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Goodwood Dissident Circular Provides Dacha Shareholders With Compelling Reasons To Replace Board

Goodwood Inc. 212 King Street West, Suite 201 Toronto, Ontario CANADA M5H 1K5

November 5, 2012

Dear Fellow Shareholder:

We are today providing you with our proxy circular and asking for your support to elect a new board of directors at Dacha Strategic Metals Inc. (" Dacha") that will bring an end to the inappropriate related party dealings, culture of insider self-enrichment and inadequate board oversight and direction that has characterized Dacha for the past three years under the control of Stan Bharti and Forbes & Manhattan, Inc. (" Forbes & Manhattan ").

Dacha's Board is Not Acting in Your Interests

Dacha urgently requires a new board of directors that will act in the best interests of Dacha and all its shareholders, rather than serving the interests of Stan Bharti and Forbes & Manhattan:

  • during fiscal 2012, Dacha's stock price declined 65% from its high leaving the company with a market capitalization of only $37 million;
  • under the control of directors assembled by Stan Bharti and Forbes & Manhattan, Dacha has consistently demonstrated that it will place the interests of Stan Bharti and Forbes & Manhattan ahead of the interests of Dacha's shareholders.  The actions referred to below, while suiting the purposes of Stan Bharti and other Dacha insiders who benefited from them, were demonstrably not in the interests of Dacha or its shareholders:
    • Dacha's board recently purportedly adopted inappropriate "change of control" arrangements that, if permitted to stand, will transfer at least $8 million, equal to approximately 22% of Dacha's current market capitalization, from Dacha's shareholders into the pockets of Dacha's insiders, including $3.3 million to Forbes & Manhattan;
    • these change of control arrangements are on top of the more than $3.8 million in compensation paid to Dacha's directors and management during fiscal 2012, which included substantial discretionary cash bonuses paid to certain directors notwithstanding Dacha's declining share price;
    • in fiscal 2012, Dacha was forced to take a $3.7 million write-off, equal to approximately 10% of its current market capitalization, on account of the non-payment of a non-arm's length related party loan previously advanced by Dacha to a company associated with Stan Bharti and Forbes & Manhattan - contrary to applicable regulatory requirements, this related party loan was advanced without the required public disclosure or notification to the TSX Venture Exchange; and
  • Dacha's board recently spent months wasting Dacha shareholder value pursuing an ill advised related party merger transaction with another Forbes & Manhattan company, Aberdeen International Inc., that was not in the best interests of Dacha's shareholders or ultimately even capable of completion, apparently because the combined company did not meet the net income tests under the Toronto Stock Exchange's listing requirements;Dacha has shown itself to be devoid of any coherent strategy to protect the interests of shareholders during the current down-cycle in rare earth element pricing.  Over the past 12 months, the net asset value of Dacha's metals inventory and cash has consistently declined every month, falling by an aggregate of approximately 60.8%;
  • Dacha's current board and management have demonstrated that they neither understand the intricacies of the rare earth element business nor have the expertise or experience to properly manage Dacha's business or create value for Dacha's shareholders.  Their track-record is one of destroying shareholder value, while enriching themselves at the expense of Dacha's shareholders; and
  • Dacha's business and affairs are being conducted without sufficient regard to its timely disclosure and other regulatory obligations.  Certain share trading undertaken by a director of Dacha in the context of the failed Aberdeen transaction also raises concerns that Dacha's compliance policies are inadequate.

Dacha's Board Must be Independent of Stan Bharti and Forbes & Manhattan

Currently, Dacha's board and management consists exclusively of individuals with bonds to Stan Bharti and Forbes & Manhattan.  In response to shareholder demands for change, that same Stan Bharti-dominated board is now purporting to shuffle the deck by introducing four new director nominees, hand-chosen by the same failed board, in a hollow effort to show greater distance between Dacha's board and Forbes & Manhattan.  The reality, however, is quite different.  Each of the proposed new directors, like each of the current directors who are not standing for re-election, is tied to Stan Bharti and Forbes & Manhattan.  While it may suit the purposes of Stan Bharti and Forbes & Manhattan to have Dacha's board and management stacked with individuals beholden to Stan Bharti and Forbes & Manhattan, it has not well served the interests of Dacha or its shareholders in the past and will not well serve their interests in the future.

In the Management Circular, Stan Bharti and Forbes & Manhattan try to create the impression that their involvement with Forbes & Manhattan portfolio companies adds value for shareholders.  The reality is that their involvement often enriches only Stan Bharti, Forbes & Manhattan and the stable of related individuals that they install as directors and officers, and not shareholders.  We found a clear and disturbing trend when we reviewed the aggregate compensation paid to Stan Bharti and Forbes & Manhattan, and to other Forbes & Manhattan associates, by various Forbes & Manhattan portfolio companies in their last fiscal year, and compared that to the last 12 months' shareholder returns at those companies.  During the relevant period, Stan Bharti and Forbes & Manhattan collectively were paid compensation of approximately $20.8 million by these companies.  Other Forbes & Manhattan associates took out compensation of approximately $31 million.  At the same time, the median shareholder return at these companies was negative 48.2%.

The Goodwood Nominees will Protect Your Interests and Enhance Value

At the meeting of Dacha's shareholders on November 28, 2012, shareholders finally have the opportunity to elevate Dacha out of the world of penny-stock behaviour and related party dealings that have been harming the interests of its shareholders over the past several years.

The seven new director nominees being proposed by Goodwood (the " Goodwood Nominees") have the skills, knowledge and experience to finally provide Dacha with the leadership, governance and strong board oversight that Dacha's complex business requires and its shareholders deserve.  As importantly, they have earned the trust and respect of shareholders and capital markets participants through proven track records of honest leadership, building businesses and creating shareholder value.  The Goodwood Nominees are as follows:

Ian W. Delaney

  • One of Canada's most accomplished and respected business leaders with a track record of significant long-term value creation at some of Canada's most successful businesses, including Sherritt International Corporation, Viridian Inc., The Horsham Corporation and Merrill Lynch Canada Inc.
  • Chairman of The Westaim Corporation, whose principal asset JEVCO Insurance Company was sold to Intact Financial Corporation on September 5, 2012 representing a gain of over 55% to Westaim's shareholders who financed Westaim's acquisition of JEVCO in February 2010
  • Has served as a director on some of Canada's largest and most respected companies

Jorge Bernhard

  • Highly respected former Chief Executive Officer of several successful international metals trading businesses with more than 25 years experience in selling and trading a wide variety of non-ferrous metals
  • Significant success in the international metals trading business and extensive knowledge of London Metals Exchange and non-exchange traded metals
  • Created new price discovery mechanisms in the cobalt market to generate better transparency for all market participants

Timothy E. Thorsteinson

  • A leading turn-around and restructuring specialist with numerous instances of outsized returns to investors
  • Appointed to the board of Miranda Technologies Inc. in March 2012, and instrumental in the sale of Miranda to Belden Inc. generating a return for shareholders of approximately 60% in under one year
  • Joined Leitch Technology Corporation in November 2003 and led a highly successful turnaround of the company culminating in a sale to Harris Corporation in 2005 resulting in a return of over 290% for shareholders
  • Part of a buyout group of Grass Valley Inc. in 2000 culminating in a sale of the company to Thomson Corp. in 2002 generating a return of approximately 80% over two years

Gregory M. Cameron

  • Extensive experience raising capital for both resource and non-resource growth companies
  • Grew CUB Energy Inc. from no production in late 2011 to over 1,500 barrels of oil equivalent and a market capitalization of approximately  $90 million today
  • The hydrocarbons produced by CUB Energy Inc. today represent a greater volume of hydrocarbon production than ever achieved within Forbes & Manhattan's energy holdings
  • CUB Energy's current market capitalization represents a greater market value than all of Forbes & Manhattan's energy holdings combined

Tye W. Burt

  • Chief Executive Officer of Kinross Gold Corp. from March 2005 to August 2012
  • At Kinross, grew production from 1.65 million ounces of gold to 2.6 million ounces of gold - an increase of approximately 58%; grew gold reserves from 19.4 million ounces to 62.6 million ounces - an increase of over 220%; grew operating cash flow ten-fold; top-performing senior gold producer on NYSE during each of 2006, 2007 and 2008
  • Growth in production and reserves is more gold produced or discovered than by all Forbes & Manhattan precious metals companies combined over the past 10 years
  • Current and prior directorships include ArcelorMittal, Barrick Gold Corporation, the Ontario Financing Authority and MacDonald, Dettwiler and Associates Ltd.

Daniel Marks

  • Significant micro/small capitalization investing and turn-around experience and success
  • Orchestrated the management and board revamp of Pacific Safety Products Inc. that solidified the balance sheet, through a financing and merger with Zuni Holdings Inc., and moved the company from recurring losses back to profitability
  • Was the catalyst on the board of MTI Global Inc. that initiated a strategic review culminating in the sale of the main operating unit to 3M in June 2010 taking the company from near insolvency to providing a substantial return of capital to shareholders

Peter H. Puccetti

  • 16 year track record of successful management of Goodwood Fund - compounded annual returns of 10.34% since inception in 1996, outperforming the S&P/TSX Total Return Index by 2.96% over that period
  • Director of The Westaim Corporation, whose principal asset JEVCO Insurance Company was sold to Intact Financial Corporation on September 5, 2012 representing a gain of over 55% to Westaim's shareholders who financed Westaim's acquisition of JEVCO in February 2010

In discharging their responsibilities as directors of Dacha, the Goodwood Nominees also expect to have the benefit of the services of Peter V. Gundy.  Mr. Gundy was a founder of Neo Material Technologies Inc. (" Neo") and served as the Chairman and President of Neo from 1993 to 2006, and then as its Chairman until 2008.  Mr. Gundy is widely regarded as one of the foremost world experts in the rare earth element business, with unparalleled sourcing, trading and other relationships.  Under Mr. Gundy's direction, Neo was one of the few non-Chinese firms in the world to succeed in generating consistent significant profits in the rare earth element business.  During the period in which Mr. Gundy was a senior officer and/or director of Neo, he was instrumental in orchestrating a strategy of organic growth initiatives and transformative acquisitions, growing Neo's revenue from $46.9 million to $266.6 million between 2003 and 2008 and Neo's net income from $302,000 in 2003 to $23.3 million in 2008 - representing compound annual growth rates of 41.6% and 139%, respectively.  Based on the solid business foundation developed by Mr. Gundy, Neo was acquired by Molycorp, Inc. in 2012 for $1.3 billion.

Upon their election, the Goodwood Nominees intend to conduct a thorough review of Dacha's metals inventory and the opportunities and prospects to create shareholder value from both Dacha's existing inventories and its rare earth element business going forward.  The Goodwood Nominees' sole focus in conducting this review, which is expected to be undertaken with the assistance of Mr. Gundy, will be to maximize value for Dacha's shareholders.  As part of that review, the Goodwood Nominees will also consider and assess Dacha's overall corporate strategy and all strategic and other alternatives available to it, with a view to implementing that corporate strategy and direction which maximizes long-term shareholder value for the benefit of Dacha's shareholders.

Don't Settle for More of the Same

The Goodwood Nominees will also, upon their election, implement an appropriate corporate policy requiring minimum share ownership by all Dacha directors so as to properly align the interests of Dacha's directors with its shareholders.  This will avoid a repeat of the current situation, where two of the three incumbent directors being proposed by Dacha's management for re-election own not a single common share of Dacha despite having served as Dacha directors for more than two years.  Similarly, during the more than three years that Stan Bharti has been a director of Dacha, he has never reported purchasing a single common share of Dacha, and in fact early in 2012 he sold approximately 33% of his shares such that he currently owns only approximately 1.3% of Dacha's outstanding shares.  Dacha shareholders should ask themselves why it is that Stan Bharti and his nominees want to control Dacha, but don't want to own its shares?

We encourage you to carefully review the full biographies of the Goodwood Nominees included in our circular, and to form your own judgment about who will provide the best leadership for Dacha going forward.  We also encourage you to carefully review the information included in our circular regarding the nominees being proposed by Dacha's current Stan Bharti-dominated board.  Ask yourself why it is that Stan Bharti so wants James Rogers, a member of the Forbes & Manhattan Advisory Board, to succeed him as Chairman of Dacha.  Mr. Rogers is not an expert in rare earth elements and, with the greatest of respect for him, neither is he a logical choice to be Chairman of a Canadian-listed reporting issuer whose shareholders wish to separate from Stan Bharti and Forbes & Manhattan.  Further, while Dacha's current board claims in its circular that Mr. Rogers currently serves as a director of King's Bay Gold Corporation and QRS Capital Corp., those claims with respect to Mr. Rogers' experience are simply not true.

It is also troubling that Dacha's current board does not appear to understand Dacha's own by-laws, as the director nominees being put forward by the current board would not appear to satisfy the requirement in Dacha's by-laws that a majority of its directors be resident Canadian.

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