Dissidents target T.MNR CEO

A dissident shareholder group is hoping to kickstart Mediterranean Resources and its lackluster stock price by slashing costs and replacing a slate of directors led by CEO Peter Guest.

A group of disgruntled Mediterranean Resources Ltd. (TSX: T.MNR, Stock Forum) shareholders are gearing up for a proxy fight to oust the company’s 73-year-old President and chief executive Peter Guest, and install a new slate of directors.

The dissidents say they are concerned about the lackluster performance of the company’s stock price, which they attribute to the lack of progress in developing the company’s flagship Yusufeli gold project in northeastern Turkey.

The dissidents say Guest’s compensation – at $317,302 in 2009 -- is excessive for a company that is trading around 11.5 cents, giving it a market cap of $11.6 million, based on the 101.3 million shares outstanding.

“Costs are running far too high and the biggest one is Peter’s salary,’’ said Frank Lucas, a British financier who is leading a dissident group that holds approximately 12% of Mediterranean.

A principal of Loeb Aron & Co. Ltd. in London, England, Lucas is working with former Mediterranean director Philip Strathy who is a partner with FairLane Asset Management in Toronto.

The dissidents believe Mediterranean’s share price should be more in line with a peer group that he said includes Anatolia Minerals Development Ltd. (TSX: T.ANO, Stock Forum), Aldridge Minerals Inc. (TSX: V.AGM, Stock Forum), Lydian International Ltd. (TSX: T.LYD, Stock Forum), and Alamos Gold Inc. (TSX: T.AGI, Stock Forum).

But during an interview in his Vancouver office, Guest said he is shocked to find himself at the centre of a proxy fight.

A highly experienced mining engineer, and member of the Australia rowing team in the 1960 Olympic Games, he has worked for Robert Friedland (at Galactic Resources) amongst others before acquiring an option on the Yusufeli gold property from Teck Resources Ltd. (TSX: T.TCK.B, Stock Forum) and (TSX: T.TCK.A, Stock Forum) in 2004.

“This is not an experience that we are common with,’’ said Guest, who retains a thick Australian accent, and leads a management group that owns 1.5 per cent of the company.

But he also left Stockhouse with little doubt that he is prepared to do battle with the dissidents.

“I had two uncles at Gallipoli and we are going to fight,’’ he said, referring to the infamous World War 1 battle in Turkey.

“I don’t want to be forced to accept a certain approach that might be good for some shareholders but not for all.”

Having outlined a 43-101-compliant indicated resource of 1.58 million ounces at Yusufeli, the company signed a preliminary deal last September to sell the property to Demir Export, a coal mining subsidiary of Turkish conglomerate Koc Holding.

But Guest said the deal fell through because the Koc family opted to buy power assets instead.

This week, Mediterranean solved its immediate cash needs by raising $1.5 million from the sale of 15 million units priced at 10 cents, and consisting of one share and one half of a warrant (each whole warrant is exercisable at 14 cents per share for 12 months following the closing date).

Guest said the company can now move to secure its Yusufeli mining permits by expediting a preliminary economic assessment and starting the process of filing an environmental impact assessment with the Turkish government.

It has also added two high profile names to its board of directors, including Australian mining industry consultant Christopher Ecclestone and former U.S. gold analyst Jeffrey Nichols.

Guest said he hopes that the new directors can give the company a lift on the marketing and investor relations side, while alerting investors in the U.S. who might be interested in what Mediterranean is doing in Turkey.

When asked to comment on the criticism of his salary, Guest said his annual salary and compensation is determined by the board. “I certainly don’t think that I’m overpaid.’’

In recent regulatory filings, the company said it is seeking to acquire another development project in Turkey and has received an “unsolicited’’ merger approach to which it has responded by seeking more details of the proposed combinations. It did not elaborate.

But the dissidents say they are unhappy that a project in eastern Turkey is being run from an office in Vancouver. They are proposing to install a new slate of directors led by international investor Huseyin Gun, and Kerim Sener. Sener is the managing director of Turkish gold explorer Ariana Resources Plc.

“It’s best to have a management group which understands the language and the culture,’’ said Lucas, who spoke to Stockhouse from London, England.

Meanwhile, the dissident group is calling for a special shareholders meeting on May 20th, 2011 the same day as the company’s annual meeting in Vancouver.

Strathy said this gives the dissidents almost 3.5 months to negotiate a transition of power.

Under B.C. takeover regulations, the dissidents will need to secure at least 66 and 2/3rds of the votes at the special meeting. By comparison, the existing board only needs to secure over 50 per cent of the votes cast at the meeting to remain in place.

Despite the odds the dissidents are confident that they will achieve their goals. “I think we will be successful,’’ Strathy said.