Sparks to fly at Marret shareholder meeting: I will be there https://www.nationalpost.com/Sparks+Marret+shareholder+meeting+will+there+screaming/10764878/story.html
Sparks to fly at Marret shareholder meeting: ‘I will be there screaming’
It’s a string of events that’s expected to make this year’s annual meeting of Marret Resource Corp. (MAR/TSX) more interesting than usual.
“The crickets are chirping and the next annual meeting is in the spring. I will be there screaming,” noted one shareholder.
What’s got shareholders excited is the recent filing of an alternative monthly report by institutional investors Frigate Ventures LP and M5V Advisors Inc.
The two made that first-time filing because the funds they manage now have a combined stake of more than 10%, an ownership level they reached in mid-December. At year-end they had a 12.07% stake, adding the stake is held for “investment purposes.”
This filing comes a month after Marret announced the suspension of its monthly dividend “until further notice.” Marret said the suspension – most recently it paid $0.023334 per share – “is the result of the material deterioration in commodity prices and related securities in the last few months, particularly in the energy and metals sectors.” It termed the suspension “technical in nature” intending to reinstate a monthly dividend “as soon as it’s “able to pay a dividend under applicable corporate law.”
The dividend suspension caused the share price to fall but a falling share price has been a characteristic of Marret since it emerged from an already public company, Primary Corp. Marret went public in mid-2011 and raised $75 million at $6.50 per unit. The shares closed Tuesday at $3.15, a 31% discount from its recently reported NAV ($4.55). Last December, Marret said it was “committed” to dealing with the discount.
The two institutional investors declined comment. What are their possible plans? It can be presumed that they, along with other owners who want change, are upset that Marret continues to put a value on its largest investment, Cline Mining Corp. At the end of 2014, Cline had a 10.16% weight. In its most recent filing (Sept. 30, 2014), Marret had $97.555 million in investments.
What puzzles holders is that Cline has been delisted from the TSX for about 18 months, and is now in the process of going through a complicated restructuring. Determining fair value is a challenge. In a recent update, Marret said Cline “has sufficient liquidity to continue for at least two more years and Cline is looking at various avenues, including surplus equipment sales, to extend this period.”
But given the uncertainty, “the entire NAV of Cline should be written off,” noted one holder, who also wants other changes, including a substantial issuer bid. (The ultimate change: wind up the company.) Both moves move would reduce NAV but also narrow the discount.
A lower NAV wouldn’t suit the manager, Marret Asset Management, which receives an annual management fee equal to 1.5% of NAV. The manager is eligible for other fees, including a private investment fee and a performance fee.
That management agreement runs for five years and comes due at year-end. The prospectus indicates the circumstances under which the agreement can be terminated and the payments to the manager. While there seems little opportunity for shareholders to turf the manager, it’s a possibility if the board presents a proposal to “wind-up, amalgamate, or reorganize the Corporation.”
Calls to Marret seeking a comment weren’t returned.