--Stillwater CEO says Argentina acquisition was right choice
--Shareholder Clinton Group has nominated board candidates
--U.S. palladium miner Stillwater has expanded with acquisitions
in Argentina, Canada
Stillwater Mining Co. (SWC) Chief Executive Francis McAllister
meant for his company's acquisition of copper deposits in Argentina
to serve as a lifeline if its precious-metals business ran into
trouble. Now, it threatens to cost him his job.
The purchase of the 29,000-acre Altar deposit in the mountains
of Argentina was a sore spot with some investors as soon as it was
announced in July 2011. They worried the palladium mining company
had overpaid for assets far from both its Montana base and its area
of expertise.
Since then, Stillwater has put the project on the backburner,
Mr. McAllister said in an interview. He described the deposits as
potentially vital if precious-metal prices fall but said the
company was concentrating on other projects.
"It's an extraordinary property," Mr. McAllister said. "Is it
critical to us? Not as critical as when we [bought] it."
A New York hedge fund with a 1.2% stake in Stillwater is arguing
the management team should go, citing Altar and what it calls a
wasteful palladium promotional campaign that at one point enlisted
Pamela Anderson and Kelly Osbourne. Clinton Group Inc. has proposed
its own candidates for the board of directors, with the goal of
unseating the current directors and forcing Mr. McAllister's
ouster.
Among Clinton's candidates is former Montana Gov. Brian
Schweitzer, a Democrat who left office two months ago after term
limits prevented him from seeking re-election. Mr. Schweitzer owns
29,000 shares of Stillwater, Montana's largest corporation by
market capitalization, Clinton said in a regulatory filing.
Mr. McAllister, 70 years old, has been Stillwater's chairman and
CEO since 2001 and said he isn't stepping down. Both sides have
about a month to make their case ahead of a shareholder vote
scheduled for the company's annual meeting on May 2.
"We're staying the course," Mr. McAllister said. "We have a
great board."
The fight to control Stillwater comes during a period of turmoil
in the mining industry, as investors voice frustration with share
prices and spending on big projects. During the last year, chief
executives at Rio Tinto PLC (RIO, RIO.LN), Anglo American PLC
(AAUKY, AAL.LN) and Barrick Gold Corp. (ABX, ABX.T) were removed by
their boards for boom-era dealmaking that led to write-downs and a
slump in share prices.
Mr. McAllister said the Argentine acquisition was the right
decision at the time. But now, with the company developing its
first mine in Canada and expanding its flagship mines in Montana,
Argentina can wait.
"We can back off a bit," Mr. McAllister said. The company has
trimmed its spending there and expects drilling results to give it
a better idea of what to do with the prospective mine by the third
quarter.
Rio Tinto sold the concessions that would form Altar to
Peregrine Metals Ltd. in 2009 for $2.7 million. After two years of
development work and expansion of the claims, Stillwater's initial
$487 million bid to buy Peregrine was at a 290% premium to its
share price, stunning investors and sending Stillwater shares down
22% at the time.
Stillwater's shares are still worth about half of their recent
peak of $25.51, reached in 2011 before the acquisition. Shares were
recently up 0.9% at $12.91.
Mr. McAllister said Stillwater was unlikely to make a deal on
the scale of Altar as the company pursues its current strategy.
"Would we do it again? No."
Clinton is pushing for a sale of the Argentine property.
The move to "diversify the company away from its historical
roots and become a more global and diversified mining
company...have been bad decisions in our view," said Greg Taxion, a
managing director with Clinton and one of the group's eight board
candidates.
Clinton also criticizes the company's creation and funding of a
market-development group to tout palladium.
Palladium Alliance International, formed in 2006, has marketed
the metal beyond its most common use, as a component of
autocatalysts, which scrub emissions from automobile exhaust.
Mr. McAllister says the work is necessary to stoke palladium
demand and substitution for platinum, which is also used in
jewelry, automobiles and as an investment. "I'm the only one who's
informing the market what the value proposition is for palladium,"
he says.
Write to Matt Day at matt.day@dowjones.com
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