Snow Lake Resources suing ex-CEO over payments

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This article was published 29/04/2023 (1251 days ago), so information in it may no longer be current.

THE former CEO and chairman of the board of Snow Lake Resources Ltd. along with some associates are being sued by the company over what they claim to be “exorbitant” payments from a “golden parachute” arranged at the 11th hour.

In its statement of claim Snow Lake Resources said that Philip Gross, former CEO and chairman of the board, Derek Knight, the chief operating officer and others improperly altered their consulting contracts such that their payout would triple in the event of a change of control of the company including a change in the composition of the board.

The alteration of the consulting agreement was made when Gross and the board were aware that a group of shareholders were agitating for just such a change of control.

That change of control occurred in January 2023, when the so-called “requisitioning shareholders” succeeded in voting in a new slate of directors. Gross and Knight were subsequently let go.

This suit is another episode in the internal squabbling that has been going on for almost a year.

Snow Lake Resources Ltd. was created after the former owners of the exploration property near Snow Lake, Man., spun off part of the property and raised US$24 million in an initial public offering on the U.S. Nasdaq Exchange in November 2021 that Gross led.

Gross dramatically increased the profile of the company underlining the significance of the property in light of rising global demand for lithium to feed the supply chain for batteries that is expected to increase dramatically as the numbers of electric vehicles increase with the global decarbonization efforts.

Among other things the company has declared its intentions to build the world’s first all-electric lithium mine, is in the process of becoming a certified B Corp and signed a memorandum of understanding with Korean battery-maker LG Energy Solution with the potential for LG to partner with Snow Lake in a billion-dollar lithium processing plant in Manitoba.

LG’s interest in the potential venture attracted government support for the project from both the province of Manitoba and the federal government.

The former owners of Snow Lake Resources Ltd.’s property, Nova Minerals of Australia, was clearly supportive of management at first and early in 2022 actually sold shares in Snow Lake for $18 million in proceeds.

But Nova’s directors and individuals associated with Nova, started to tire of Gross’s ambitious and expensive plans for the lithium property which remains in exploration. The company has not yet filed a feasibility study,a comprehensive analysis of the business case for investing the actual construction of a mine that every exploration property has to undertake.

But Nova and its associates continued to control enough shares to successfully vote in new directors. They had tried to schedule a board meeting to do that in the fall of 2022 but Gross and the then board filed court injunctions successfully delaying the board meeting that eventually led to the change of control on Jan. 17, 2023.

The statement of claim filed in the Manitoba Court of King’s Bench allege that the change in the consulting contracts with management were done improperly — including by excluding one board member who was supportive of the new board.

The suite also alleges that Gross and the former board arranged for the issuance of 10 million new shares after they were aware of the proxy battle that the Nova-supported requisitioning shareholders had launched.

The company is seeking a judgement of $1.8 million from the defendants along with other costs.

None of the allegations have been proven and Gross and others have not filed a statement of defence.

Gross and his legal representatives could not be reached for comment.

martin.cash@freepress.mb.ca