Editorial: A loss, a win and a draw

The resource market passed the halfway mark of 2011 in a bit of a foul mood, with the ongoing anxiety over the feeble economic recovery seen in the U.S. and parts of Europe continuing to depress mining share prices, even in the face of robust metals prices.

At least there were resolutions in the civil wars that flared up in the boardrooms of three North American mining juniors:

• Prompted by a proxy battle launched by Bayfront Capital Partners, shareholders of Toronto-based Midlands Minerals turfed their president, CEO and founder Kim Harris and her key supporters at a meeting on June 30. Harris, who got Midlands off the ground in 2000, is staying on in a consulting role, but vice-president of exploration Tom Neelands has resigned.

The dissident group had complained of inadequate progress at the company’s flagship Sian gold project in Ghana, and of lacklustre share-price performance during a bull market for gold.

Toronto-based Bayfront mostly got its way at the meeting, with the election of a new slate of six directors comprised of: John Carruthers and Mark Keatley, who were among the nominees proposed by previous management and continuing directors, and John Vettese, Mark Morabito, Nicholas Tintor and Anthony Wonnacott, who were the nominees of Bayfront.

To top it off, shortly after the management shake-up, Midlands’ joint-venture partner at the Sian project, Sian Goldfields, sent Midlands a letter that was, in Midlands’ words, “purporting to terminate their joint-venture agreement.” Midlands commented that there is “no basis for the termination being claimed by Sian,” and that it is “looking forward to continuing to work with Sian, and expeditious identification and resolution of the issues that motivated Sian to send the letter.”

In another letter sent a week earlier, Sian Goldfields’ managing director Ben Kufuor said his company had “every confidence and trust in the current management with whom we have had a good relationship over the past five years,” and warned that “should the hostile takeover occur . . . (we will view it) as a breach of trust and a clear demonstration of lack of respect for local partners, and lack of social responsibility.”

• In another all-Toronto showdown, the incumbent directors and managers at nickel miner Ursa Major Minerals had much better success fending off a dissident group, this time led by Stan Bharti’s merchant bank Forbes & Manhattan and its ally Inspiration Mining.

Ursa’s management described the company as having been “plagued by a group of opportunistic dissident shareholders . . . who have repeatedly attempted to hijack the company for their own ends.”

In addition to getting strong voting support from shareholders for keeping existing management, Ursa scored a big win in the Ontario Superior Court, which ordered Forbes & Manhattan and Inspiration to cover $110,000 in legal bills racked up by Ursa and large Ursa shareholder, Wesley Hall, who supports the incumbent management.

Forbes and Inspiration had filed a hasty court motion a week before the Ursa shareholder vote, arguing that Hall’s 14.7% shareholding should not be counted, but then they withdrew the application two days later, minutes before a hearing was to begin.

Justice Robert Brown was scathing in his rebuke of the duo’s legal manoeuvring, writing in his decision, “In sum, I find that the serious allegations of misconduct levelled by (Forbes & Manhattan and Inspiration) against (Ursa Major and Wesley Hall), the lack of merit to those allegations and the tactical use made by (F&M and Inspiration) of this proceeding, combine to place the litigation conduct of (F&M and Inspiration) in the category of ‘reprehensible conduct’ . . . “

• The battle for Nevada-focused gold mine developer Klondex Mines was more genteel, with management and dissident shareholder The K2 Principal Fund L.P. striking a deal to end their proxy dispute just before a shareholder meeting.

The formerly warring parties agreed to form a new Klondex board made up of three representatives of the existing management, namely Blane Wilson, Robin Goad and William Solloway, and three members of K2’s proposed slate, namely Andre Douchane, Warren Moysey and Chad Williams. Kenneth Stowe, the outgoing president and CEO of Northgate Minerals, will also be appointed a director. 

Solloway is stepping down as Klondex’s CEO, but remains chairman, and Wilson, Klondex’s president and COO, is being appointed president and CEO. 

Three outgoing Klondex directors are Brendan Donohoe, who will remain as treasurer, Ronald Shorr and Richard Kern.