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."
Frequently Asked Questions about this Article…
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. The campaigners have contacted major shareholders and say owners of close to 30% of Paladin shares would support change if an extraordinary general meeting were called.
Shareholder discontent has been growing for years, partly over the size of John Borshoff's pay packet (criticised since 2011), his sale of $5.6 million of Paladin shares in November 2012, and management decisions such as guiding the market to expect an asset sale but instead conducting a highly dilutive equity raising that hurt the share price.
Paladin announced cost reductions including a 10% cut to directors' base salaries (reducing John Borshoff's base from $1.534 million to about $1.38 million), a freeze on bonuses and pay rises until the uranium price recovers, reduced exploration spending, and plans to cut operating costs at its two African mines.
The announcement of the cost reductions and pay cuts pushed Paladin shares up by 5¢ to 53¢ on the Wednesday the changes were revealed, after the stock had fallen from $1 in August to around 48¢ earlier that week.
Paladin aims to cut $23 million from costs in fiscal 2014. While the company has trimmed pay and spending, analysts say the market is focused on asset sales—specifically completion of a partial sale of the Langer Heinrich mine—to reduce debt and generate sufficient revenue at current uranium prices.
Some investors worry that John Borshoff may be too optimistic about future uranium prices and the value of Paladin's assets, and that the company may have rebuffed takeover offers that should have been accepted, leaving the business exposed at weak uranium market levels.
Paladin’s highly dilutive equity raising surprised investors who had been expecting a partial asset sale. That dilution contributed to a sharp share price fall—from $1 in August to 48¢—eroding shareholder value and fueling calls for board change.
Everyday investors should monitor progress on any asset sales (notably the partial sale of Langer Heinrich), the uranium price recovery, Paladin’s ability to meet debt obligations at current prices, and any further shareholder actions or board changes prompted by the campaign to unseat executives.
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