Guyana Goldfields’ ‘a sitting duck’

Ousted founder seeks to oust board

TORONTO • In a sign of the increased shareholder activism creeping into the mining sector, the ousted founder of Toronto-based Guyana Goldfields Inc. has launched a campaign to replace the company’s current board of directors.

Patrick Sheridan, Guyana Goldfield’s founder, who is leading the campaign to replace the board, announced Thursday that his legal counsel sent a letter to the Toronto Stock Exchange this week requesting it monitor any transaction made by the company in coming months.

The campaign follows a successful effort by U.S. billionaire John Paulson in 2018 to replace the board at Detour Gold Corp., and an ongoing effort announced in December by a shareholder in Hudbay Minerals Inc. to replace a majority of that company’s board.

Guyana Goldfields’ share price is down 70 per cent from its 52-week high, trading at $1.66, and Sheridan — who pegged the real value of the company between $5.50 and $7 per share — said he feared the decline has made the company into an attractive takeover target.

“This company, through management failures, is a sitting duck,” said Sheridan.

On Jan. 2, he and a group of shareholders including the Northfield Capital Corp., which collectively control 5.4 per cent of the company, called for a shareholder meeting to replace the board of directors, form an ethics committee at the company, and begin “a strategic review.”

The company’s stock fell 47 per cent in late October when it revised expected gold production from its flagship Aurora mine in Guyana down to 155,000 ounces — its second downward revision in 2018 from an original estimate of as much as 210,000. It also noted costs per ounce had increased by 23 per cent.

The company also announced at the time it had hired independent contractors to review the accuracy of the resource model that predicts the size and quality of the ore deposit feeding the mine.

The bad news continued. In November, management announced it had started blasting an underground expansion of the mine, only to stop work 10 days later because the local environmental regulators had requested more information from the project.

Vincent Adams, head of the environmental protection agency in Guyana, declined to comment, but last week told the Guyana Standard that the company had proceeded with work before it was granted a permit.

Guyana Goldfields did not respond on Thursday to requests for comment.

Sheridan and others have noted the company’s shares traded above $10 in 2016, and that the company’s market capitalization has declined more than $1 billion to about $286 million today. He founded the company in 1993, and had acted as executive chairman during part of that period.

In July, after the company announced its first downward revision of expected gold production, it announced Sheridan had been terminated as executive chairman.

Chief executive Scott Caldwell said in a press release at the time that the company had “substantially evolved since its founding” and needed a more effective management structure.

Sheridan remained on the board as a director until resigning in October after the second downward revision in production was announced.

His coalition of other shareholders have asked for a shareholder meeting in March to vote on their slate of directors — which does not include Sheridan — but said the company could wait until its annual general meeting in May.

“I don’t have any desire to re-engage with the company on a professional level,” Sheridan said, “other than to make suitable management changes.”