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New Millennium Iron Corp shareholders call for drastic changes to directors, expenses

Former market darling New Millennium Iron Corp. is embroiled in a nasty proxy fight as disgruntled investors hope to remove directors, cut expenses and improve its disclosure.

The angry shareholders are members of the Milton family, who were early investors in New Millennium and own roughly seven per cent of the stock. They outlined a plan Monday to “dramatically” cut expenses in order to preserve the company’s financial health amid an unprecedented crash in global iron ore prices. In particular, they want to slash management and board compensation.

“The concerned shareholders are prepared to see this through to the end,” said Paul Davis, a lawyer at McMillan LLP who is advising the family.

Just four years ago, iron ore prices were close to US$200 a tonne and Montreal-based New Millennium was one of the sector’s emerging stars. The company appeared to be poised for big things as it struck joint ventures with Indian steelmaking giant Tata Steel Ltd. to develop iron ore projects in Canada’s Labrador Trough.

But New Millennium’s fortunes collapsed alongside iron ore prices, which have plunged to about US$40 a tonne due to massive global oversupply. The company’s interest in its Labrador Trough projects was diluted to six per cent from 20 per cent this year due to unfunded cash calls from Tata. The stock price has dropped 98 per cent from its 2011 peak.

The Miltons want to remove six of New Millennium’s nine directors and replace them with four dissident nominees, one of whom is family member Susan Milton. (The three directors who are not being targeted by the family are all Tata Steel employees).

The family’s biggest priority is cutting compensation to company insiders. If the four dissident nominees are all elected, the family proposed that they would not receive cash payments. As well, management compensation would be slashed.

Last year, New Millennium chief executive Robert Patzelt received total compensation of $469,759, according to the company’s proxy circular, while at least five other executives received more than $250,000. The Milton family believes this is out of line with comparable companies, and is frustrated that the current management and board own very little of the company’s stock.

The family said it has received positive feedback to its proposals from “all” the New Millennium shareholders it has spoken with.

At least year’s annual meeting, the majority of shareholder votes were cast against re-electing New Millennium’s non-Tata directors. Three of those directors remain on the board.

New Millennium did not respond to a request for comment, but the company issued a statement last month saying it is committed to preserving working capital.