A battle for control of Guyana Goldfields Inc. is looming as the ousted company founder seeks to replace the miner’s board of directors and management.
Patrick Sheridan and several other investors on Wednesday announced their proposal for a new board to oversee changes at the struggling gold miner. The Toronto-based company’s market capitalization fell by more than two-thirds in 2018, from about $900-million to less than $300-million. The company, which operates a gold mine in Guyana, twice cut its production forecast and also twice announced its benchmark costs had climbed.
“It’s clear change is needed,” Mr. Sheridan said in an interview.
Mr. Sheridan, who was removed from his post as executive chairman last July, put forward six new directors to replace the current seven-person board at a special meeting of shareholders. He said his group will propose a new management team soon. Mr. Sheridan does not plan to become a director or executive again.
Mr. Sheridan owns 6.8 million shares of the company, about 4 per cent. His group together owns more than 5 per cent of the shares. A key player in the dispute will be Boston hedge fund giant Baupost Group, helmed by billionaire Seth Klarman. Baupost has been the largest investor in Guyana Goldfields for several years and early last fall increased its stake by 2.3 million shares to 26.1 million shares, 15 per cent of the company.
A Baupost Group spokeswoman declined to comment on Wednesday. Mr. Sheridan said he had not yet been in contact with the hedge fund.
Guyana Goldfields management says it has the backing of its largest investor.
“As far as we’re aware, Baupost is a supporter of ours,” said Ron Stewart, vice-president of corporate development at Guyana Goldfields.
Mr. Stewart said the company plans to show its shareholders that Mr. Sheridan’s proposal is not justified.
“We’ve had a difficult 2018, there’s no question about that,” Mr. Stewart said. “We’re working on resolving the issues.”
The fight for control of Guyana Goldfields’s board comes three weeks after shareholders of Toronto-based Detour Gold Corp. installed five new directors at that company after a six-month proxy contest. The activist investors included New York hedge fund Paulson & Co. They had sought to remove eight directors and had originally wanted the company to be sold. Like Guyana Goldfields, Detour has struggled with rising costs at its operations and a falling share price.
As problems mounted at Guyana Goldfields’s mine last year, the company cut ties with Mr. Sheridan. He founded the company in 1993 and was its long-time chief executive until five years ago, when he stepped down and became executive chairman. Scott Caldwell, a veteran mining executive who had been on the board for a year, became CEO. Last July, when Guyana Goldfields first cut its production outlook and said its costs were climbing, the company “terminated” Mr. Sheridan from his executive chairman role, although he remained on the board. René Marion, who had been a director since 2013, became non-executive chairman. Mr. Marion at the time said the company needed “an effective management structure.”
Mr. Sheridan stepped down as a director on Oct. 30, the same day Guyana Goldfields cut its production forecast again.
“We’ve seen a remarkable evaporation of value since my departure,” Mr. Sheridan said.
“This isn’t about sour grapes. This is about fixing a billion-dollar issue,” he added, referencing the value lost in Guyana Goldfields’s shares since mid-2016.
Among the plans of Mr. Sheridan’s group is to hire a Canadian bank to conduct a strategic review of the company.
Stock of Guyana Goldfields rose 9 cents, or 5.63 per cent, to $1.69 on the Toronto Stock Exchange on Wednesday.
David Ebner