Noront Resources

Hi All,

Sorry for my absence the past seven days. Work and a sick puppy has kept me from visiting the boards. I did check in once and was proud to see that the message is still strong and the battle for the distribution of accurate information still being waged.

We are living in days of uncertainty regarding a company many of us have invested our hard earned money in for months, years, and in some cases decades. Money that could have been used for other things. Money that was invested with a large risk handicap associated with it due to the fact that only a few juniors miners out of a thousand hit a production mine find.

We have earned our stripes over the years through holding when all seemed to be falling apart at times, whether through market dynamics, fund manipulation, or at times disappointing results.

But the reward of perseverance, continued risk, and patience is that we held shares in a company that hit very significant results at Double Eagle on many fronts. It was not a matter of if, but a matter of when and what is the upper end of the resources in the ground.

I was doing some research on McFaulds earlier this week and noticed that back to 2004 many were calling for this to be the next big mining camp in Canada. The likes of Probe, Spider, and others who were looking for diamonds starting to hit sulfides. Though the results were not as great as what Noront has announced over the last year, there was still a lot of excitement over the area that has continued for four years.

Noront has also been involved in the area for longer than I realized. While I knew they had struck a deal for Double Eagle back in Q2 2007, they optioned out some claims there to Probe back in 2004. So they have had many years of understanding of the area.

We are in a fight for our investing lives. This is our company as well as Roussea's. We all hold shares.

But based on what I have read recently (thanks CrazyDik), it appears that a minority of shareholders are looking to take control of a company they feel is worthless. I interpret this to mean that this fund manager and the President who put up over 30 million dollars to buy 9.2 million shares of Noront over the past year made what looks to be a serious business mistake. Which would explain why they continued to purchase shares even after the initial DE2 broke and the estimate reports were released. Rather than buy shares at the ask in order to prop up the price, I see that many of the sells were at lower and lower prices. Again, bad business sense in book terms. But another day at the office in hedge fund terms.

I read an interesting quote this week regarding hedge funds. It is from the person who wrote a book about Warren Buffet named Alice Schroeder. When asked by CNN if Warren was still critical of Wall Street, she responded:

Schroeder: You've got an economy in which financial intermediaries who don't add anything to the economy ... have in the past two decades stripped off huge amounts of fees, particularly buyout funds, and hedge funds and funds of funds, and he's very, very critical of the amount of fees that have been taken out.

That essentially sums up our situation folks. I reviewed the economic analysis on Eagle One that was released today and it clearly shows that even with a five year average nickel price, we have a 2.4 year payback from a direct shipping infrastructure investment and an over $2.50 per share profit from just shipping what has been estimated at Eagle One. To me this shows that there is value in this company. Value that we all hoped for when we risked our money to invest in this spec play.

It is completely obvious that Rosseau's move is opportunistic. They like us, have suffered, but unlike us they have the financial means to perform this type of proxy takeover of the board and the company.

Our only defense at this point, from a shareholders point of view, is voting and hopefully winning the proxy battle in one week's time.

It is interesting to note that we are not alone in this type of battle. A quick search on google shows that Biovail, Biogen, and Napster have all been involved in proxy fights in 2008. An interesting statistic is that while proxy battles among minority shareholders rarely win, those conducted by hedge funds have a 60% success rate.

Napster is the most recent. With a market cap of $67 million, they found themselves in a proxy battle as they had $69 million in cash. Rather than try to buy out the shares for a higher price, replacing the board puts one in control of the cash, among other things.

http://money.cnn.com/2008/07/25/tech...

What is interesting is how this played out:

A month after the proxy battle announcement Napster announced that they had hired the investment bank UBS to find a suitor:

http://www.socaltech.com/napster_hir...

Two weeks later, the proxy battle was over as the company had been sold for $121 million in cash. The purchaser was Best Buy.

I will not comment on whether the shareholders got good value, but what is known is that proxy battle was avoided due to the sale, and the CEO was kept in place by the new owners.

As I sit here wondering what will be the fate of our beloved Noront, I wonder if Richard has one last trick up his sleeve. At this point he has announced pretty much all that can be announced regarding the properties, excluding the W3 assay results. But the sale of the company would be a current board decision, with shareholders accepting or not accepting the offer at a later date. Even a new BOD, I believe, would still have to honor the future shareholder vote for sale. To vote against the sale and drive the company into the ground or put the company in a place where the common shareholder received less value due to internal manipulation than the sale would have offered places the new board at personal financial risk due to their exposure to lawsuits. With a BOD position comes a lot of personal responsibility. Nothing is protected if they make the wrong decisions as board members.

I wonder if a sale is in the works this week? It will likely depend on the proxy numbers coming in. But look for some surprises this week. This is not based on insider information, but on the options I see remaining to keep the sharks from ruling the aquarium. Richard will take any steps possible to fulfill his duties as CEO to enhance shareholder value.

Keep with the fight and pray that the investments of the retail shareholders, made up of young and old, retired and working class, family and friends is protected. The thought of having someone come into our house and attempt to rob the safe or sell off the furniture to their own gain is considered theft in many parts of the world. It appears this is not the same with small companies. At least not yet.

There is a lot of fight left in Misfit and regardless of the outcome of the proxy battle, this fight will continue into the future. I only wish I could be at the AGM.

M1.