Investors Elect Dissidents to Stillwater Mining Board


Effectively agreeing with outside activist shareholders that platinum metals group miner Stillwater Mining needed a good housecleaning, investors elected to the board of directors four of the slate of candidates dissident shareholder Clinton Group had offered up for consideration.

No doubt Stillwater's management had seen the writing on the wall and feared an even greater number of candidates would be elected because, in the waning hours before the shareholders' meeting where the vote would be taken, it offered the hedge fund operator four seats on the board. Clinton rejected the offer, saying it would simply offer gridlock as the board would be evenly split between insiders and outsiders, but now that investors have given both sides exactly that, the hedge fund says it's willing to work with management for the betterment of the company.

The biggest sticking point is the continued presence of Chairman and CEO Frank McAllister, who Clinton contends is the root of the problem, having mismanaged the miner in recent years, particularly its quixotic pursuit of the gold and copper assets of Peregrine Metals for which it overpaid in its bid to diversify away from platinum and palladium.

Stillwater Mining remains the only U.S. producer of palladium and platinum, and the largest primary producer of platinum group metals outside South Africa and Russia. Platinum is primarily used in the auto industry's catalytic converter exhaust system and the only other large scale producer in the western hemisphere is North American Palladium , but it has run into delays in expanding its Lac des Iles mine in Thunder Bay, Ontario.

It hasn't helped either miner that platinum and palladium prices have collapsed substantially in recent weeks, with the former falling to $1,500 an ounce from $1,600 and the latter trading for $690 per ounce, down from $780 an ounce one month ago.

For Stillwater and its management team that's fighting for its life, gold's concomitant collapse in value couldn't have come at a worse time and exacerbated what was already a difficult situation. That allowed Clinton Group, which owns 1.3% of the company's stock, to exploit the opportunity for change. It also got help from two shareholder services groups, Institutional Shareholder Services and Glass Lewis, both of which thought Stillwater needed shaking up to varying degrees. Where Glass Lewis thought three of Clinton's nominees should be elected, ISS advocated throwing out the entire incumbent board.

With momentum building in favor of the dissidents, it's easy to see why Stillwater made the overtures, but now it seems investors will be stuck with a deadlocked board unable to move beyond the infighting sure to occur.

Elected to the board of directors was Montana's former governor Brian Schweitzer; Patrice Merrin, a former base metals mining executive; Michael McMullen, another mining executive; and the former CEO of Stillwater itself, Charles Engles. Remaining from Stillwater will be CEO McAllister, George Bee, Michael Parrett, and Gary Sugar.

If nothing else, investors elected nominees best suited for the job as advisory firm Glass Lewis had worried inexperienced nominees might gain the seats. It was for that reason it advocated keeping some of the current board on board because of their knowledge of the company and the industry.

Stillwater, though, still has to dig itself out of a deep hole, and it remains to be seen whether these disparate viewpoints can overcome their inherent conflicts for the best interests of the miner and its shareholders.

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