Veteran Canadian mining investors are joining forces to purchase an obscure junior gold company, agreeing to lavish severance packages in exchange for control of a Colombian mining project.
The group of buyers includes former Goldcorp chair Ian Telfer, former Goldcorp chief executive officer David Garofalo, current Yamana Gold Corp. executive chair Peter Marrone and mining financier Frank Giustra. Together, the group will buy $38-million in new shares of Toronto-based Caldas Gold Corp. as part of an $85-million private placement, and they will also assume operational control.
After the financing Caldas Caldas will be renamed Aris Gold Corp. and Mr. Telfer will become its board chair. Neil Woodyer, the former CEO of Leagold Mining and Endeavour Mining, will serve as CEO, while Mr. Marrone and Mr. Garofalo will both sit on the board. Mr. Giustra will be a special adviser.
Because the financing constitutes a change of control, Caldas’s top four executives will be paid US$8.8-million in cash severance. CEO Serafino Iacono, who has run the gold producer for nine months, will earn a US$4.04-million severance package, while president Lombardo Paredes will earn US$2.32-million.
The exit packages have come to light two months after a coalition of heavyweight investors publicly called on the global gold industry to improve its corporate governance after being criticized for the way its compensation is structured. The 24-member group included portfolio managers with VanEck, Sprott, Mackenzie Investments and CI Investments, Franklin Templeton and Paulson & Co.
In an interview, Mike Davies, Caldas’s chief financial officer, said the payments were negotiated as part of the original employment contracts in March and that they recognize the efforts of the existing management team to build the company, including raising sufficient funds to finance the next key phase of underground expansion at Caldas’s Marmato mine.
“Some will find it a bit much, and others will say it’s ordinary course for the kind of situation we’re in,” Mr. Davies said.
Some of Caldas’s new owners have histories of outsized pay.
Mr. Telfer, for one, used to run Goldcorp, yet after a series of missteps the company’s shares went into freefall. Colorado-based Newmont Corp. bought the Canadian company for US$10-billion in 2019, or about 75 per cent less than its peak valuation. Mr. Telfer was paid a cash severance of US$12-million upon his exit, which prompted outrage from a number of corporate governance experts and shareholders.
Mr. Marrone, meanwhile, lost a say-on-pay vote at Yamana in 2015 and returned some of the shares he was awarded as part of his compensation. Last year, proxy advisory service Glass Lewis gave his company an “F” grade for compensation, adding that Yamana had “a history of misaligning pay and performance.” Shortly after, Mr. Marrone told The Globe and Mail that the gold industry “should be critically evaluating what is fair compensation.”
Mr. Telfer and Mr. Marrone did not return requests for comment.
Caldas was created earlier this year as a spinoff of Gran Colombia Gold Corp. as a way to give shareholders direct exposure to its Marmato gold mine. In February, the company went public in a reverse takeover of shell company Bluenose Gold Corp. on the TSX Venture Exchange.
Since then, Caldas has done a number of financings to try to advance the Marmato mine, including a $110-million streaming deal with Wheaton Precious Metals. The latest financing means the company can forge ahead with a planned expansion, that should see it gradually increase its output from around 25,000 ounces of gold a year to as much as 180,000 ounces by 2024.
Despite his severance, Mr. Iacono will join Aris’s board and also continue to serve as executive chair of Gran Colombia Gold, which will hold 45 per cent of its shares after the takeover.
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Tim Kiladze
Niall McGee