Mayfair Gold Sets Record Straight Amid Muddy Waters’ Activist Push Against Board

Mayfair Gold (TSXV: MFG) issued a response to a letter addressed to shareholders by Muddy Waters Capital disclosing its requisition of a meeting of shareholders with the intent of reconstituting the company’s board of directors.

The company has affirmed that it is currently reviewing the requisition and will respond within the designated timeframe stipulated by relevant legislation.

Muddy Waters has called for a shareholder meeting of Mayfair to be held no later than June 5, 2024, campaigning to reconstitute Mayfair’s board of directors by removing all current members and electing four new independent directors the activist investor recommends.

In a letter addressed to Mayfair shareholders, Muddy Waters cited growing dissatisfaction among shareholders, with support for Muddy Waters’ initiatives surpassing 50% of Mayfair’s shares, including those held by the activist investment firm.

“Since our initial March 19, 2024 press release, we have received support from shareholders who, combined with our holdings, exceed 50% of the shares in Mayfair. With this development, we gave the Board additional time hoping to resolve this quickly. Instead, they have further dug in and so we are now calling for the removal of all directors. In our view, fighting against a voting majority of shareholders is the highest form of entrenchment,” the activist investor said.

Refused to engage

Moreover, Mayfair has taken the opportunity to address what it considers to be misleading and inaccurate statements made by Muddy Waters in their letter.

“Contrary to Muddy Waters’ assertion that it hoped to resolve issues with the Company quickly, it has consistently refused to engage in a constructive dialogue with Mayfair,” the company said.

The comment was in response to Muddy Waters’ previously detailing a history of strained relations with Mayfair’s board, highlighting instances of what it perceives as poor governance decisions and a lack of responsiveness to shareholder concerns. Specifically, Muddy Waters criticized the board’s alleged resistance to shareholder input and its failure to address issues such as the depletion of the company’s options pool and concerns over executive compensation.

According to Muddy Waters, despite its attempts to initially negotiate for the replacement of only one board member and the appointment of a Muddy Waters representative as chairman, the situation escalated due to what the firm describes as the board’s “entrenchment.”

“Increasingly, the Board’s actions appeared to be motivated by fear of oversight. Our patience ran out, and the Chairman’s seat needed to be occupied by somebody whom shareholders trusted,” Muddy Waters added.

The four shareholder nominees proposed include Carson Block, Freddy Brick, Anthony Jew, and Darren McLean — all executives at Muddy Waters. Block is Muddy Waters’ chief investment officer while Jew is its chief compliance officer.

Mayfair answers this by saying that Muddy Waters was insisting on the immediate appointment of its nominee, McLean, as a director and chair, “McLean never having served as a director or officer of a Canadian public company.” Mayfair asserts that when the board expressed willingness to consider McLean’s candidacy as part of a comprehensive selection process, Muddy Waters declined.

“Muddy Waters did not express any dissatisfaction or deterioration of trust in the Board until sending its March 14, 2024, demand that the Board immediately halt its recruitment process and instead appoint its nominee as Chair,” the company asserted.

“You have lost your way”

In addition, Mayfair addresses purportedly unsubstantiated statements regarding director and management compensation in Muddy Waters’ letter. The company clarifies that its option pool remains intact, with sufficient options available to support necessary additions to the board or management.

“No shareholder other than Muddy Waters has expressed any concerns to the Board or management regarding the Company’s compensation practices. An offer for a representative of Muddy Waters to meet with the Compensation Committee of the Board was declined,” Mayfair said.

In its letter, Muddy Waters emphasized its confidence in the future prospects of Mayfair, particularly highlighting the potential of the Fenn-Gib gold project. However, it stressed the necessity of a board that is receptive to shareholder concerns and capable of driving the company’s growth in a responsible manner.

“This is why shareholders have votes. They are meant to be heard,” the investor asserted. “To the Board of Mayfair, you have lost your way.”

In answering this, the company refuted claims of denying nomination rights to a founder, emphasizing its commitment to honor nomination rights under existing agreements with founders. Mayfair assures shareholders that nomination rights holders will be duly informed once the date for the 2024 annual general meeting is finalized.

“There is no attempt by the current Board to entrench itself, and the Board and management welcome ongoing engagement with shareholders. Unfortunately, good faith efforts made by the Company to constructively address concerns raised by Muddy Waters have been rejected out of hand with no compromise suggested,” the company answered back.

Mayfair concludes its response by affirming its commitment to good governance and value creation. The Board and management expressed their readiness for ongoing engagement with shareholders and reiterated their dedication to advancing the Fenn-Gib gold project, demonstrated by the initiation of a pre-feasibility study announced on March 27, 2024.

Mayfair is currently focused on developing the Fenn-Gib gold project, which is found in the Timmins region of Ontario. The project currently holds a 3.38 million ounce resource of indicated gold, which is contained within an open-pit model. A resource update for the project is expected in the second quarter of 2024, with a pre-feasibility study planned for the first half of 2024. 

Mayfair Gold last traded at $2.14 on the TSX Venture.

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.

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