Following the strongly-worded public letter by one of its shareholders regarding its company board’s composition, IAMGOLD Corporation (TSX: IMG) said it is “setting the record straight” with RCF Management. The latter owns 5.2% equity in the mining firm but said it had consulted with major shareholders equating to 40% of ownership.
“IAMGOLD firmly rejects RCF’s revisionist narrative regarding its engagement with the Company and the quality of its Board and management team,” stated the company’s statement.
In its open letter released yesterday, RCF has enumerated reasons supporting its claim that “IAMGOLD has been one of the worst performers in its industry,” which allegedly stems from mismanagement. These performance indicators include a -18% TSR in the past three years, approximately 30% decline in production, more than 30% increase in costs, and nearly $700 million in losses, “during a period of very strong gold prices”.
The private equity firm also cited as management failure the appointment of Daniella Dimitrov as interim CEO following the resignation of Gordon Stothart in early January 2022. The firm said Dimitrov has no previous C-suite or leadership experience at mid-to-large cap companies, was a CEO of a microcap firm for less than a year, and is “unquestionably overcommitted” given her other roles as interim president, CFO, and EVP for Strategy and Corporate Development.
“The situation is critical – the Company is in urgent need of an operational turnaround,” said RCF’s fund Resource Capital Fund VII Head Martin Valdes in the open letter.
RCF narrated its approach to IAMGOLD’s board for a “modest board renewal, the appointment of a new Chair, a credible CEO search, and a plan for an operational turnaround.” This follows the retirement of former board chairman Don Charter on January 29, 2022, who was replaced for the interim by Kevin O’Kane.
“We were provided with assurances that the Board was agreeable to our proposals and prepared to work with us expeditiously and in good faith to implement them in a non-disruptive manner,” Valdes added. “We no longer believe that to be the case.”
The investment firm called for the resignation of IAMGOLD board members Ronald Gagel (Chair of the Audit Committee), Richard Hall (Chair of the Reserves and Resources Committee), and Timothy Snider (Chair of the Côté Project Review Committee). Further, the firm nominates Maryse Belanger, David Smith, and Lawrence Haber to replace their seats on the board and recommends Belanger to be “immediately” appointed chairman.
Valdes added that the nominees “are fully independent of RCF and [have] recent relevant experience” to turn around the mining firm’s recent declining performance.
However, IAMGOLD answered the firm today saying it is “not willing to accept several overreaching and self-interested demands” that effectively would result in “a recent 5.2% shareholder taking de facto control of the company.”
While the company agreed to appoint Belanger and Smith to the board “after completing interviews,” it does not accept Belanger to be appointed as chairman.
“It is the responsibility and mandate of the Board of Directors, not a recent 5.2% shareholder, to elect its Chair,” said the company’s statement. “RCF’s demand that Ms. Belanger be immediately installed as Chair without meeting all of the Board members, exposed an alarming disregard for good governance.”
The mining firm said it is willing to agree with some of the private equity firm’s demands, including three seats on the board for RCF, ensuring a seat for an RCF nominee in all standing committees, and making its CEO search committee consist of two directors each from IAMGOLD and RCF.
But IAMGOLD rejects the other suggestions by the shareholder, including putting an RCF employee as board observer, retaining the RCF-owned mining services company Ausenco, and paying RCF $1 million for settlement negotiation costs.
The company said it also has “additional concerns” with the investment firm and its nominees that it will disclose in due course.
In January 2022, BMO lowered its average 12-month price target for the company to $3.98 after announcing its 2022 production guidance of 570,000 to 640,000 gold ounces. In 2021, the firm produced 601,000 ounces, reaching the high end of its guidance of 565,000 to 605,000 ounces.
IAMGOLD Corporation last traded at $3.21 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.