Investor push for board spill at Paladin
An Asian hedge fund is understood to be leading a campaign to unseat managing director John Borshoff, and possibly other long-serving directors of the uranium miner.
BusinessDay understands that some of Paladin's bigger shareholders, analysts and other market participants have been contacted by those leading the campaign, and told that owners of close to 30 per cent of Paladin shares would be supportive of a change should an extraordinary meeting of shareholders be called.
Discontent has been rumbling for several years, with Mr Borshoff being criticised for the size of his pay packet as far back as 2011.
He responded by cutting his base salary by 25 per cent, but he was soon back in shareholders' bad books when he sold $5.6 million worth of Paladin shares in November 2012.
Discontent flared again this year, when Mr Borshoff guided the market to expect a partial asset sale in the September quarter, only to stun investors with a highly-dilutive equity raising.
That raising saw the Paladin share price fall from $1 in August to just 48¢ earlier this week, meaning the stock has literally been decimated since the Fukushima nuclear disaster in March 2011.
Some investors are concerned that Mr Borshoff may be too optimistic about uranium prices and the value of Paladin's assets, and may be rebuffing offers from suitors that should be accepted.
Paladin sought to appease shareholders on Wednesday by announcing a set of cost reductions, which included further cuts to executive pay.
Directors will have their base salaries cut by 10 per cent, which in Mr Borshoff's case will see his $1.534 million base salary cut to about $1.38 million. That means his actual salary will now be more than $600,000 below his contracted base of $2.04 million.
The company has imposed a freeze on bonuses and pay rises until the uranium price recovers, slashed exploration spending and vowed to reduce operating costs at its two mines in Africa.
In total, Paladin aims to cut $23 million from costs in fiscal 2014, and the announcement pushed Paladin shares up by 5¢ to 53¢ on Wednesday.
PhillipCapital analyst Andrew Shearer welcomed the cuts, but said an asset sale was what the market was looking for.
"The challenge for Paladin remains generating sufficient revenue at current uranium prices to service their debt position," he said. "Completion of the partial sale of Langer Heinrich to reduce debt remains a market focus."
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An Asian hedge fund is understood to be leading a campaign to unseat managing director John Borshoff and possibly other long‑serving directors at Paladin Energy. Campaigners have contacted large shareholders, analysts and market participants and say owners of close to 30% of Paladin shares would be supportive of change if an extraordinary general meeting were called.
Shareholder discontent has built over several years. Critics point to the size of John Borshoff’s pay packet (first flagged in 2011), his sale of $5.6 million of Paladin shares in November 2012, and a recent highly dilutive equity raising that surprised investors after guidance suggesting a partial asset sale. Some investors also worry management may be too optimistic about future uranium prices and the value of Paladin’s assets.
Paladin announced a further round of cost reductions that include a 10% cut to directors’ base salaries (reducing Mr Borshoff’s base from $1.534 million to about $1.38 million), plus a freeze on bonuses and pay rises until the uranium price recovers. The company had also previously implemented a 25% cut to Mr Borshoff’s base salary.
The equity raising was highly dilutive and contributed to the Paladin share price falling from $1 in August to about 48¢ earlier in the week. After Paladin announced the cost reductions, its shares rose roughly 5¢ to 53¢ on the day of the announcement.
Paladin pledged to cut $23 million from costs in fiscal 2014. Measures include a 10% reduction in directors’ base salaries, freezing bonuses and pay rises until uranium prices recover, slashing exploration spending, and committing to reduce operating costs at its two African mines.
According to the article, a fresh round of executive pay cuts is unlikely to quell shareholder rumblings. While cost reductions were welcomed, many investors and analysts remain focused on bigger actions such as asset sales to reduce debt and restore confidence.
PhillipCapital analyst Andrew Shearer said the market is looking for an asset sale to reduce debt. He highlighted the challenge of generating sufficient revenue at current uranium prices to service Paladin’s debt and said completion of a partial sale of Langer Heinrich to reduce debt remains a market focus.
Investor concern partly stems from management’s optimism about uranium prices and asset values. Until uranium prices recover, Paladin has frozen bonuses and pay rises and cut costs, but many shareholders want clearer actions—like asset sales—that would improve revenue and help service the company’s debt at current uranium price levels.
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