Battered Canadian miners to face more shareholder activism

By Nicole Mordant and John Tilak
VANCOUVER/TORONTO, March 7 (Reuters) - Shareholder activism
in the Canadian mining sector will gather pace this year, driven
by investor fatigue after years of share price weakness and
concerns about high executive pay levels and slim insider stock
holdings, advisors to such situations said.
With few options left to salvage investments hit by a
prolonged downturn in commodity prices, more shareholders are
demanding change at miners they perceive to have strong assets
but weak boards and management. Proxy advisers and lawyers said
these shareholders see an opportunity to force more effective
capital allocation and lower executive compensation.
An early year bounce in prices of metals like gold and
silver may provide comfort to some activists who have been keen
to pounce but concerned that metal prices could drop further.
"The reality is there's some settling in the mining space,"
said Amy Freedman, Canada president for Kingsdale Shareholder
Services, a Toronto-based proxy solicitation firm.
"A lot of the juniors are susceptible," she added. "They're
sitting on cash that's not being deployed properly, there are
often governance concerns and the ability to do a shakeup does
not require as much capital."
Shareholder pressure for change began rising in 2015.
Forty-eight mining firms globally faced public demands from
activists in 2015, up from 30 in 2014, figures from London-based
Activist Insight show.
In Canada, where more than half of the world's public mining
companies are listed, proxy contests in the materials sector
rose by nearly a third to 17 last year, according to Kingsdale.
Currently, U.S. investment firm Raging River Capital, formed
by a handful of industry veterans, is targeting Canadian copper
miner Taseko Mines TKO.TO .
"The mining sector has been under pressure and shareholder
value in the sector has been under pressure, due to the decrease
in commodity prices and leverage issues," said Pickersgill, a
partner at Torys. "All that is driving up shareholder activism."
Pickersgill said activists are increasingly favoring
constructive discussions and resolutions over a hostile proxy
contest that could be messy and expensive.
Toronto-based activist group K2 & Associates, which targeted
Canadian miner Dominion Diamond DDC.TO in December, has since
received requests to help launch campaigns against other miners,
a source close to the group said.
"There will be a healthy dose of activism fueled by very
unhappy shareholders," said Brad Allen, founder of Toronto-based
Branav Shareholder Advisory Services, warning that executives in
the sector getting pay hikes could face shareholder wrath.