VANCOUVER – Selwyn Resources‘ (SWN-T) management and board did everything they could to convince investors they had shareholders’ interests at heart, but in the end it wasn’t enough.
At the annual general meeting on June 17 shareholders turfed Selwyn’s directors, replacing them with five dissident candidates nominated by a group of concerned investors that included several of Selwyn’s biggest shareholders. In fact, no one voted against the dissident candidates: each dissident nominee earned support from 83.69% of the votes cast while the other 16.31% of votes were withheld.
The new board will almost certainly replace Selwyn’s longtime president and CEO, Harlan Meade. The group in question already tried to oust Meade once, following a special shareholder meeting held to vote on the sale of the remaining 50% of Selwyn’s flagship project to Chihong Canada Mining. The dissident group wanted to conduct AGM business at that special meeting as well, including the election of directors, but Meade’s team deferred the AGM business to a later date purportedly to give investors enough time to understand the dissident’s stance.
Once shareholders at the special meeting had voted in favour of the Chihong deal, Meade adjourned the meeting and left. The dissident group and many shareholders, however, remained. They carried on with the meeting, voting amongst themselves to elect new directors. A few days later those new ‘directors’ appointed a new president and CEO, telling the world via a press release that appeared to come from Selwyn itself.
That round of director elections was invalid, but the latest round at the AGM certainly is. Shareholders voting at the AGM also elected to not seek voluntary liquidation, an avenue the old board suggested as the best way to fairly distribute the company’s assets if shareholders indeed wanted to get their hands on the cash from the asset sale, and potentially also from a sale of the company’s other project, as the dissident group plans to do.
Selwyn’s old board and management had other ideas. Specifically, they wanted to use the Chihong deal money to push the company’s other project to production. ScoZinc is an historic zinc-lead mine in Nova Scotia. Last year a preliminary economic assessment (PEA) concluded that an investment of $31.5 million could restart the 2,500-tonne-per-day operation, which would then generate a 57.8% after-tax internal rate of return (IRR).
Those numbers made the restart attainable, as Selwyn has $40 million in the bank from the Chihong deal.
However, the dissident group has no interest in restarting an historic zinc-lead mine. Not optimistic about zinc and lead prices, they see restarting ScoZinc as a waste of money. Instead, they want the $40 million issued to shareholders as a special dividend. Then they want to sell either ScoZinc or the entire company, paying out those proceeds to shareholders as well.
Selwyn’s old team tried their utmost to convince shareholders that a ScoZinc restart was the way to go. A week before the AGM they even issued an update to the PEA that boosted the after-tax IRR to 46.2%, raised the after-tax net present value by 44% to $51.9 million, and kept capital requirements almost even at $32.8 million.
It was to no avail. The new board says it will complete a “thorough review” of the company’s options. Once that is complete the board will let Selwyn’s shareholders, who put their faith in this new board’s hands, know what is to become of the $40 million, of ScoZinc, and of Selwyn Resources itself.