10, 2007, shaving millions of dollars off the Company’s market capitalization.

On their website, the company describes its history (I edit for length):

Originally established in 1924, Atlas Mining Company is an exploration-stage natural resource and mining company.  Upon becoming president and CEO of Atlas Mining Company in 1997, William Jacobson established a set of goals that has guided the company ever since. It now provides contracting services for other mining companies, conducts timber harvesting operations on its properties and is moving into the industrial minerals sector.  Atlas Fausett Contracting, a division of Atlas, is a leading mining contracting services company in the Idaho silver belt.  The Company’s current focus, however, is on the Dragon Mine property in Juab County, Utah: the only known deposit of halloysite clay in North America that is large enough to be mined commercially.

Background to this story is provided at the company’s website, where they tell of their intention to “restate” audited financial statements for 2005, 2006, and 2007.  Seems they were posting orders for delivery of mined product as revenue when they should have been posting the amounts as a liability.  From the numbers they provide this practice appears to have understated liabilities by about $250,000. 

New management has taken over and as they state about a conference call they cancelled: 

Management planned to inform investors that in their opinion, a current lack of a comprehensive, independent, third-party resource evaluation and estimation, insufficient mine planning, and inadequate processing facilities at the Dragon Mine are significant ongoing factors in the Company’s inability to enter into definitive contracts for the supply of halloysite clay from the Dragon Mine.  Accordingly, no short or long term contracts for halloysite clay from the Dragon mine are pending or imminent in the near future.

At best one can characterize this as the proper workings of the system to protect investors and employees.  At worst, it is another of those tales of management and lawyers and lost opportunities.  Somewhere inbetween is the customer for the halloysite, which according to one posting I read includes the U.S. Navy.  And with a son on a destroyer in the gulf, that pisses me off.