On Thursday the Board of Minera IRL Ltd – the existing parent company of the Peruvian operating subsidiaries Minera IRL SA and Minera Kurri Kullu SA – presided over an Extraordinary General Meeting (EGM) – held in Toronto although the company is registered in Jersey, Channel Islands – to consider a vote to completely replace the Board of Directors with a new slate made up with some top Latin American experienced mining figures, bankers and lawyers.  By several accounts (unsubstantiated by the parent company I should add though), the votes counted were enormously in favour of replacing the existing Board with the new slate, but by invoking a technicality the validity of the vote has been set aside pending a new EGM to be held within 3 weeks.

The battle for control of Minera IRL, which operates the small Corihuarmi gold mine which generates positive cash flow and is nearing the end of its life, and is developing the far bigger Ollachea gold mining project, has to say the least been bitter with innuendo after innuendo being put out about Diego Benavides, who currently controls both Peruvian operating subsidiaries and who would presumably be the new CEO if the new Board is voted in.  Indeed the Board of Minera IRL Ltd has even gone so far  as to try to initiate criminal proceedings in Peru over the financial deal with Peruvian bank, COFIDE, which had been fully approved by the full board at the time.  The impression gained by outsiders was that this move was both without foundation, and entirely aimed at trying to muddy the waters re Benavides ahead of the EGM vote and thereby convince some shareholders to vote in favour of the current board – a move which seems to have failed completely.

But back to the decision by current Minera IRL Ltd chairman, Jaime Pinto – who appears himself to be under criminal investigation by the Peruvian Government – to suspend the EGM without an official vote count.  Here’s how London broker/investment bankers SP Angel views this fiasco:

“Minera IRL EGM adjourned despite Rebels holding >90% of votes, questions over handful of shares
• The chairman yesterday adjourned the Minera EGM.  We are told the adjournment was over potential irregularities over a handful of shares.
• Diego Benavides and his supporters are now forced to wait till the next EGM which can be called at any time but no later than 17 December.
• Long suffering shareholders must now wait, while the company is effectively paralysed, racking up costs at a time when, we believe >90% of the shares have been cast in support of sacking the entire board.  Do Turkeys ever vote for Christmas?  We hope these turkeys get a proper roasting by shareholders when this is all said and done.
• In a further twist:  we are also told that a key shareholder has agreed to buy Rio Tinto’s 19% stake and is seeking to be elected to the board
Conclusion:   Do Turkeys ever vote for Christmas?  We hope these turkeys get a proper roasting by shareholders when this is all said and done.
* SP Angel analysts are expressing their own views and opinions in this analysis.  SP Angel has no corporate connection with Minera IRL or its subsidiaries.  SP Angel holds no shares in Minera IRL and does not have any current financial arrangements with the company.”

For longer standing – and hugely outspoken – comment on the whole Minera IRL control saga it is well worth reading a Latin American mining focused blog called Inca Kola News, the author of which certainly does not mince his words.  He has put out a series of anti-current Minera IRL board comments which focuses on totally countering the various anti-Benavides and anti-new Board statements which have been disseminated by the parent company.

In a nutshell, the Minera IRL dispute followed on from the death of company co-founder (with Benavides), Courtney Chamberlain.  Under the original Chamberlain/Benavides control the former was chairman of the parent company and the latter of the Peruvian operating subsidiaries.  Thus Peruvian national Benavides was responsible for building the very positive relationships with the Ollachea community, without whose support the proposed new mine would not go ahead, and also negotiating the key loan agreement with COFIDE.  The work with the Ollachea Community has been widely seen as the ideal model for mining companies to utilise in Peru where community support is so important.

With Chamberlain’s death, board member Daryl Hodges, assumed executive control and reports suggest he then tried to dismantle many of the old relationships with the Peruvian end of the business.  The motivation behind these moves is perhaps more uncertain, but presumably a huge clash of personalities between Hodges and Benavides as to who should take the company forward precipitated much of the unpleasantness which has since ensued.  This culminated in a vote to remove Hodges from the Board (with around 90% supporting the decision to remove him and thus of executive responsibility for the company)  However the Benavides led rebels believe Hodges may still be pulling the strings over control of the company and its decisions.

With Hodges off the Board, the remaining directors co-opted Pinto as the new chairman – he has never been voted onto the Board – and the anti-Benavides campaign continued.

So there we have it.  The EGM vote suspension is a total fiasco and is put down to some irregularities with some of the votes in terms of Ontario securities legislation – here its should perhaps be noted that Minera IRL Ltd. – the parent company – is not actually a Canadian company and the TSX is one of three exchanges on which it is quoted with shareholders virtually split between the three (LSE AIM, TSX, and Lima) as we are given to understand it. Shares are currently suspended effectively awaiting the outcome of the new EGM.

The Board statement on the adjournment of the EGM is as follows: “Information was brought to the attention of the Board early on the morning of the meeting suggesting that there may have been irregularities in the way the vote for the EGM was conducted. As Chair of the EGM, it is my responsibility to determine the validity of the votes cast by proxy or in person. I have received evidence of a potential violation of Ontario securities laws as a result of which a substantial proportion of the votes cast by proxy, significant enough in number to alter the outcome of the matters to be decided at the EGM, were cast on behalf of persons who do not have a corresponding economic interest in the future of the Company. Given the significance of the decisions made at the EGM to the future of this Company and my duties both to the Company and to the meeting, I therefore felt that I was unable to rule on the validity of the votes in question without conducting a proper investigation.”

To an outsider it does appear that this has been another tactic to delay the inevitable or perhaps lead to a change in the votes cast, but for Minera IRL shareholders it is yet another kick in the teeth in terms of additional costs which a smallish mining company in the gold space can ill afford – particularly in the current gold price environment.  We see it as just a postponement of the inevitable, with the only way for the company to move ahead as a potentially much more significant gold miner in the future is to put the proposed new Board in place and take it from there.  However it is possible that perhaps the existing Board may somehow manage to disqualify sufficient of the votes cast to alter the decision in their favour with the help of its Canadian law firm Fasken Martineau looking at legal technicalities.  If it does so, in our view it would be a tragic miscarriage of justice.

To us it seems pretty obvious that relationships between the existing Board and executive management of the parent company with the Ollachea Community and COFIDE are somewhat more than fragile, whereas Benavides’ relationships with these remain strong.  And without COFIDE and the Ollachea community behind it, the company is unlikely to be able to move ahead with the mine on which its whole future depends.  We don’t see that the interests of the shareholders could be served better than the new Board to be appointed if Minera IRL is to have a future as a significant gold miner in Peru.