In an increasingly bitter battle for control of the company, former Guyana Goldfields Inc (GGI) Chairman, Patrick Sheridan, has alleged that the current CEO, Scott Caldwell, and his associates, are involved in suspicious activity and has threatened to file a lawsuit if the Board does not act.
A recent statement issued on behalf of dissent shareholders said that Sheridan had sent a letter dated April 10 to GGI’s Board of Directors urging them to commence a claim against Caldwell “for a series of disturbing allegations of misconduct at the company’s head office and the Aurora Gold Mine.”
GGI owns the Aurora mine in Region Seven here. A proxy battle is currently raging over control of the company as Sheridan, who was ousted from the company in July last year, now leads a group of shareholders that are aiming to take over the Board.
“In the Letter, Mr Sheridan states that unless the company commences a claim against Mr Caldwell, upon expiry of the 14 days’ statutory notice period on April 24, 2019, Mr Sheridan intends to seek leave of the court to commence a derivative action on behalf of shareholders…,” the statement said. A derivative action is a lawsuit brought by a corporation shareholder against the directors, management and/or other shareholders of the corporation, for a failure by management. Sheridan owns shares in GGI.
The statement pointed out that Sheridan had previously communicated the allegations to the Board and asked them to take immediate action to fully investigate and address the allegations. If the Board does not promptly commence a claim against Caldwell, Sheridan will seek to file a lawsuit on behalf of shareholders, the statement emphasised.
“Not only is it unsettling that senior management of the company, including the CEO, may have engaged in such misconduct, but what is even more troubling is the Board’s failure to take appropriate actions to investigate and address such misconduct, and to hold the offenders accountable. Mr Sheridan believes that the severity of these allegations, and the fact that they have gone unchecked for so long, has played a significant role in the value destruction that occurred in recent months,” the statement said.
Saying that “wholesale change is needed” at the company, the statement added that concerned shareholders have been made aware by a source close to GGI that as a defensive response to the allegations of misconduct, the current Board “may make additional changes to its Board and management team” ahead of the upcoming annual and special meeting of shareholders.
The concerned shareholders believe that changes including the termination of Caldwell would be “too little too late” and would not address the fundamental problem – “A board that is either unwilling or unable to identify, root out, and stop alleged corruption across the company,” the statement said.
It added that only a fresh start with a new Board can provide “the reset for the company the market needs to see” and that allowing the current directors to make these changes without input from shareholders is “akin to rearranging the chairs on the Titanic.”
“The current Board is responsible for the value destruction at the company and accountable for the misconduct of management, selective disclosures, and poor mine performance,” the statement said, while emphasising that the change GGI needs is a new independent Board of experienced and qualified nominees.
It identified those as Carmen Diges, Declan Franzmann, Doug Kirwin, Luc Lessard, Thomas Pladsen, James White and Alan Pangbourne.
“This new Board can initiate a credible and full investigation into all allegations of misconduct and hold the appropriate parties to account,” the statement said.
Recently, non-executive Chair of the current Board of Directors, René Marion, in a letter to shareholders, disclosed that a recently-completed independent technical report has found that the reserves at the Aurora Gold Mine were previously overestimated. He said that the prior reserves were based on a resource model developed in 2012 under Sheridan’s watch.
He said that company’s current management team has the experience and strategic plan to position the company for future success and highlighted several initiatives in this regard.
As it relates to the dismissal of Sheridan, the letter said that he “had to go and he should stay away.” It alleged that Sheridan was terminated due to poor managerial performance, conflicts of interest and ethical lapses and the move was the first step in the Board’s renewal effort. “Shareholders are asked to support the new vision for the company proposed by the Board, instead of retreating to the old, unproductive management practices propagated under Mr Sheridan’s ineffective leadership,” Marion added.
He also argued that Sheridan’s Board nominees are underqualified and inexperienced since they have limited board experience with producing miners, no experience on boards of large producing miners and value destruction, which, according to him, stood at 27.3 per cent during the Sheridan Nominees’ limited tenure as directors, as compared to 50.1 per cent average value creation for the company’s nominees with producing miners.
