What nowWell, there it is. Didn't take them long. The independent directors have sold investors down the river to GC. It is interesting to read a bit more in the 2010 Noranda AIF (just google that). On page 51 there is a paragraph about potential conflict of interest. Xstrata is basically saying that they know they are in conflict or could be in conflict with the fund and that they might not do what's best for the fund (no surprise). They go on to say...
Absent gross negligence, wilful misconduct or fraud on the part of Xstrata Canada or the Manager, as applicable, the only recourse of the Fund upon the breach of a material obligation by Xstrata Canada or the Manager, as applicable, will be to terminate the relevant agreement in
accordance with its terms.
In other words they are saying that we can't sue them. Well I know that if a company tells you that you can't sue them, firstly that you never take their word for it, and secondly that they probably have something to hide. For example, how can they tell shareholders of the fund that we can't sue them? Isn't that in itself a reason to want to sue, in order to clarify the wording? Anyway, GC has made it clear that the divvie can be cut at any time, and so it has - it has been cut to zero before. The SPA, when it is released, itself might provide grounds for legal action. The whole set-up between GC and the fund does not pass the sniff test, but will it pass a legal challenge? I hope, before that happens, that we get a chance to vote on the new SPA. And can anyone tell me why the shareholders can't nominate our own directors? Isn't that also part of the problem, that the independent directors we have now were nominated and paid for by the manager, not the fund? We should sue the Independent Directors and terminate the agreement, and go to Trevali and other miners with a better deal for us and them. I think we should demand that the Independent Directors step down, as the previous directors did. If the new SPA means that GC is still selling concentrate and metal for the smelter, but at a lower price, then there may also be grounds for a class-action lawsuit against GC for having undue influence over the independent directors, arguing that they were forced to accept a deal that was bad for the shareholders. Does that make sense? The thing is, GC is a large and well-funded company. A lawsuit would be expensive and would drag out over years. Who has the appetite for that?
Sigh
Well, what's next? I expect GC will want to move quickly to buy the smelter. They are playing hardball here, and they don't want us shareholders to have time to catch our breath and figure out a course of action. I expect an offer this year or next. Who knows what it will be. GC will not want us to see any financials for the smelter before it turns around. Maybe they will shut it down? Perhaps that is why TD was valuing the smelter in a bankruptcy situation as one of the options. Speaking of bad smells, this whole set-up with TD bothers me too. That they advise the Independent DIrectors and also publicly called for a divvie cut. Nobody should be allowed to do that, and it is not enough to take TD's word that there is a "firewall" between the two departments.
GC needs the divvie cut to reinforce their stance on labour negotiations. I expect they will keep the pressure on the union, and push them to the wall. Maybe GC doesn't mind if Trevali gets a cash-flow problem? I expect the next year is going to be nasty for us. Don't panic! There is value in the shares and they are way oversold. Why were there so many short-sellers? That is fishy too.
In the 3Q conference call, only two people asked questions, and nobody asked what the likelihood of a divvie cut was. One guy was Clearwater Capital - I wonder if they were short-sellers? You'd think anybody who really cared about the smelter would be quick to ask about the divvie. I tell you guys, we should be asking questions at these things...I am sorry I was not on the ball myself.