Dissidents force Sherritt meeting

Sherritt Gordon (TSE) says it will comply with a request from a minority shareholder for a shareholders’ meeting to vote on proposed changes in the metal refiners’ board. However, Sherritt said it is puzzled by the request from Canada SherGor Enterprises for such a vote and by the motivation of SherGor’s controlling shareholders Ian Delaney and Bruce Walters.

The requisition asking for the meeting was delivered two years after Toronto investment dealer Sprott Securities placed a block of Sherritt Gordon shares with institutional investors. If Sherritt had not called the meeting within 21 days of the request, SherGor would be entitled to call such a meeting because it holds 5% of Sherritt’s issued shares.

“We believe that the current board of directors of Sherritt Gordon has not seized the opportunities provided by its strong asset base and sound operating management to increase shareholder value,” said Eric Sprott, president and chief executive officer of Sprott.

“Sherritt Gordon has been lacking in the dynamic leadership and discipline which can be provided by strong executive management with a significant equity interest in the company,” he said.

Due to a large drop in the price of nickel, Sherritt Gordon reported a loss of almost $2 million in the first quarter of 1990.

As reported (T.N.M., April 30/90), the company’s metals division suffered badly after it realized an average nickel price of $3.74 per lb. during the quarter, compared with $9.17 for the same period last year. Because the company failed to secure the necessary feed to keep its Fort Saskatchewan, Alta., nickel refinery running at full capacity, the facility was shut down at the end of June and won’t open again until Sept. 1.

The fertilizer division reported lower sales volumes and prices and was hurt by higher costs because of an unscheduled shutdown.

“If the shareholders support them, Delaney and Walter will become directors of Sherritt Gordon and it is expected that they will be appointed to executive positions by the new board,” said Sprott.

Delaney and Walter are former senior executives of Horsham (TSE), which controls American Barrick Resources (TSE).

However, with cash flow running at $1.75 per share, Sherritt’s financial health isn’t weak enough to warrant a fully fledged shakeout in the refiners’ board, said a Toronto metals analyst who asked not to be identified.

“Management should be strengthened somewhat but I don’t know whether this is the group that can do it,” he said.