TORONTO (CP) -- The chairman of beleaguered Southwestern Resources Corp. [TSX:SWG], which has seen its shares lose more than half their value recently amid a drill sample scandal, says the company is arming itself against a potential hostile advance.
''We don't want anyone stealing the company at this level,'' chairman David Black said in an interview Tuesday, a day after the company's board of directors adopted a shareholder rights plan.
Southwestern shares have plunged since Thursday, when the Vancouver-based company reported sample tampering at its Boka gold project in China.
Black also said Tuesday the company remains hard at work on its review of its Boka drill results, all of which it was obliged to withdraw pending its investigation of sample tampering at the Chinese project.
''We're working very hard so we can make additional disclosure as soon as possible,'' Black said.
Southwestern shares recovered somewhat Tuesday.
The poison pill sent Southwestern's stock up as high as C$2.67 Tuesday, before closing at C$2.41 - up 18 cents, or about 8% for the day. The stock had closed at C$6.34 on July 18, before the bad news hammered its shares.
''It seems to be getting better,'' Black said, of the market's reaction to the company's shares. ''The market isn't so excited, and we're moving things forward.''
Despite the bad karma emanating from the Boka tampering scandal, Southwestern's portfolio of mineral assets could still prove attractive to savvy investors looking at a possible takeover.
In addition to two Chinese exploration properties, Southwestern has no long-term debt, has two mineral assets in Peru, a stake in a diamond company doing exploration work in Canada, and about C$40 million cash on hand, Black said. The company also has a 50% stake in Zincore Metals Inc. [TSX:ZNC], which is doing zinc exploration in Peru.
Southwestern has entered into a joint venture with Denver-based gold mining giant Newmont Mining Corp. [TSX:NMC; NYSE:NEM] on its main property in Peru, the Liam gold-silver project, which is located about 190 kilometres northwest of the city of Arequipa.
Southwestern also owns 100% of Antay copper project, comprised of 50,000 hectares within the northern extension of the Southern Peru copper belt, some 80 kilometres northwest of BHP Billion's [NYSE:BHP] Tintaya copper deposits.
Meanwhile, a subsidiary of Southwestern, called Southwestern Minerals Inc., and a subsidiary of Newmont Mining are also collaborating on a copper-gold exploration project on a 76,000-square kilometre area in the Yunnan and Sichuan provinces of China.
''We spent C$40 million in China and C$15 million in Peru,'' Black said. ''These aren't raw prospects.''
The company, which also said board member Patrick Downey has resigned as a director after joining the board in April, said it is not aware of any current takeover bid.
The rights plan, which was applauded Tuesday by analyst Eric Zaunscherb of Haywood Securities, limits shareholder ownership at 20% of outstanding common shares in the absence of a takeover bid for the entire company.
Zaunscherb saw Downey's resignation, however, as bad news for Southwestern.
''We were disappointed that Patrick Downey ... has decided to resign as he could have contributed greatly to the resolution of this problem and the rebuilding of the company,'' Zaunscherb wrote in a July 24 note to investors.
Downey resigned because he could not commit the time needed to deal with the massive undertaking now facing the company, Black said.
The plan also includes a requirement for any bid to be open for a minimum of 60 days. It is still subject to regulatory approvals.
The company also said it hired Daniel Innes, its former vice-president of exploration, as a special consultant in its probe.
Innes has a lot of credibility with markets, Black said Tuesday, and Zaunscherb agreed Innes should be a help.
''His familiarity with the company's properties will help expedite the review process and shows support for the company when most needed,'' Zaunscherb wrote.
Zaunscherb wrote in a July 23 note that Haywood had visited the property three times in four years and took several independent samples that were assayed for gold and returned gold values consistent with those reported by the company.
Last week, Southwestern said it uncovered ''deficiencies in its control procedures'' and said the integrity of certain drill core samples was ''compromised.'' The company fired John Zhang, the project's general manager.
The company's CEO, John Paterson, a co-founder of the company, had already left abruptly on June 19.
(c) The Canadian Press 2007