Conservation groups file securities complaint about Constantine
September 9, 2021
Three environmental advocacy organizations filed a complaint on Aug. 27 with Canadian securities regulators alleging that Constantine Metal Resources violated regulations by making misleading statements to the public and to investors about infrastructure for its Palmer project.
Lynn Canal Conservation (LCC), Alaska Clean Water Advocacy and Rivers Without Borders claim that in financial statements, presentations and public communications Constantine, which oversees the exploratory Palmer mine project near Haines, has misrepresented or omitted significant details about Haines’ facilities and readiness to export ore. The groups say Constantine has indicated that it has “access to a port in Haines that can load ore concentrate for export via ship and...paved road access from the Palmer project to the port.”
Constantine hasn’t stated explicitly that it could export ore from Haines at the moment. The company said, in a 2019 press release, that it intends to barge trucks full of mine concentrate “to the existing ore-terminal located in Skagway for eventual loadout onto ocean-going cargo vessels to Asian smelters.” The company also acknowledged in its 2019 preliminary economic assessment report that areas of the Palmer project are connected to the paved Haines Highway by graded roads.
But in other reports and presentations the company has touted, in general terms, the Palmer project’s proximity to Haines as a deep-sea port accessed by paved highway.
“The complaint makes it clear that Constantine habitually downplays the serious infrastructure challenges they face, to the point of misleading investors, when by law they are required to be ‘full, true, and plain’ in their language,” Jessica Plachta, executive director of LCC, wrote in an email to the CVN. The complaint asks that regulators require Constantine to amend its public disclosures.
The company has no plans to do so. “We have already disclosed to our stakeholders that we are considering using an ore-terminal located in Skagway to ship ore to Asian smelters,” Garfield MacVeigh, Constantine’s chief executive, wrote in an email to the CVN. Plachta said shipping truckloads of ore from Haines to Skagway would be “very expensive” and “not practical” and that “the elephant in the room is Constantine’s need for an ore port.” Alaska Industrial Development and Export Authority is considering decommissioning the Skagway ore facility. The state’s lease on the terminal, which is located on Skagway Borough land, is up for renewal in 2023.
Elise Palmer, a spokesperson at the British Columbia Securities Commission (BCSC), confirmed the commission was aware of the complaint but, per government policy, she declined to comment on whether Constantine might have violated securities law or whether the BCSC would investigate the complaint.
Canadian regulations, like American ones, require companies to disclose “material” facts to the public so investors can make informed decisions. A “material” fact is defined by statute as one “that would reasonably be expected to have a significant effect on the market price or value of the securities.” It might be thought of as information that a reasonable investor would consider important in his or her investment decision.
But there’s no one-size-fits-all formula for determining what a “reasonable investor” needs to know. Regulators and judges assess materiality on a case-by-case basis.
“Those are really hard cases,” said Amanda Rose, a law professor at Vanderbilt University who specializes in corporate and securities law.
Regulators have to look at the “total mix of information” in each case — not only the facts that have or haven’t been disclosed by a company but also information that’s already part of the public domain and industry-specific context.
What’s clear is that Constantine repeatedly has marketed the Palmer Project in broad strokes as close to Haines, a deep-sea port, and accessible by a paved highway.
In its 2019 preliminary economic assessment, Constantine published that Haines “boasts infrastructure to support exploration and mining operations.” The company’s website says that the Palmer project has “excellent access — located adjacent to a paved Alaska state highway, with a short (60 kilometers/37 miles) haul to year-round deep-sea port facilities in Haines, Alaska, providing ready access to Asian mineral concentrate markets.”
Those are two of more than a dozen similarly vague statements that the environmental groups cite in their complaint as misrepresenting Constantine’s access to infrastructure.
That some details are missing isn’t unusual, said Bob Loeffler, a professor of public policy at the University of Alaska, Anchorage, who has spent years working on and studying mining issues in Alaska. Loeffler said his work is funded by a grant to the university from the mining industry.
Loeffler said it’s common for companies to be vague about infrastructure in the preliminary economic assessment phase, which Constantine is in, and that detail increases in the next two phases of economic analysis, as the development project progresses. “You just wouldn’t expect to have the entire panoply of all those things laid out at the PEA level,” Loeffler said.
Loeffler often hears rumblings from the mining community if a company is in trouble, he said, but he hadn’t heard any concerns about the Constantine complaint, which he reviewed before speaking to the CVN.
Three independent investors in Constantine — Michael Gentile, John Tognetti and Peter Grandich — didn’t respond to requests for comment. The Electrum Group, a New York investment firm that recently sold a nearly 20% stake in Constantine, didn’t respond by press time to written and phone inquiries.
Plachta declined to say if she had been in touch with Constantine’s investors. “I think once this information is more widely known, investors will rightfully feel that they were misled by Constantine, and I don’t imagine they’ll be very happy about it,” Plachta wrote to the CVN.
MacVeigh said Constantine had heard from investors about issues raised in the complaint but that the company has no reason to believe investors were misled.
Gentile, who bought 19.4% of Constantine’s shares in August, has discussed the company's upside in recent YouTube videos.
“It’s on its path to become a producer,” Gentile said in a video published Aug. 13. He acknowledged that the Palmer Project still has “a bunch of steps to get through,” but he didn't mention Haines' roads or port facilities.