Taseko’s proxy battle with 
Raging River heats up

VANCOUVER — Taseko Mines (TSX: TKO; NYSE-MKT: TGB) is in the midst of a proxy battle with upstart activist shareholder group Raging River Capital, which has led to a flurry of press releases and a potential defamation lawsuit.

On Jan. 13 Raging River requisitioned a Taseko shareholder meeting to cut the company’s ties with privately owned Hunter Dickinson (HDI) group. The activist shareholder collective — which owns a 5.1% equity stake in Taseko — noted that HDI executives hold three board positions at the company, including Taseko chairman Ronald Thiessen (HDI’s CEO and a director of HDI) and Taseko CEO Russell Hallbauer (a director of HDI).

Raging River subsequently cited concerns around fees and investments totalling $25.8 million paid to HDI since 2012, and a deal in November 2014 wherein Taseko acquired Curis Resources and its Florence Copper project in Arizona for $80 million. The deal represented a 21% premium on Curis’ 20-day, volume-weighted trading price at the time, and Raging River has framed the takeover as a “bail out” of a junior company that was nearing bankruptcy.

“We had a total of two calls with the Raging River group prior to them filing the requisition for the meeting. Those two calls lasted less than an hour, so they did not make any good faith attempt to engage with Taseko’s management or board,” Taseko vice-president of investor relations Brian Bergot said during a phone interview.

“To put it in perspective, the services we paid for through HDI represent only 1% of our total operating costs over the past four years. We’ve had an interest in Curis for a number of years, and Florence is a project we think has great potential. We worked on the friendly deal when we felt the time was right, and had two banks and legal opinions that all agree the premium paid was appropriate,” he added.

Taseko has fired back with a pair of press releases aimed at questioning the reliability of a Raging River director nominee, and the group’s overarching motives. On Feb. 18 the company noted that Raging River had accumulated a “large position” in Taseko bonds, which hold a par value of $21.8 million. The argument is that bond holders will have priority over shareholders when it comes to proceeds from asset sales, which creates a theoretical conflict of interest.

Taseko then claimed a Raging River director nominee failed to disclose a bankruptcy. On Feb. 25 the company pointed out that nominee Mark Radzik was involved in what it termed “messy bankruptcy” proceedings in 2013.

“They are not being very transparent. First there was the undisclosed bond position, and now the news about Mr. Radzik’s bankruptcy proceedings. It’s just another example of their failure to disclose what we believe is material information to the shareholders,” Bergot said.

The Northern Miner reached out to Kingsdale Shareholder Services executive vice-president Ian Roberston, who is listed as Raging River’s point of contact. Robertson labelled Taseko’s tactics as “throwing mud,” and forwarded a response from the shareholder group that criticizes Raging River’s “campaign of mass distraction.”

Radzik said in the release that “Taseko will eventually and desperately use the fact I once lost money on a lemonade stand venture when I was six as an excuse for why their conflicted and self-interested directors should not be replaced.”

He added that “no amount of mud-slinging will change our view that the [HDI] related directors have gotten rich at the expense of Taseko shareholders, and no amount of attempted distraction can erase their value destruction. Today we say enough is enough. We won’t be bullied and we won’t back down. We are fighting back to ensure we can bring the change to Taseko that shareholders want.”

Raging River claimed it is commencing a defamation lawsuit with the “objective of elevating the tenor of the debate to focus on the real issues of Taseko.”

Robertson of Kingsdale responded that the group believes the allegations over the bond holdings are “not news,” and are an attempt to “distract from the ongoing conflicts of interest and underperformance Raging River seeks to correct.” Raging River said it has “built up a bond position as an alternative strategy for participating in the company’s turnaround, and provide protection from the current board’s continued mismanagement and self-interested decisions.”

Raging River reported it has received “overwhelming expressions of support” from Taskeo shareholders — including Vertex One, which owns 3.9% of outstanding shares — endorsing the replacement of incumbent directors Ronald Thiessen, Russell Hallbauer and Robert Dickinson with independent nominees Paul Blythe, Randy Davenport, Henry Park and Mark Radzik.

“Every shareholder will formulate their own opinion and the facts will come out in due course,” Bergot said. “We will get all these facts in front of shareholders so they can make a decision, and I believe they will ultimately support the current management team. The undisclosed bankruptcy, and the fact it has not been denied, are material facts.”

Raging River also noted the “sudden resignation” of independent director George Ireland on Feb. 25. Bergot said Ireland’s departure was on “good terms,” and that the company will use the vacancy as an opportunity to appoint “another strong, independent board member.”

Taseko’s flagship Gibraltar copper operation lies northeast of Williams Lake, B.C. and produced 142 million lb. copper and 1 million lb. molybdenum in 2015. The company reported a $23-million net loss last year on revenues of $61.4 million. Total operating costs were US$1.96 per lb. copper, and its cash balance was $76 million to end 2015.

The company’s shares have traded within a 52-week range of 35¢ to $1.22, and closed at 47¢ per share at press time. Taseko has 222 million shares outstanding for a $112-million market capitalization.

Bergot noted the $700 million in investment that Taseko has made in the past six years are now “coming to fruition,” and that annual total cash costs have dropped 22% year-on-year.

The company also completed a US$70-million loan with Red Kite Mine Finance to deal with $40 million due in May.

“We’ve made a lot of strides in responding to current copper prices through improvements at the mine,” Bergot said.

Raging River followed up on March 1 with accusations of insider trading against Hallbauer and vice-president Brian Battison pursuant to shares bought in January. The activist group said “these trades occurred while both executives had knowledge of non-public, material information on the [US$70-million financing] from Red Kite Mine Finance.”

“By Taseko’s own admission they have left the fox to guard the henhouse,” Radzik said. “The [board of directors] need to take immediate action and send a message that everyone in the company will be held accountable for breaking the trust of shareholders, not to mention the law.”