Iamgold responds to US firm pushing for board reshuffle

Iamgold (TSX: IMG; NYSE: IAG) is firing back at a U.S. investment fund pushing for a reshuffle of the miner’s board of directors over what it calls “massive value destruction and chronic underperformance” at the Canadian gold producer.

Denver-based RCF Management LLC, which owns 5.2% of Iamgold’s issued and outstanding shares, published an open letter on Feb. 1 saying there was “an urgent need” for an operational turnaround at the Toronto-based miner. It also noted it had put forward a slate of three independent directors.

Setting “the record straight,” Iamgold said today it had recently negotiated with RCF and accepted the fund’s intention to nominate three independent directors. The miner, however, rejected RCF “revisionist narrative” regarding their talks, saying it had engaged “openly and constructively” with RCF over a period of two weeks, including via meetings with management, board members and legal advisors.

“In an attempt to avoid the unnecessary cost and distraction of a proxy contest, at the company’s suggestion, the parties entered into a standstill agreement,” Iamgold said.

The pause sought to provide the necessary time for the board and an international search firm engaged by the company to meet with and consider RCF’s three director nominees, the miner added.

Iamgold concluded that two RCF nominees, Maryse Belanger and David Smith, were acceptable, and one, Lawrence Haber, was not. It said the board was ready to appoint the successful nominees and agree to most of RCF’s demands.

These requirements included considering two RCF’s nominees for the vacant CEO position, ensuring one of the fund’s candidates was included as a member of each standing committee of the board, and keeping the ongoing strategic review of two of Iamgold mines open.

Iamgold is building a new gold mine in Ontario, Canada — Côté, which has experienced numerous significant cost overruns. The miner’s stock has underperformed peers in the Canadian gold sector for months, trading at a discount partly because it operates in Burkina Faso, a politically unstable country where soldiers ousted the democratically elected President in a coup last week.

As of yesterday’s close, Iamgold shares have lost 27.2% of their value over the last year, compared to a 21.7% gain for the S&P/TSX Composite Index and a 2.45% gain for the TSX materials subgroup.

The company is also facing lack of leadership at the top as its chief executive officer Gordon Stothart left in early January providing no reason for the move, and its chairman suddenly retired on January 30.

Frequent leadership changes in a company can sometimes be a sign of instability or poor management, analysts say. Unexplained C-suite departures are even more concerning to investors, because of potential liabilities or scandals that could affect the stock price and the direction of the company.

Iamgold revealed in January that it was evaluating options for its Rosebel gold mine in Suriname, which would require a material capital investment in 2022 and 2023 to address certain challenges that the operation had been experiencing over the last two years.

Iamgold estimates Rosebel will require about US$1.24 billion for the remaining 12 years of mine life. Additionally, it flagged a potential non-cash asset impairment charge on the asset. Iamgold has run into delays in stripping, strategic pit pushbacks as well as issues with maintenance and the completion of required infrastructure at Saramacca, a satellite for Rosebel.

The company, with mines in North America, South America and West Africa expects to produce between 570,000 and 640,000 attributable ounces of gold in 2022.