Baja Mining Corp. employees work on construction at the Boleo Mine project near Santa Rosalia, Mexico, in this undated handout photograph made available to the media on April 23, 2012. Source: Baja Mining Corp. via BloombergBloomberg
Baja Mining Corp. has been shaken and stirred, but it now appears that at least the board of directors is settling. That's good news, since the company's finances remain agitated.
In the past three days the mining company, enmeshed in a proxy fight for several months, has gone from facing off against a frustrated shareholder to acquiescing. But agreeing to four new appointments to the board won't solve Baja's money problems. The company is rapidly running short of the cash it needs to develop its flagship Boleo mine in Mexico.
Baja first announced this morning that former company board members Tom Orgryzlo (chair of the board) and Wolf Seidler (director and corporate governance committee chair) would return to their posts. Both quit on April 21, along with one other director, after expressing concerns over corporate governance issues. But they won't be coming back alone; Mount Kellett Capital Management, Baja's largest shareholder with a 19.9 per cent stake, has also had its two nominees approved.
Mount Kellett has been embroiled in disagreements with Baja over corporate governance issues (which resulted in proxy contest Mount Kellett lost by one per cent), and until this morning it looked as though the company might seek B.C. court intervention. Instead, its board nominees Stephen Lehner (the managing director of Mount Kellett) and Lorie Waisberg were also appointed today. Baja's remaining three directors bring the tally to seven directors.
Mount Kellett isn't commenting on this morning's release, but the move is undoubtedly a positive result for the American investment firm. The return of Mr. Orgryzlo and Mr. Seidler may indicate an agreement formed with Mount Kellett on Baja's future governance and financial position. If the four board appointments today agree on how to move forward they now fill the majority of board seats.
While Baja previously accused Mount Kellett of organizing a creeping takeover, Kellett has always maintained that this was noise at the fringes. As Streetwise reported this morning, the battle has thus far involved accusations of family favouritism (the CEO's daughter holds a senior title) and the aforementioned proxy vote.
Whether these new fiduciaries can agree on cost-reducing strategies remains to be seen, but one thing's for sure –- they're running out of time.
Baja made a separate announcement today on its recent admission that costs at the Boleo mine will be 20 per cent higher than expected. Baja recounted a meeting in Seoul, South Korea last week where it explored funding alternatives with its partners.
The miner is also exploring recruiting other third parties for backing and has been in talks with the brokerage industry, although challenging equity markets make this route an unlikely possibility. Whatever they do, Baja will need the approval of the new board to proceed.
Baja reports the consortium talks have been positive, but there is one last problem: They're taking too long. The company is burning through cash (a projected $60-million (U.S.) in May and July and $75-million in June) and will need a liquidity injection by about mid-June 2012.