‘Min­ers need more in­vestor ac­tivism’

The Star Early Edition - - COMPANIES - David Stringer Mel­bourne

MIN­ING com­pa­nies could ben­e­fit from more in­vestor ac­tivism in the wake of El­liott Man­age­ment’s cam­paign for im­proved per­for­mance at BHP Bil­li­ton, ac­cord­ing to Aus­tralia’s sec­ond-largest gold pro­ducer.

The sec­tor’s record of re­turns war­rant closer scru­tiny from share­hold­ers, Evo­lu­tion Min­ing ex­ec­u­tive chair­man Jake Klein said in an in­ter­view in Kal­go­or­lie, West­ern Aus­tralia. “I’d like to see it,” he said. “In­vestors are al­most too tol­er­ant and too ac­cept­ing.”

Ac­tivism cam­paigns are ac­cel­er­at­ing in tra­di­tional min­ing hubs, in­clud­ing Aus­tralia and Canada, ac­cord­ing to FTI Con­sult­ing. All 19 mem­bers of a Bloomberg In­tel­li­gence in­dex of mid-sized gold pro­duc­ers, which in­cludes Evo­lu­tion, have had a neg­a­tive re­turn in the past 12 months, with only seven ad­vanc­ing this year, ac­cord­ing to data com­piled by Bloomberg.

“It’s a dou­ble-edged sword,” Klein said in the in­ter­view on Mon­day on the side­lines of the Dig­gers and Deal­ers min­ing fo­rum. “I said to a fund man­ager the other day, ‘Well, why aren’t you guys more ac­tive?’ – and then I re­alised I’m prob­a­bly go­ing to have to beg their for­give­ness in a lit­tle while.”

Lam­basted

Bil­lion­aire Paul Singer’s El­liott has tar­geted BHP, the world’s top miner, for a cor­po­rate over­haul and lam­basted a man­age­ment strat­egy that the fund claims has de­stroyed about $40 bil­lion (R538bn) in value. El­liott, which has drawn sup­port from in­vestors on some pro­pos­als, has called for changes to the com­pany’s board.

“We keep in­vestors close, and we have to be alive to con­cerns. The land­scape is chang­ing and be­com­ing more com­plex. We have to be pre­pared for any­thing,” Gold Fields chief ex­ec­u­tive of­fi­cer Nick Hol­land said on Tues­day in an in­ter­view at the fo­rum. Hol­land said he sees about 80 per­cent of hold­ers in per­son twice a year.

The num­ber of share­holder ac­tivist cam­paigns out­side of the US in­creased to 201 in the first half of this year, com­pared with only 70 in all of 2010, FTI Con­sult­ing said last week. A strong dol­lar, un­der­val­ued as­set prices and in­creased global scru­tiny of cor­po­rate gov­er­nance are driv­ing the trend, ac­cord­ing to the firm.

An in­creased risk of ac­tivism con­trasts with the rise of pas­sive in­vest­ing, ac­cord­ing to Klein. About $500bn flowed from ac­tive to pas­sive funds in the first half of this year and Singer, in a let­ter to in­vestors last month, flagged the trend as in “dan­ger of de­vour­ing cap­i­tal­ism”.

“Pas­sive in­vest­ing is a chal­lenge,” Klein said in the in­ter­view. “How do you dif­fer­en­ti­ate yourself if they be­come dom­i­nant on your reg­is­ter, and you can’t speak to your share­holder?” – Bloomberg

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