In a month, in Toronto, Canada, shareholders of the Guyana Goldfields Inc. which manages the country’s biggest gold mine, is set for a special meeting.
A number of “dissidents” shareholders including co-founder, Patrick Sheridan, are accusing the current board and management of mismanagement and floating fudged figures. They want a new board and Sheridan and shareholders have submitted those names.
Yesterday, those shareholders threatened a court action ahead of the board vote, giving Guyana Goldfield until tomorrow to start court actions against the company if legal actions are not taken to recoup damages by Chief Executive Scott Caldwell.
However, the company, which has over 700 employees, has hit back at the shareholders, insisting that a new board as proposed was highly inexperienced.
In fact, Sheridan was fired last year due to “poor managerial performance, conflicts of interest and ethical lapses,” Guyana Goldfields said in a separate statement yesterday.
Guyana Goldfield has hired former US ambassador to Guyana, Perry Holloway, as the Senior Vice President, Strategy and Corporate Affairs, to help reverse the fortunes of the company.
The Government of Guyana has said that it is keeping a close eye on the company which is the largest gold producer, contributing almost US$50M in royalties since starting production in January 2016.
The company has applied for permits to move into underground mining within months.
According to the statement, disseminated by Holloway on behalf of René Marion, the company’s non-executive chairman, the company’s share price has taken a toll as a result of a new strategy advanced by the current board of directors.
But the company also insisted that the toll on Guyana Goldfields would have been much worse if the board hadn’t taken steps to improve efficiency.
According to the company, it has filed a Letter to Shareholders together with its Management Information Circular and a GOLD form of proxy in respect of the upcoming Annual and Special Meeting of the shareholders.
In urging its shareholders to be wary of Sheridan, the Canadian mining company said they have an important decision to make.
“It is one that will affect the value of your investment in Guyana Goldfields now and for years to come. A group led by Patrick Sheridan, whom we terminated last year as Executive Chair, wants to replace your experienced Board with an under-qualified group of his friends.
“Most of them have little or no experience as directors of producing miners. They have no coherent business strategy for the Company and no actionable business plan.”
The statement said that it has improved mining and milling rates at the Aurora Gold Mine in the Cuyuni, Region Seven.
“We eliminated an inefficient and costly dual reporting structure. We strengthened our management team and refreshed the Board. We enhanced our governance practices. We restructured our local office in Guyana.”
The company has also developed a new resource model and life-of-mine plan to deal with its biggest challenge: the over-estimation of contained ounces in the Aurora Gold Mine’s 2012 resource model
“Throughout all of this, we have continued to lead safe operations at the Aurora Gold Mine
We recognize that these challenges – particularly the revised resource model – have taken a toll on our share price. But had we not faced them, the toll would have been much worse.”
“Throughout this challenging period, we have been transparent and forthright with shareholders. Mr. Sheridan criticized our transparency as “irresponsible.” He would have kept shareholders in the dark.”
Shareholders were told that the company’s just-completed independent technical report, carried out by Roscoe Postle Associates Inc. concluded that contained gold reserves were 38% lower, after mining depletion, compared with December 31, 2017.
“Notably, the prior reserves were based on a resource model developed in 2012 under Mr. Sheridan’s watch as CEO and interim COO of the Company. Now we know that the 2012 model overestimated the contained ounces at the Aurora Gold Mine. The unavoidable consequence is that the net present value of our reserves is lower than it was.
But there are opportunities ahead.”
Shareholders were warned that if they vote for Sheridan and the nominees for the board, there will be uncertainty.
“Mr. Sheridan had to go, and he should stay away. Mr. Sheridan’s role as the spokesperson of the dissident shareholder group makes it very clear who is behind their proposals. Mr. Sheridan’s history with the company and the reasons for his termination as Executive Chair are highly relevant to your evaluation of his proposals.”
Selling Twin Otter
The company said its balance sheet remains strong.
“We reported an unaudited cash balance of approximately US$73 million at March 31, 2019 and our total debt has been reduced to US$35 million. We are also actively pursuing cost efficiencies at our operations…”
Among other things, the company said it is reducing and optimizing stores inventory – its capital spare parts and operating supplies and rationalizing and disposing of certain non-essential capital assets.
It will also be selling its Twin Otter and tender to charter aircraft services.
The company had been using local aircrafts until it bought that Twin Otter, using at least one overseas pilot.
“Under our strategic plan, we will maintain approximately US$35 million to US$40 million in available cash at all times during the transition to underground mining at Aurora (based on gold prices of US$1,200 per ounce). The Board has demonstrated fiscal responsibility.”
As part of this review, the company said it has entered into more than 15 confidentiality agreements with credible mining companies who are in various stages of conducting due diligence regarding the company.
“There is no certainty of a transaction, but the Board is open to the right one if it makes sense for stakeholders. Many of our nominees have been involved in value maximizing opportunities on the boards of other companies.”
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