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.
Equinox Partners, a long-term value investor, announced Thursday the launch of “Directors Without Stock” to amplify its investment stewardship policy.
The New York-based hedge fund, with over $700 million in total assets under management with more than half in gold and silver junior miners, announced its new investment stewardship policy toward directors of public companies last month. Equinox Partners will vote against directors who have served for two or more years but hold less than two years of director’s fees in the company’s stock.
It sets “a clear, lower-bound for director share ownership,” according to chief investment officer Sean Fieler.
The website lists directors of gold and silver mining companies in the MVIS Global Junior Miners Index (GDXJ) who fail the firm’s stewardship policy and includes the director’s photo, name, company, total shares owned, value of shares owned, annual compensation, ratio of value of shares to compensation, and years on board, Equinox said in a news release.
Key results on the website include:
• Of the 95 gold and silver mining companies in the index with readily available public filings, there were 590 directors, of which 125, or 21%, that failed the Equinox Partners stewardship policy;
• Of those 125 that failed, 37 owned no stock at all;
• Of those 37 that owned no stock, the average board tenure was 8 years; and
• By eliminating the two-year minimum tenure constraint, 311 directors, or 53%, would fail the Equinox Partners policy.
By adopting a clear, lower-bound for director share ownership, Equinox Partners said it is pushing back on the growing indifference of boards to non-executive director stock ownership and the decision of some companies to prohibit non-executive directors from owning stock all together.
Equinox said it believes financially aligned directors are more likely to prioritize returns on and of owners’ capital. In comparison, the Canadian E&P industry is an example of a similar capital-intensive industry that has incentivized more insider ownership and prioritized disciplined capital allocation.
“Directors who lack any meaningful financial alignment with shareholders are going to tend to things that aren’t in the financial best interest of shareholders,” Fieler said in a statement.
“Insider ownership amongst the gold miners is worsening, as passive investors push board turnover that does not always align with the interest of shareholders. We hope our policy and this new site can be a step in a different direction.”
