The owner of the huge Lac Bloom mining complex, near Fermont, inflates the bonuses of his bosses even if they miss their financial targets, something to displease shareholders, including the Quebec state. Champion Iron Limited has also lent nearly $9 million to its executive chairman, a tidy sum, according to a governance specialist.
Added to this is the payment of a severance package of 3 million to his former financial director and a one-time bonus of $ 750,000 to his big boss David Cataford because of a “performance” described as “remarkable last year, where net profits fell 62% to 200 million.
These details are contained in the proxy circular sent by Champion to its shareholders in view of its annual meeting on August 30. The company is the parent company of Quebec Iron Ore (MFQ), the operator of the iron mine located on the North Shore, where more than 1,000 people work. It was financially supported by Quebec – its second largest shareholder – and the Fonds de solidarité FTQ.
“There are significant flaws in terms of transparency,” said François Dauphin, director of the Institute for the Governance of Public and Private Organizations (IGOPP). “It’s a beautiful case. We are not on the right path. We set goals at the beginning of the year, we don’t reach them, but we revise them afterwards. Why do we set goals? »
Champion has already received a slap on the wrist last year. Its compensation policy had only collected 75.4% from its shareholders, a result considered “very low” in the community, underlines Mr. Dauphin, who anticipates another “message” this year. As of this writing, the Legault government has not commented on compensation practices at Champion.
Together, the main bosses of the parent company of MFQ were entitled to a salary – which takes into account bonuses and other benefits – of 12.8 million for the financial year ended last March 31. This is less than the 16 million of the previous year. The management team was unable to meet its targets for adjusted operating profit, cash, production for Phase 1 of the complex and cost of production per ton.
That didn’t stop the board from using its “discretionary power” to be more generous. He decided that the base salary multiplier to determine the annual bonus would be increased from 33.5% to 50% due to “challenging macroeconomic conditions”, the “inflationary environment” and the “significant headwinds facing the industry. iron ore was confronted”.
MFQ’s head of public affairs, Noémie Prégent-Charlebois, added, via email, that other “accomplishments” such as the “finalization” of phase 2 of the complex, the advancement of the “direct reduction for the Pelletization” and the feasibility study of the “Kami” project were added to the existing indicators.
“As the scales used at the beginning of the year to calculate the bonus did not take these elements into account […], the board revised its percentage upwards,” she wrote.
We also learn that a “company controlled” by the executive chairman of the board, Michael O’Keefe, was loaned 8.9 million by the company on June 21 last. This loan, which bears an interest rate of 6.1%, matures on December 31. The name of the company controlled by the businessman is not specified in the circular. It is not stated why the company is lending to its executive chairman, who has offered unspecified “certain assets” as collateral.
“It would have been relevant to have the decision-making process behind this decision explained to us,” says the director of IGOPP, who believes that the amount lent is high.
MFQ claims that the loan was “validated by an external firm”, information that is not included in the circular.
Mr. O’Keefe owns 45 million shares of Champion, making him the largest shareholder with a stake of about 8.7%, according to Refinitiv. Those securities were worth $217 million on Monday when the Toronto Stock Exchange closed, where the company’s stock closed at $4.82.
This is not the first time the mining company has loaned out its top executives. In September 2018, Mr. Cataford obtained a $500,000 interest-free loan over five years. The sum is secured by a mortgage on real estate. Reimbursement is expected in the “coming weeks”, according to Ms. Prégent-Charlebois.
The Bloom Lake mine is still awaiting authorization from the Trudeau government to expand the tailings pond – sand and silica – which would result in the destruction of lakes. According to MFQ, this is necessary to extend the life of the project while its second phase is underway. Quebec had given the green light last year despite an unfavorable opinion from the Bureau of Public Hearings on the Environment.
Headquarters: Australia
CEO: David Cataford
Market value: 2.5 billion
Projects: in Quebec and New Zealand
