TORONTO – Sherritt International Corp. (TSX:S), which is embroiled in a fight with a group of dissident shareholders seeking seats on its board and other changes, said Wednesday that it lost $48.2 million in its latest quarter.
President and chief executive David Pathe said he’s pleased with the support he’s received from shareholders in the company’s fight with the group led by Clarke Inc. and its chief executive, George Armoyan.
“While costly and distracting, this proxy contest has highlighted the positive activities that are underway at Sherritt and the potential that I believe we have,” Pathe told a conference call with financial analysts.
Sherritt shares are up roughly 20 per cent from where they were when it first disclosed plans by the dissident group to try and replace three of the company’s directors.
Pathe also said he’s had many valuable conversations with shareholders throughout the process.
“We appreciate the support and constructive feedback we’ve received. We’ll use what we’ve learned in those conversations to improve the execution of our plans going forward,” he said.
The mining company said Wednesday that its results were affected by higher financing costs related to foreign exchange losses as a result of a lower Canadian dollar and costs related to the start of commercial production at its Ambatovy nickel and cobalt mine in Madagascar.
Sherritt said the loss amounted to 16 cents per diluted share for the quarter ended March 31 compared with a profit of $23.1 million or eight cents per share a year ago.
Revenue increased to $120.9 million from $107 million.
The dissident group said the results confirmed Sherritt’s need for new directors and other changes at the company.
“Sherritt needs leadership that will not wait for the nickel price to bail them out of their consistent lacklustre performance, but instead will take immediate and concrete action to improve operations,” the group said in a statement.
However, Pathe said the company is building momentum with the commercial production at Ambatovy and the completion of the sale of its coal business this week.
“The market has begun to recognize the progress we have made in our business and the improvements in our operating environment,” Pathe said in a statement.
“Our near-term focus continues to be paying down debt, meeting our cost-reduction targets and moving Ambatovy forward.”
Late Wednesday, the dissent group issued another statement calling on current and recent directors to pay back an estimated $2.2 million in compensation its says was “improperly taken from the shareholders in the past four years.”
The statement said Sherritt’s board has paid each director $150,000 a year for purportedly being barred from entering the United States due to the restrictions of the U.S. Helms-Burton Act which is designed to discourage business with Cuba, where Sherritt has operations.
“In fact, to the knowledge of the concerned shareholders, no Sherritt director appointed in the past five years has been barred from the United States, but the board has continued to make the payments,” it said.
And while the board has announced it would not make such payments in future, “that is clearly not sufficient,” the dissidents said.
“By changing its policy, the board has admitted that making the payments was wrong and not in the best interests of shareholders. However, it has done nothing to correct wrongful payments made in the past.”
The comments were the latest salvo in what has at times been a nasty and personal fight between Sherritt and Armoyan, with both sides launching attacks.
The dissident group is seeking three seats on the Sherritt board as well as changes to company’s bylaws to require unanimous board support for any major acquisition and on how both Sherritt directors and executives are paid.
The group has also said that they believe Pathe, who became CEO at the beginning of 2012, needs to be replaced.
The Clarke-led group holds a 5.4 per cent stake in Sherritt.
Last week, proxy advisory firms ISS and Glass Lewis recommended shareholders support the management nominees for the board.
Glass Lewis also recommended shareholders support management in its fight against all of the dissidents’ other proposals to be voted on at Sherritt’s annual meeting.
However, ISS said shareholders should back a dissident motion to stop “special payments to directors that are not aligned with shareholder value.”
Sherritt’s annual meeting is set for May 6 in Toronto.
On the Toronto Stock Exchange, Sherritt shares closed down two cents at $4.64 on Wednesday.