Canada’s Cornerstone Capital Resources said on Wednesday that it intended to requisition a general meeting to replace the entire board of LSE- and TSX-listed SolGold.

Cornerstone, which is currently the subject of a hostile takeover by SolGold, owns 7.58% of the company, with other large insider independent shareholders including diversified major BHP (13.64%), gold miner Newcrest Mining (13.57%) and investment manager BlackRock (5.24%).

“The time has come to put an end to SolGold’s suspect corporate governance and self-dealing practices. As one of the largest shareholders of SolGold, it is obvious to Cornerstone that the current SolGold board is incapable of managing the affairs of SolGold for the benefit of all shareholders in a prudent and transparent manner,” said Cornerstone chairperson Greg Chamandy.

He also took issue with the proposed Franco-Nevada royalty financing, which he claimed would destroy shareholder value for SolGold shareholders.

At the requisitioned general meeting, Cornerstone intends to propose that all members of the current board be replaced with five new nominees.

Cornerstone said any new board should conduct a strategic review, including reviewing the terms of the Franco-Nevada royalty financing and to take appropriate action to terminate the deal if the board determined that the financing was not in the best interests of SolGold and its shareholders.

“In light of the foregoing, Cornerstone expects that the current SolGold board will not proceed to completion of the Franco-Nevada Royalty Financing and, should it nevertheless proceed to do so, Cornerstone reserves all its rights to pursue any derivative claim or other appropriate remedies against SolGold and/or the members of the board.”

In May, SolGold agreed a financing package of up to $150-million with streaming company Franco-Nevada to develop its Alpala project, in Ecuador.

Franco-Nevada, which provides miners with upfront cash in exchange for future production, will receive a perpetual 1% net smelter return (NSR) interest from SolGold. An initial funding of $100-million could be increased to $150-million, which would also increase the NSR for Franco Nevada.

Cornerstone also said that SolGold chairperson Brian Moller has a longstanding relationship with CEO Nick Mather, which could explain an "unusual" exception to the conflict of interest provisions in the company's corporate governance charter.

The company highlighted a section of SolGold’s corporate governance charter: “The [SolGold] board, management and employees must not involve themselves in situations where there is an actual, perceived or potential conflict of interest (either direct or indirect) between them as individuals and the interest of the company (excluding those matters which may be subject to legal professional privilege)."

Such an exception, Cornerstone said,  was at odds with the legal requirements applicable to SolGold and its board and management team.

On Tuesday, Cornerstone formally rejected SolGold’s hostile bid for the company, arguing that it is “wholly inadequate”, “exploitative” and not compliant with securities laws.

MATHER SAYS HE CAN FEND OFF CALL
Mather said he was confident he could fend off a call by Cornerstone to remove the board, newswire Reuters reports.

"It seems to be an unnecessarily destabilising initiative," Mather told a webinar, adding that he was not sure of the motivation but he was "confident of defending such an attack".

In a statement, SolGold refutes the allegations in relation to SolGold withholding material non-public information, corporate governance and the terms of the NSR financing agreement with Franco-Nevada.

The current SolGold board comprises Moller, Mather, and executive director Jason Ward, as well as nonexecutive directors Robert Weinberg, James Clare and Liam Twigger.