The current directors of New Millennium Iron Corp. will keep their jobs after they narrowly fended off a dissident shareholder group in a proxy fight.
The existing board was backed by 58.23 per cent of shareholder votes cast at a special meeting in Toronto on Tuesday morning, while the dissidents received 41.77 per cent, according to a preliminary count. The dissidents, who want New Millennium to slash spending, tried to remove six of the company’s nine directors and replace them with four new nominees.
The key question going into the meeting was which side Tata Steel Ltd., the Indian steel giant, would support. Tata owns 22.6 per cent of New Millennium shares, and its vote was going to determine the winner. New Millennium was confident Tata would back management, and it ultimately did.
If Tata’s vote is stripped out, the dissidents got significantly more votes than the current board.
“(Tata’s decision) is pretty disappointing considering the level of support we had from the minority shareholders,” Susan Milton, the leader of the dissident group, said in an interview.
Robert Patzelt, New Millennium’s chief executive, said he was disappointed the dispute wasn’t settled before the vote.
“We have to get back to business now as soon as practicable,” he said. “We have to double up our efforts because we’ve lost some time and momentum.”
The dispute revolved around the company’s central strategy. Montreal-based New Millennium owns vast iron deposits in Canada’s Labrador Trough, but its ambitious plans to develop them were thwarted by plunging global iron ore prices.
The dissidents, led by Milton and her family, want the company to slash spending as much as possible until the iron market recovers. They are particularly unhappy about compensation to board and management, which they think is far too high for a struggling junior mining company. Patzelt received total compensation of $469,759 last year, according to a proxy circular, while at least five other executives received more than $250,000.
Patzelt and his team want to keep moving forward with a slimmed down iron project in the Labrador Trough called NuTac. They think that halting work would damage relations with stakeholders and disrupt all the momentum the company has built.
“Unless you believe that iron ore is coming back in two years, (New Millennium’s) strategy doesn’t make any sense,” Milton argued. Her family owns about seven per cent of the stock.
Patzelt said the company’s plan is “flexible” and “measured” and that he welcomed more feedback on it from shareholders.
Paul Davis, a lawyer at McMillan LLP who advised the Milton family, said the lines of communication will “always be open” between the two sides.
Proxy advisory firms Institutional Shareholder Services and Glass Lewis & Co. both recommended that New Millennium’s shareholders elect a new board with a mix of nominees from the company and the dissidents. Patzelt said he disagreed with the advisory firms on some key points, but noted that they helped shareholders get a better understanding of the dispute.
Iron ore, which peaked at more than US$190 a tonne in 2011, is now worth about US$57. The global market is heavily oversupplied because of soaring production from Australia and Brazil and weakening demand in China.
The changing market conditions have crushed New Millennium’s share price, which is down more than 97 per cent from its 2011 peak.