Apparently there are more than a few long-serving and well-entrenched chief executives of Canadian junior mining and exploration companies who feel a little worried about their personal situations after the outcome of a big shareholder revolt at Toronto-listed Noront Resources Ltd.

This resulted in Richard Nemis, the 70-year-old chief executive who had been running Noront since 1980, stepping down. Mr Nemis has become ‘chairman emeritus’. This does not give him a place on the board but he is acting as an adviser to the company.

It seems that Mr Nemis came very close to being unceremoniously ousted along with all the other Noront directors at the company’s annual meeting on October 28. This followed a campaign by Rosseau Asset Management Ltd, a Toronto-based money management group, that set out to replace the directors with its own set of nominees.

With the annual meeting quickly approaching, Rosseau could count on the support of holders of about 37% of Noront’s issued capital – including the 9.2% it could speak for on its own account.

However, Mr Nemis, his board and their supporters also had about 37% of the votes. Obviously a compromise had to be worked out.

Negotiations between the two factions began on the Friday ahead of the meeting. And they were not completed until three in the morning on the Monday – after more than three days of very tough talking by both sides.

Under the compromise, Noront now has a board consisting of three people nominated by Noront’s former directors, and three Rosseau nominees. Mr Nemis ends up with a title that is largely symbolic.

He told local reporters: “It was either that or give control to the hedge fund [Rosseau]. The vote was that close, so we really had to make a decision.”

Noront was just one of a crowd of unexceptional Canadian junior exploration companies until August last year when it announced the discovery of the so-called Eagle One, a high grade nickel-copper-platinum-palladium deposit in the James Bay Lowlands of northern Ontario. This led to a staking rush near a geological structure that has now been dubbed ‘The Ring of Fire’. Since that first discovery, Noront has found a separate nickel-copper deposit and made two high-grade chromite discoveries.

As the Noront share price quickly moved from under C$1 to a peak of C$7.42, the company took the opportunity to raise C$26 million (US$22.3 million) – and the private placement attracted some high-profile investors including Pierre Lassonde, now chairman of the Franco-Nevada Corporation royalty company; Rob McEwen, former chief executive of Goldcorp, Sprott Asset Management; and Rosseau.

Warren Irwin, Rosseau’s president and chief investment officer, became extremely frustrated at the way Mr Nemis in particular handled Noront’s discovery. This is very clear from the tone of the letter he sent to Noront shareholders at the beginning of October when he made his call for a complete boardroom clear-out.

He suggested it was not appropriate for Noront to have raised the C$26 million by promoting the Eagle One discovery and then to spend some of the money on other projects. He said Noront, by spreading itself too thinly over a number of less advanced projects, had lost its focus and “appears disorganised”. He urged Noront to focus solely on the James Bay Lowlands discoveries.
Mr Irwin also said Noront should have recruited a more experienced and qualified chief executive.

And he criticised Mr Nemis for comments he made in April to Canada’s Financial Post newspaper when Mr Nemis compared the James Bay Lowlands’ geology to that of the huge Voisey’s Bay nickel deposit in Labrador. Mr Irwin wrote: “To imply that Noront could have a deposit larger than Voisey’s Bay was reckless and undermined Noront’s credibility.”

Mr Irwin also told local media that Noront “has a hell of a good property and it’s being squandered. And if we don’t get a good board and good management in here, it will be a lot harder to raise money in this difficult environment. At the current burn rate they’re going to run out of cash in about seven months.”

After the compromise agreement, however, there was a notable change in his rhetoric. Noront’s formal statement quoted Mr Irwin as saying: “We thank Mr Nemis for the contributions he has made to the foundation and development of the company.” The statement also said the title of chairman emeritus was given to Mr Nemis “in recognition of his outstanding and pivotal contribution to the success of the company to date”.
Mr Nemis graduated from Osgoode Hall Law School and was called to the bar in Ontario as barrister and solicitor in 1968. He currently is a senior member and part owner of Noront Steel, the largest structural steel company in northern Ontario.

During his career in the mining business, Mr Nemis joined forces with another Canadian industry veteran, Noble Harbison, to set up Consolidated Durham Mines which funded the exploration and discovery of what may be the biggest and richest antimony deposit in the world – Beaver Brook in Newfoundland. The mine was started up but its new owner, Roycefield Resources, had to put it on care and maintenance because of low antimony prices.
Mr Nemis was associated with other Harbison group companies, including Dominion Explorers and Noble Mines and Oils. He was also chief executive of Central Crude Ltd until its merger to become River Gold Mines Inc. While he was chief executive of that company it was instrumental in the development of two gold deposits – Eagle River, near Mishibishu Lake, south of Hemlo, and Moss Lake near the Thunder Bay area, also in Ontario.

A new chief executive

The search is now on to find a new chief executive for Noront – the company might well involve some head hunters in this exercise, although some people are already putting their names forward, thanks to the publicity given to the battle for control of the Noront board. The new chief executive will also become the seventh member of Noront’s new board.

Meanwhile, two directors will share the role of acting chief executive: Joe Hamilton and Paul Parisotto.

Mr Hamilton earned his BSc (Honours) in geology at the University of Toronto in 1985 and later received his MSc (Applied) from Queen’s University. He spent seven years as a mining analyst with Dundee Securities and then RBC Capital Markets. He also has 14 years of exploration experience including a spell as chief operating officer and, later, chief executive, of African Copper plc. He is currently the president of Pickax International Corporation, a private company providing services to the mining industry.

Mr Parisotto is an investment banker who previously – from 1984 to 1995 – was manager, original listings, at the Toronto Stock Exchange. During that time he was involved in the listing of more than 250 companies. Subsequently, he was vice-president and director of HSBC Securities (Canada) Inc. In the mining industry he is best known as chief executive of Arizona Star Resource Corp which was acquired last year by Barrick Gold Corp for C$773 million cash. He was also a director of Nevada Pacific Gold Ltd until its acquisition by US Gold Inc. Today he is chief executive of Blacksands Petroleum Inc, a company seeking ‘unconventional oil’ in Western Canada.

Other members of the new Noront board include: Darren Blasutti, senior vice-president, corporate development for Barrick Gold and a chartered accountant who previously worked with PricewaterhouseCoopers; Keith McKay, another chartered accountant, who has 25 years of experience in all aspects of the mining industry – including time as controller at Rio Algom Ltd and as chief financial officer of Aurelian Resources Ltd; and Lorie Waisberg QC, who for 30 years practised with and was a senior business law partner at Goodmans LLP. In the past he has been on the boards of about 15 Canadian public companies and currently is a director of five.

Ironically, the appointment of Mr McKay and, particularly, of the sixth member of the new board, Patrick Anderson, started another controversy and stirred up some Noront shareholders who also until recently held shares in another junior with a promising project, Aurelian Resources.

The scars have still to heal after a vitriolic, internet-based campaign by a group of dissident small shareholders who complained that Mr Anderson, who was chief executive of Aurelian, sold that company at too low a price. A geologist with 13 years’ experience, Mr Anderson co-founded Aurelian – together with another geologist, Keith Barron – in 2001 and sold it to Kinross Gold Corp in exchange for shares and warrants then worth about US$1.2 billion. That deal was completed in September this year.

Aurelian became a stock market darling after it discovered the Fruta del Norte gold-silver deposit in Ecuador – with initial inferred resources of 13.7Moz of contained gold and 22.4Moz contained silver. But it was badly affected in April by Ecuador’s so-called Mining Mandate and the Constituent Assembly’s six-month ban on mining activity.

Mr Anderson made it clear he believed Kinross, a bigger and more experienced mining company, was in a much better position to negotiate with the Ecuadorian authorities and to bring Fruta del Norte into production. In spite of the dissident shareholders’ campaign, holders of 97% of Aurelian’s shares quickly accepted the Kinross offer.

Rosseau, which also held Aurelian shares, wanted that company’s two former executives on the Noront board. Rosseau’s Mr Irwin tells me: “I’m very pleased with the talent on the new board and they definitely have the skills and background to take Noront to the next level.”

He adds: “Noront is now in a good position to attract a new ceo, given that it has an extraordinary property, cash on the balance sheet, access to additional funding and a new board that wants to move the company forward.”