Dissident Shareholders Continue to Strike Fear in the Hearts and Minds of Mining/Energy Executives – by Travis McPherson (Ceo.ca – August 6, 2014)


Just a week after the New York hedge-fund, Casablanca Capital, won its intense proxy fight over the $2.7 billion Cliffs Natural Resources (CLF:NYSE), another New York based fund has sent a warning to Madalena Energy’s management this morning.

In a powerful yet to the point press release this morning, Joshua Silverman of Iroquois Capital Management, LLC stated, “As a shareholder of Madalena we are very concerned with management’s failure to generate shareholder value. We expect to hear some concrete steps the Company is taking to better manage their assets for maximum value creation during their investor conference call tomorrow.”

In May, Madalena (MVN:TSX) surprised investors by acquiring Gran Tierra Energy’s Argentinian assets. Although the deal was accretive on most measures, the rationale for the purchase was unclear due to the fact that management had been telling investors that they were trying to find a farm-in partner for the expensive drilling in Argentina and would be focusing their efforts on their Canadian production.

Haywood Securities’ Senior Energy Analyst, Darrell Bishop said in a note: “there are some investors disappointed that the first major news coming out of Argentina was not a JV deal, as most had expected.”

Madalena holds over 950,000 net acres in Argentina including 130,000 acres in the heart of the Vaca Muerta (which translates to ‘dead cow’ from Spanish) shale play which has been garnering the attention of the global super majors. Land in the Vaca Muerta has been fetching over $10,000 per acre. Management has yet to find a farm-in partner for their land there.

It is a fickle market and investors are restless. As a result, there has been a steady increase in the number of dissident shareholders in the mining and energy sectors.

The surge in proxy battles started late last year when Renegade Petroleum began a very public battle for control of its own company against FrontFour Capital. FrontFour ended up losing the fight, but Renegade was merged with another company to become the market darling it is today, Spartan Energy (SPE:TSX).

In the mining sector, many of the underperforming producers have seen activist investors circling them.

This culminated in the very public battle for Cliffs. On July 29th the company announced their shareholders elected all six of Casablanca’s director nominees which effectively gave the hedge fund control the Board with 6 of the 11 seats.

“There were two messages that the shareholders have sent,” Douglas Taylor, a co-founder of Casablanca and another of the candidates on the hedge fund’s slate, said in a telephone interview to the New York Times. “One, to the incumbent board, they said, ‘You need to be held responsible.’ And two, the right people to lead change are Lourenco and the other Casablanca directors.”

Although unconfirmed by Casablanca, it is believed the hedge fund will split and sell Cliffs in pieces to unlock value.

Sherritt International also came under attack by a group of dissident shareholders led by Clark Inc. who was seeking to control 3 of 9 seats on the Board of Directors.

For the rest of this article, click here: http://ceo.ca/2014/08/06/dissident-shareholders-continue-to-strike-fear-in-the-hearts-and-minds-of-miningenergy-executives/