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Energy and Resources Guyana Goldfields CEO to exit as company reaches proxy fight settlement with founder

Troubled junior gold company Guyana Goldfields Inc. has agreed to replace its chief executive officer and is parting ways with three board members, as it reached a proxy settlement with a dissident shareholder group.

A week ago, Guyana said it was standing behind its CEO, while painting a picture of dissident ringleader Patrick Sheridan as an irresponsible rogue.

But on Monday, Toronto-based Guyana said it is now looking for a replacement for Scott Caldwell, who had led the miner since 2013.

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Guyana also said that long-time board members Jean-Pierre Chauvin, Michael Richings and David Beatty are stepping down immediately.

The developments are a partial victory for a dissident shareholder group led by Guyana’s founder, Mr. Sheridan, who launched a campaign in January with the objective of ousting Mr. Caldwell and tossing out the entire board of directors.

In a revised director slate unveiled on Monday, Guyana proposed that Alan Pangbourne, former SSR Mining executive and originally a dissident nominee, should join the board. The company also nominated Allen Palmiere, onetime CEO of Hudbay Minerals Inc., as a board member. Ian Robertson, a spokesperson for Mr. Sheridan, said that Mr. Palmiere was approved by both the company and Mr. Sheridan.

As part of the settlement, Guyana also agreed to reimburse “reasonable expenses” incurred by the dissident group up to a value of $1.5-million. Last week, Mr. Sheridan said he was personally funding the proxy fight.

Last week the proxy spat intensified with Mr. Sheridan accusing Guyana of financial misconduct, and said he’d become aware of “suspicious banking activity" pertaining to Mr. Caldwell and his associates, involving millions of dollars in offshore accounts.

Both Guyana and Mr. Caldwell said the allegations are false.

Guyana meantime accused Mr. Sheridan of “conflicts of interest and ethical lapses” during his tenure, including raising the possibility that he may have traded in the company’s shares while in possession of material undisclosed information. In an interview with The Globe, Mr. Sheridan was adamant he did nothing to violate securities laws.

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The pending exit of Guyana’s CEO is an about-face for the board of directors.

“The board has put its confidence in Scott moving forward,” said René Marion, chairman of Guyana, in an interview with The Globe and Mail last week.

“He did a fabulous job building the Aurora mine in the first couple of years and he’s kinda victim to a legacy item that didn’t get uncovered til now.”

Late last year, Guyana’s share price lost almost half its value in one trading session, when the company disclosed serious geological problems at its Aurora mine in Guyana. The company said that the grade of gold it was mining at Aurora was materially lower than anticipated. Last month, an independent consultant cut Aurora’s reserves by more than 40 per cent, raised its cost estimates and shortened the mine life.

Guyana’s proxy fight largely centred on who was to blame for the catastrophe, with Guyana pointing the finger at Mr. Sheridan, who was CEO and chief operating officer when the original mine plan for Aurora was developed. But Mr. Sheridan said that much of the fault was instead with management, which he says failed to execute on a solid mine plan.

Guyana is the latest in a series of high-profile proxy dust-ups in the mining sector, which have largely been driven by disgruntled shareholders agitating for change after periods of poor performance. In December, a campaign led by New York-based hedge fund Paulson & Co. succeeded in wholesale board change at Detour Gold Corp. Currently, Toronto-based private equity firm Waterton Global Resources is engaged in a proxy battle with base metals company Hudbay Minerals.

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Guyana, which at one point had a market capitalization of more than $1.5-billion, has lost about 90 per cent of its value. A new mine plan is in place that will see the company transition to underground mining from an open-pit operation much sooner than anticipated. But questions linger about whether the company can generate enough cash to pay down its debt and meet significant capital cost requirements over the next few years.

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