Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
With shares trending 51% in the red over the past 12 months, NorthWest Copper (TSXV: NWST; US-OTC: NWCCF) says the British Columbia Securities Commission (BCSC) has agreed to schedule a two-day hearing over allegations that an activist group did not make the required securities law disclosures.
In May, the activist group, led by Grant Sawiak, John Kimmel, and Tony Ianno, put forward an alternative slate of directors they want investors to vote onto the board in an upcoming annual general meeting.
Scheduled to begin on Sept. 12, the hearing will weigh NorthWest’s claims that the activist group concealed their joint actor status for this year’s shareholders’ meeting. Additionally, concerns are rising that the group might pursue a no-premium take-private plan if shareholders elect their nominees.
The nominees include engineer John Theobald, chartered accountant Braam Jonker, geoscientist Jim Steel, public service veteran Maryantoinnett Flumian, lawyer Adam Manna and securities law professional Sawiak.Since the activist investors started auguring for change in May, NorthWest has installed two new directors and released its preferred slate of nominees, including mining executive Terrence Lyons as chair, David Moore as interim president, CEO and director, B.C.-focused mine developer David Smith, experienced explorer Rick Bailes and Jim Lang as the chief geoscientist.
The activists’ main concerns centre around the board’s alleged strategy of excessive dilution, which has significantly reduced the company’s share value; the board’s proposed further dilution, which the activists claim is likely to double the currently issued share capital, the board’s lack of response to the problem of share price depression by short sellers, and the board’s general lack of transparency and alleged expertise.
Interestingly, Moore was also included on Sawiak’s proxy without consent, and according to a company spokesman, Moore has indicated he will resign if Sawiak’s nominees are elected. NorthWest further points out Sawiak has not named his preferred candidates for replacement management, and it appears Ianno’s involvement in the activist group was at first concealed.According to NorthWest’s BSC application, Ianno and Kimmel, as joint actors, own more than 10% of the company’s issued and outstanding common sharesand failed to comply with the early warning requirements of NI 62-103 and NI 62-104.
“The company is concerned that the joint actors have put forward Sawiak as the face of their efforts in order to conceal the identities of the rest of the group. Most notably, Ianno has a history of securities law infringements that the joint actors would be keen to keep hidden from other shareholders. As a consequence of the joint actor’s deliberate flouting of NI 62-103 and NI 62-104, neither the company’s shareholders nor the market at large have the information they are entitled to have regarding Mr. Sawiak’s solicitations,” reads the complaint.
Sawiak proposes a three-fold approach to rectify these problems once the new board takes charge. He proposes a thorough review of NorthWest’s assets to prioritize and decide which ones the company should develop directly and which should be left for third parties, a continuous assessment of the board’s expertise to ensure it remains aligned with the company’s requirements, and securing rational and less dilutive financing as and when necessary.
Amid this potentially heated proxy battle, NorthWest asserts that the activist group acts against the broader interests of the shareholders. By potentially withholding critical disclosure, they could risk the value of shareholders’ investments in the company.
To ensure shareholders have all the necessary information, NorthWest is considering postponing its annual shareholders’ meeting, allowing them to factor in the hearing’s outcome when voting.
Despite the challenges, NorthWest remains confident that its current board, with its experience and dedication, is the best fit to navigate the company toward future growth. The board and management have expressed concerns about the potential disruption of vital projects if the activist group’s nominees come into power.
The company also highlights the possibility of the activist group using company funds to cover their campaign costs.
On the exploration front, NorthWest on Aug. 29 reported promising results from the Kwanika drilling program. Results show significant copper and gold mineralization in the Kwanika South Zone.
Some assays surpass the current average grades of the South Zone resource estimate. The highlight hole reported was an intersect of 316.9 metres grading 0.3% copper from 307.1 metres depth.
At market close on Thursday, NorthWest shares were down 3.13% at 15.5¢, testing its 12-month lower bound of 15¢ per share, compared with a high of 33¢ and valuing the company at C$29.4 million.
*This story has been updated for clarification and to add more details about NorthWest’s current position.
