Proxy fights get started: Raging River wants change at Taseko Mines

It hasn’t taken long for activist investors to obtain busy in 2016.

In its first foray into Canada, Raging River Capital, a Chicago-based private equity/investment firm has requested a shareholder’s meeting of Vancouver-based Taseko Mines. Raging River includes a 5.1 per cent stake within the company that owns the country’s second largest open pit copper-molybdenum mine.

In fact Raging River, a Taseko Mines shareholder for some weeks, am keen using its case for change that it issued two statements, per week apart. So far, Taseko C whose share price stood at $6.94 in October 2010 versus $0.385 now C has made one response. It’s “reviewing” the request, has formed a unique committee and “will give a detailed response in the near future.”

It short, Taseko takes the request seriously, though it includes a significant amount of time to call a meeting. Raging River really wants to oust three incumbent directors and replace them with four of their own nominees.

In a job interview, Mark Radzik, a Raging River nominee, said governance and capital allocation would be the key explanations why he’s launched the proxy contest. Taken together, Radzik sees further shareholder dilution later on. “I am nervous,” because of the debt refinancings which are coming up.

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Central to those concerns is the role-played by Hunter Dickinson Services. In Taseko’s 2014 financial statements, HDSI, that has three Taseko directors, is defined as a “private company, which employs some members of the executive management of the organization.” Additionally, it provides other services. In 2014, such fees were $3.351 million. In 2013 they were $3.607 million.



The related party portion of the fiscal reports also suggests that in 2013 Taseko invested $2.4 million inside a “private company with directors in keeping.” In 2014, it invested $5 million (up from $2 million in 2013) in Curis Resources “a related party having a director in common.” After 2014, Taseko bought the remainder of Curis, which operates a copper project in central Arizona.

According to Radzik’s calculations in the last three years Taseko paid $9.396 million to HDSI and made $16.5 million in investments in entities with common directors to Taseko C a total of $26 million.

Indeed Radzik disagrees with Taseko’s strategy of purchasing development projects outside its section of focus. “That’s no appropriate strategy. It should operate the mine [in Canada] and do a great job. What’s the strategic benefit of buying Curis?” he asks.

Indeed Radzik swoons when he thinks about the strong position Taseko could be in had it not provided the attached party investments coupled with it not purchased Curis. “This company might be taking advantage of the cycle,” he asserts.

Executive compensation C from the backdrop of the declining stock price C is another Radzik beef. “If the stock price ranges from $0.25 to $10 and also you pay a CEO $2.26 million (the compensation paid to Russell Hallbauer, Taseko’s CEO in 2014) that may make sense. However when your stock price went from $1 to $0.25, it’s different,” he added.

Indeed considering that stock price performance, Radzik was surprised using the reception he received as he discussed the problem with Taseko the board before going public together with his request. “We were surprised and disappointed that they wouldn’t took a more collaborative approach.”

Financial Post

bcritchley@nationalpost.com