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Some observations on Friday's NR out of Minera IRL ( (MIRL.L), from IKN337

Here's a part of yesterday's subscription weekly that had a look at the EGM NR out of Minera IRL on Friday. Reproduced here for the fun of it.

And by the way, one interesting factoid about the November 26th EGM: It's being held at the offices of Fasken Martineau so if any of you shareholders want to stroll over and say hello to Chuck Higgins at his place of work, there's no better chance. Hi Chuck!


Minera IRL (MIRL.L) ( is run by lawyers
Friday morning Toronto time brought the awaited NR from Minera IRL (11), setting the date for the EGM for November 26th, venue Toronto Canada (Thanksgiving Day USA, as noted above). The EGM NR made the announcement of the meeting venue and then, in time-honoured fashion, set out the current board’s reasonings as to why the proxy slate and its ten points should be voted down. Of course, it was my preferred reading material last Friday morning. The first pass you see them making their case, the second pass you start to note their stronger and weaker arguments. It was around half way through the third pass that the penny dropped; that this document hasn’t been written by miner, it’s been written by a bunch of lawyers.

One thing we know about the current band of usurpers at Minera IRL, collectively known as Team Hodges, is that they might not know much about the act of mining and have precious little idea about how to conduct community relations, but we know people such as chair Jaime Pinto and Daryl’s friend, business partner Chuck Higgins and chief motor behind this are lawyers. And what we know about lawyers is that they’re great at bending and twisting language to suit their ends and means. So what we get, all the way through this so-called “robust” defence of the board of directors, doesn’t stand up to much scrutiny once the critical eye is applied.

So today I’m going to point out a few of the things that this band of sophists wrote to pull the wool over your eyes, kind reader and/or shareholder of Minera IRL. We’re not going into the full list (which is in fact long) because, quite frankly, I’m not going to hand over defence ideas to this band of scumballs so early in the process. But a sample or three of how lawyer-speak is being used to fool you is due because these master baiters of the truth have obviously burned plenty of midnight oil getting the phraseology juuuust right.

Example one: Team Hodges makes it sound like Courtney Chamberlain approved of Daryl Hodges’ move to executive chairman by writing this in the NR:

On March 6, 2015, the Company's Executive Chairman, Mr. Courtney Chamberlain, took a medical leave of absence and asked a non-executive Director, Mr. Daryl Hodges, to assume the role of Executive Chairman with immediate effect, a recommendation which the Board approved. Mr. Chamberlain sadly passed away the following month. In May 2015 Mr. Hodges recommended, and the Board approved, the appointment of Mr. Diego Benavides, the president of the operating subsidiaries in Peru, as Interim CEO.

In fact Courtney Chamberlain (RIP) did not approve of that at all.  The minutes of that meeting make no mention at all of Chamberlain’s approval. And in fact Chamberlain was strongly opposed to the appointment of Hodges in an executive role, but his views made to the meeting via telephone from his hospital in Australia while already very infirm, were roundly ignored as Hodges (who was chairing the meeting) pushed through his idea.

What did happen is that a meeting at which Chamberlain was present (by phone) eventually approved Hodges as Executive Chair and the double-speaking lawyers trying to steal this company have twisted that into “Courtney approved of Hodges”. It’s total BS.

Example two: Team Hodges is against the appointment to the board of Armando Lema, which is unsurprising because he’s one of the people on the proxy slate. But the reason they manage to squeeze from his past is a classic of lawyer doubletalk:

Mr. Lema was formerly a Partner at Lema, Solari & Santivañez Law Firm (LSS S.A.C.). LSS S.A.C currently has an outstanding tax debt for approximately US$1 million (including principal, interest and penalties), a debt that is owed to the Peruvian Tax Authority, SUNAT, and is under enforced collection, as shown in SUNAT's public registry.

In other words, a place at which Mr. Lema used to work has a tax debt with the Peru taxman of around $1m. He doesn’t work there any longer (he was there 2008 to 2010) but apparently he’s responsible for the debt that buffet of lawyers owes. That’s a bit like blaming a footballer for the relegation of a team he played for three seasons ago. But even if Lema could be linked, however tenuously to the tax debt owed by a place at which he worked, what Team Hodges fails to mention is that another lawyer we’ve heard of also worked at LSS S.A.C. at the same time as Lema. His name is Jaime Pinto and he’s the current chair of Minera IRL! Yes indeed, every word of that argument Team Hodges spun against Lema also applies directly and fully to Jaime Pinto.

Remember: This news release was written by lawyers, not human beings.

And that’s not even mentioning the wonderful argument they cooked up against the appointment of Jorge Ramos of COFIDE, which we ran on the blog on Friday. Here’s a paste-out of that post:

Let's start with just one snippet from today's NR...

The Board is of the opinion that, as a Peruvian and an official of COFIDE, Mr. Ramos would be unsuitable as a member of the Board because of provisions of Peruvian law.

...and then compare it to what the same board, but at the time headed up by the ringleader Daryl Hodges as executive chair (voted off by over 90% at the AGM), said earlier this year when welcoming the COFIDE deal:

The Company has agreed to COFIDE's participation on the Minera IRL board of directors, subject to the required approvals.

That’s just wonderful. I couldn’t stop laughing.

Example three: Here’s the part when they accuse Diego Benavides of trying to fire people who he considers enemies, or on the Team Hodges side of Minera IRL:
Commencing proceedings to terminate without cause the employment of several key senior employees of the subsidiaries regarded as being sympathetic to the current Board, including the Vice-President Exploration and Environmental Manager.

Which sounds pretty nasty and vindictive on the part of Benavides. But what isn’t explained brings a different light on proceedings:

1)      The process to dismiss a contracted full-time employee person in Peru is often long-winded. In fact, the people mentioned in the NR on Friday still work at Minera IRL, still draw their pay, still turn up at the office where Deigo Benavides works (unlike Jaime Pinto, who hasn’t even set foot in the IRL offices yet, let alone one of their mining properties).

2)      While the process drags on, one side can claim it’s “without cause” while the other can equally claim it’s “with cause” and the dispute is only resolved when a definitive judgement gets handed down from a third party (typically a courtroom in hotly contested cases). Therefore the “terminate without cause” you see in that NR segment is mere opinion.

3)      It’s very biased and incorrect opinion, too. That’s something I’m not going into here, but very shortly more light will get shed on the case and it’s going to be great fun to see how far Team Hodges will be willing to defend at least one of those people when the facts emerge.

Example four: Here’s a bit where it sounds as though Benavides, as President of Peru subsidiary Minera IRL S.A., was obstructing Team Hodges (unfortunately still referred to as The Company in this news release, fortunately that won’t be for much longer):

Failing to call a shareholder meeting of Minera IRL S.A. when asked to do so by the Company as the controlling shareholder of Minera IRL S.A.

What they don’t mention is that the shareholder meeting was called in a way that was against the company by-laws and that Diego Benavides HAD to deny the call for a meeting, else be in contravention of his company’s own rules! What Team Hodges tried to do is akin to a shareholder of who turns up at the company’s head office and starts telling the board of directors to Do This Do That Do This. For sure if you’re a majority shareholder you have more rights, but there’s a clear protocol and procedure that shareholders have to go through in order to call a meeting and Team Hodges (above ‘The Company’) refused to go through the correct channels for their own reasons.

That’s how lawyers speak to you, people. They think you’re stupid.

Example five: This is a classic, where Team Hodges try to get people to think that if they lose the company’s going to be de-listed from AIM:

Canaccord Genuity has informed the Company that in the event that it is unable to fulfil these obligations in its absolute discretion, it would have no choice but to resign as the Company's Nominated Adviser with immediate effect. In this instance, under the AIM Rules for Companies, the Company's shares will remain suspended from trading on AIM and if a new Nominated Adviser is not appointed within one month of the previous Nominated Adviser ceasing to act, then the admission to trading on AIM will be cancelled.

It’s difficult to know where to start with this one, so convoluted is their argument, but rather than go into detail we’ll just keep it practical. If Canaccord Genuity decides to resign as IRL’s Nomad, there would quickly form a queue of other brokers wanting the job. The chances of IRL not having a Nomad after one month are precisely zero.

Example six: I’m going to make this the last one today but I assure you that there are many more “facts” and “statements” that don’t stand up to the most cursory of critical examination. I’m not even going to mention the arch-stupidities they’ve written trying to justify Team Hodges’s trainwreck attempts at community relations, which undid eight years of hard work in a matter of weeks (frankly that part’s too easy to dismantle). But I want to add one more, because it’s one I’ve already received feedback on from a couple of readers out there. It’s this part, when Team Hodges begins to question the deal Minera IRL did with COFIDE via the third party company, Sherpa:

The Board is also reviewing the bridge financing obtained by Minera IRL S.A. in June 2015 in the amount of US$ 70 million, and the way the transaction was structured, which included the participation of Inversiones y Asesorias Sherpa S.C.R.L ("Sherpa") as advisor to the company in return for fees, options, and royalties. The board had been advised by Mr. Benavides that Sherpa was an exclusive agent of COFIDE, and their role was demanded by COFIDE. It was subsequently determined by Mr. Hodges, as Executive Chairman, that Mr. Benavides' assertion was not true.

The inferences here are clear. There is multi-million dollar deal in the offing, there is an apparently mysterious third party, Sherpa, between the two dealing parties, there’s an inference of a cosy relationship between the parties and there’s an executive chair in Daryl Hodges who thinks he smells corruption and then says that Benavides lied when he confronted him. Sadly for Team Hodges the reality is different from the spin, this is a classic of lawyers wordsmithing along with an executive chair who at that point was looking for any excuse to fire the only person stopping him from getting his asset-stripping way with the company.

This is a point that’s going to play out in the public sphere between the two sides so I’m not going to spoil it for anyone (or give ammo to Team Hodges), so let’s just stay in the world of hypotheticals for today.

  • Let’s imagine you’re Sherpa and you sign a contract to be the intermediary in this COFIDE/IRL deal (a position that’s completely normal in the world of Peruvian finances in fact, plus Sherpa isn’t some fly-by-night company but is well-established and run by a respected local businessman).

  • In such a situation, you sign a contract with both parties and one of the things you want is to have an exclusive right on the deal, so that’s in the contract too.

  • Now let’s imagine you’re Hodges and you ask Benavides “Does Sherpa have an exclusivity contract with COFIDE”? The answer is, of course, yes.

  • Then you as Hodges go to COFIDE and ask whether Sherpa was an exclusive agent of COFIDE. You know the answer already of course. COFIDE tells you that “No, we don’t have exclusive agents”. What you don’t ask is whether in this specific contract and deal there’s an exclusive agent, because you don’t want the answer to that question.

  • You then get to write that paragraph in an EGM proxy NR, a few months later, after being very careful with wording and agreeing on what you want to suggest to the world in late-night meetings with your lawyer friends.

But like I say, my little scenario is purely hypothetical, just offering a potential alternate scenario in which the events took place. And this one could become very interesting next week, so watch out.

To sum up today: The EGM is now called and we have a date on which IRL’s fate will be settled. I trust that once the Hodges company-wreckers are gone IRL can put its annus horribilis behind it and get on with the job in hand, building a mine at Ollachea. As for the week ahead, we’re going to get news from either side of the now unleashed proxy battle. The advice is to watch and read but jump to no conclusions about what’s said because this battle is best approached as a debate, let both sides have their say about the issues.