Editorial: Resource investors turn on each other

The ship of resource investors sailed deeper into the horse latitudes in mid-June, and cranky shareholders stepped up efforts to toss their mining shares and management teams overboard. Mining shares have broadly fallen or stagnated in recent months, even as prices for mined commodities have recovered to healthy levels. This has caused tempers to fray and battles to break out over the direction of a few juniors.

• The feud intensified in the executive suite of Toronto-based RX Exploration, which operates the small Drumlummon gold mine in Montana. The dissident group is led by RX president and founder Murray Nye, director and former CFO Max Polinsky, vice-president of mining operations Mike Gunsinger, and shareholder Bob Bannerman. The incumbent management group is led by chairman John O’Donnell, CFO John Ryan, Edward Ellwood and Paul Teodorocivi.

Showing how relations have soured, one of the first press releases by the dissidents was titled, “It is Time for a Change,” while later ones screamed about the board’s “treacherous delay tactics,” and stopping a “desperate board out-of-control.” The incumbents, in turn, have complained of the dissidents’ “vitriolic rhetoric” and “ambush tactics.”

The dissidents see too many conflicts of interest at the top at RX, and too much focus by the company on exploration instead of gold production.

But the incumbents have come back strongly by proposing top-tier new leadership for the company, including former Barrick Gold senior vice-president of corporate development Darren Blasutti as RX’s new president and CEO, and semi-retired lawyer Lorie Waisberg as RX’s new chairman. The two are even willing to plow a combined $2.3 million into RX in a private placement.

The incumbents’ slate of proposed directors is rounded out by retired Kinross Gold executive Hugh Agro, former Richmont Mines CEO and Barrick exec Louis Dionne, retired Barrick exec Alex Davidson and seasoned mining entrepreneur Paul Parisotto.

A shareholders meeting has been postponed to July 6. The dissidents claim to have votes lined up in their favour representing more than 50% of shares, but the incumbents’ newly proposed heavyweight line-up means it will be a close vote.

• A similar spat has erupted at junior nickel miner URSA Major Minerals, which has its Shakespeare nickel project west of Sudbury, Ont., and is led by CEO Richard Sutcliffe.

Stan Barti’s merchant bank Forbes & Manhattan has teamed with URSA’s largest shareholder, Inspiration Mining, to try to replace URSA’s board with its own nominees, comprising Vic Alboini, Allen Hayward, George Faught, Georg Hochwimmer, Randall Miller, Mark Trevisiol and Keeheum Shin (who is also an URSA nominee, representing key shareholder Korea Resources).

The dissidents complain of URSA directors’ inability to increase the share price or meet production targets, and their over-willingness to sell the company at a low price. 

The incumbents at URSA say they effectively run Canada’s only profitable junior nickel mine, and that they have heard from supporting shareholders who are uncomfortable with the corporate governance, compensation practices and shareholder returns seen in companies managed by the dissidents, such as Alexis Minerals, Inspiration Mining, Crowflight Minerals and Northern Financial. 

The showdown come to a head at URSA’s annual meeting on June 23 in Toronto.

• There are some unhappy shareholders at Klondex Mines, too. A dissident group representing 8% of shares aims to drop five out of six of the company’s current line-up of directors at the annual meeting on June 30, and gain control over the company’s slow-moving Fire Creek high-grade gold mine project in Nevada.

The dissidents say they have “serious reservations about Klondex’s ability to create value for shareholders as a result of its poor corporate governance and the current board’s lack of adequate mine development experience.” They also claim the board has “frustrated merger and acquisition attempts, exposed the company to undue financial risk and rewarded itself handsomely.”

True to form, Klondex management has been slow to respond to dissidents. At presstime several business days later, the company had not issued a press release or any other statement regarding the challenge.