You may not have heard of Dacha Strategic Metals Inc., but you've heard of the men battling over its fate. On Dacha's side, Jim Rogers, author and international investor, and on the other, Goodwood Inc.'s founder Peter Puccetti.
Dacha found itself knee-deep in a proxy battle with Goodwood after the activist investor announced plans to replace Dacha's entire slate of directors with a crew of well-known names, including ex-Kinross Gold Corp. chief executive Tye Burt.
Dacha, which is an investment company that seeks out, stores and trades rare earth elements, recently sent shareholders a circular with the dramatic title "Beware: serial corporate raider at work," warning them about the outside push from Goodwood.
On Oct. 26, Dacha said it learned that Goodwood Fund 2.0 Ltd. planned to suggest a new group of company directors for election at its annual meeting on Nov. 28. The fund's investor group wants to put eight new candidates of its choosing at the top, according to Dacha.
A news release from Goodwood on that same day indicated that on top of its fund's ownership stake of 6.4 per cent of the rare earth company's outstanding shares, it had been in talks with other shareholders who agreed to support the plan to install the new board.
That "dissident slate" includes the Toronto-based energy- and metals-focused hedge fund Salida Capital LP, as well as Takota Asset Management Inc. and Longford Energy Inc., a small oil and gas exploration company whose CEO is listed as Mr. Puccetti, the very same founder and chief investment officer at Goodwood. Combined, Goodwood says the group already has a 31.5 per cent stake that will support the board change in the coming Dacha vote.
The proposed new board of directors includes not only Mr. Burt, who only left Kinross in August on the heels of a large writedown that disappointed investors, but also Ian Delaney, who spent years in top positions at Sherritt International Corp. Since Mr. Delaney can't really travel to the U.S. because of former business deals with Cuba and Fidel Castro, Dacha argues he would have a problem reaching customers south of the border. Unsurprisingly, the proposed new board also includes Mr. Puccetti.
Part of this story revolves around Forbes & Manhattan Inc., a junior mining incubator that offers small companies guidance to improve market access and efficiencies. Dacha is in Forbes & Manhattan's portfolio. Longford Energy was also one of its public companies, and it went through a very similar-looking conflict with both Goodwood and Salida earlier this summer.
At the time, Goodwood said it had the support of 37 per cent of Longford's outstanding shares, so Forbes & Manhattan negotiated and settled with Goodwood. According to Dacha, Goodwood sought access to Longford's capital "without paying the shareholders a full and fair control premium." Now that it's coming after Dacha, the company says it's a "false front of co-operation" with Forbes & Manhattan.
And that is hardly the only other proxy battle wrapped up in this story. Goodwood has gone head to head with companies such as Pet Valu Canada Inc. and Cenveo Inc. in recent years, and many of Goodwood's board nominees have connections either to these battles or other activist activity. Dacha's circular argues these candidates do not have the chemical expertise, experience navigating China or established relationships needed to make the company tick.
In an effort to persuade investors to stick with the current course of business, Dacha has proposed that well-known commodities investor Jim Rogers join its board. Forbes & Manhattan founder Stan Bharti will not stand for re-election.
Goodwood is expected to release its own circular in the coming week, and could point to Forbes and Manhattan's compensation as a drag for investors with the current contract being for $25,000 per month in base consulting fees, as disclosed in Dacha's circular.
Rare earths aren't a particularly liquid market, and so performance can be tricky to predict. Dacha's stock dropped from a high of $1.19 in mid-2011 to a low of 33.5 cents one year later, and closed Friday at 49 cents on the TSX Venture Exchange.