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Security helmets displaying the logo of Sherritt International can be seen in front of a picture of Fidel Castro at Energas, a natural gas plant run as a joined venture between the Canadian company and the Cuban government.Fernando Morales/The Globe and Mail

A major Sherritt International Corp. shareholder says the company rejected its request to overhaul the board, setting the Canadian miner up for a nasty proxy fight.

Clarke Inc., a Halifax-based investment company, had asked Sherritt to call a special shareholder meeting to reduce the size of its board and replace three of its directors with Clarke's representatives.

At a Thursday meeting between Clarke's chief executive officer George Armoyan and Sherritt chairman Harold (Hap) Stephen, Sherritt told Mr. Armoyan that the board was willing to consider his proposal if he went through the normal director-nominating process.

Mr. Armoyan found the offer unacceptable. "They are not willing to give me anything. We are going to have a proxy battle," he said after a one-hour meeting in his Toronto office with Mr. Stephen.

Sherritt said it had not rejected Mr. Armoyan's request for board representation and said "Mr. Armoyan declined to participate in this process, which Sherritt believes represents a basic standard of good corporate governance."

Shareholder unhappiness at Sherritt is emblematic of the struggles in the mining industry and a sign that Canadian investors are more willing to agitate for change at underperforming companies.

Sherritt shares are in a deep slump, hurt by weakened commodity prices and the delay of a key project.

The country's biggest pension funds successfully pushed for boardroom changes at Barrick Gold Corp. last year. According to proxy adviser Kingsdale, there were 32 proxy battles in Canada in 2013 compared with five in 2003.

Clarke said it started building its position in Sherritt last summer and now holds the minimum 5-per-cent stake required to issue a formal shareholder requisition for a special shareholder meeting. Clarke's request was made public on Christmas Eve and requires Sherritt to respond within 21 days. Sherritt said it will respond in due course.

In the meantime, Mr. Armoyan said he would be rounding up support for his board shakeup and said there had to be more ownership representation on the board.

"We have spoken to certain institutional [shareholders] and we believe a lot of them are fed up with this board and certain members of management and they want to see a change happen," he said.

Mr. Armoyan and another Sherritt shareholder Takota Asset Management Inc. want the company to buy back its shares – an idea the company first rejected when Takota's principal Scott Leckie asked for a share buyback early in 2013.

At the time, Sherritt said it was inappropriate given the slump in commodity prices and because funds were needed to develop its massive Ambatovy nickel project in Madagascar.

"I know [Mr. Armoyan] to be tough on costs, which I think is a good thing," Mr. Leckie said.

Unlike other companies, Sherritt's stock never fully recovered after plunging to $2.04 a share from $17.60 during the global financial crisis. The recent commodity boom helped boost Sherritt's stock up above $9. But now its shares are languishing around $3.50 a share.

The market was unforgiving when Sherritt delayed production at Ambatovy, of which it owns 40 per cent.

The company, which until recently was Canada's largest producer of thermal coal, forecast production in the summer of 2011. The mine has not started commercial production yet.

Sherritt's collection of businesses – including energy and mining assets in Cuba, as well as others in cobalt and nickel – are out of favour with investors.

Raymond Goldie, an analyst with Salman Partners, believes Sherritt's stock is undervalued and that the company could improve its share performance by spinning out its nickel and energy assets into two separate entities.

"Pure plays attract premium pricing," Mr. Goldie said.

Sherritt has taken steps to simplify its operations and recently exited the thermal coal business. The nearly $1-billion coal sale has given Sherritt an infusion of cash that the company's CEO said would be used to pay down debt and for a potential nickel acquisition.