Maudore, Roxgold enter the octagon with dissident shareholders

Frustrated resource investors are resorting to proxy battles as share prices languish, with Maudore Minerals (MAO-V) and Roxgold (ROG-V) only two of the latest juniors to see shareholder revolts.

The two have ample company, as investors blame management for declining stock prices in the bear market. Fights for board control have taken place at a  range of companies in recent months, from the high-profile fight over control of Baja Mining (BAJ-T) and its under-construction Boleo mine won by dissident shareholders, to the lower-profile fight over control of molybdenum junior Mosquito Consolidated Gold Mines (MSQ-V), won by management.

Other companies recently subject to proxy battles include Avion Gold (AVR-T), Jaguar Mining (JAG-T, JAG-N),  Argonaut Exploration (AGA-V), Mundoro Capital (MUN-T), MGold Resources (MNI-V) and Bison Gold Resources (BGE-V). While most battles were resolved at annual general meetings, the paper war is still raging at Maudore, and just starting up at Roxgold.

At Maudore, shareholders owning about 18% of shares and led by Rex Harbour have portrayed the current board of directors as lacking technical experience and therefore incapable of driving the company forward. Current CEO Ronald Shorr has countered that the Rex Harbour group are attempting a “stealth takeover” of the company by imposing an entirely new board that is “inexperienced and beholden to Mr. Harbour.”

The two sides are arguing over who is best positioned to advance the company’s high-grade Comtois gold project in Quebec towards production.

The Harbour group say that after seven years of exploration the company still does not have an economic study out on the project; that they have been waiting for a promised resource update for eight months; and that the discovery cost of $18.80 per oz. gold achieved so far is well above the industry average of $10.18 per oz. gold. The group contends that the lack of progress is in no small part due to the lack of technical expertise on the board, particularly singling out Shorr, 76, as having no mining experience.

Management has responded that it has been successful in outlining a 1.2-million-oz. gold resource, that it recently announced new gold discoveries and that it is indeed moving the project forward, all with minimal share dilution. The board has also moved to establish a technical advisory committee to increase expertise, and points out that the proposed Maudore team has two mining engineers while the proposed Harbour group has none.

Both sides have gathered supporters, with proxy advisory firms Institutional Shareholder Services and Glass Lewis recommending that shareholders vote with the current board, while Harbour has announced that Anglo Pacific Group, Maudore’s second-largest shareholder, will be voting with the dissident group.

From there the debate goes into all sorts of side concerns, including: how many options the company has issued; Shorr being both chairman and CEO until recently; the apparently questionable financial independence of Rex Habour’s charitable Harbour Foundation; and the Harbour group’s unwillingness to negotiate. The press release battle has also led to strong language on both sides, though certainly more colourful in the Shorr camp. Most recently Shorr framed the choice as being between “stability and progress” versus “half-baked plans and nepotism” with a “hare-brained scheme.”

The annual general meeting, which has been twice postponed, is now scheduled for July 19.

At Roxgold the proxy fight only started on July 9 when a group led by Oliver Lennox-King, former chairman of Fronteer Gold, Pangea Goldfields and Southern Cross, put forth a slate of directors in time for the July 12 AGM. In response, Roxgold postponed the meeting by more than two months to Sept. 25.

The company says it delayed the meeting to “provide shareholders with ample opportunity to consider all of the issues in what is now a contested election.” In response, Lennox-King stated the delay is “a stunning betrayal of shareholder rights,” and shows a “complete lack of respect for shareholder democracy.”

The Lennox-King group has raised concerns over how the current board has run Roxgold, covering much the same ground as in the Maudore debate. On the project level, concerns include slow progress on a number of fronts at the company’s flagship Yaramoko gold project in Burkina Faso, while with respect to management quality the concern is again the lack of technical experience at senior levels. And while issuing options is a small part of the Harbour group’s concerns at Maudore, the Lennox-King group sees the compensation practices at Roxgold as a main concern.

Lennox-King points out that since late 2010 the board has awarded 12.5 million options for 98% of available options under the company’s rolling 10% stock option plan, with most going to the board. Outstanding shares, meanwhile, have increased nearly 10 times from 12.5 million in October 2010 to 122 million in early June. At the same time non-executive directors paid themselves aggregate cash bonuses of $240,000 in the 2011 financial year, and paid CEO Robert Sibthorpe an additional $113,000 for serving as a director.

The Lennox-King group has also raised concerns over Roxgold’s steeply declining share price, which traded at a high of $2.27 in March but was at 56¢ on July 6. The stock got some relief, however, on news of Lennox-King’s action, jumping 19¢ to 74¢, with 3.7 million shares traded on July 9.

Roxgold stated that it “does not want to get drawn into a back-and-forth debate on the many statements made by Mr. Lennox-King at this time.” The company clarified that there is no basis for concluding Lennox-King had the shareholder support needed going into the July 12 vote. Lennox-King has stated that his group represents 28.5% of outstanding shares, and that since going public with his alternate board slate, shareholders representing a further 21.1% of outstanding shares have thrown their support behind the group.

Roxgold’s share price recovery was short lived, dropping down to 63¢ on the latest company update. Maudore’s share price, which peaked at $6.15 in November, has since been on a steady decline, hitting a 52-week low of $2.69 on the company’s latest salvo before closing at $2.78, with 26.9 million shares outstanding.