Proxy advisory firms back First Uranium's management

31st May 2012 By: Matthew Hill

JOHANNESBURG (miningweekly.com) – Two Canadian proxy advisory firms have recommended First Uranium shareholders vote in favour of the sale of its two key operations for a combined $405-million the troubled miner has proposed.

Glass Lewis & Co. and Institutional Shareholder Services (ISS) both backed management’s statements that the proposed sales were in the best interests of shareholders and the company, the Toronto- and Johannesburg-quoted company said on Wednesday.

A group of minority shareholders have criticised the sale of the Ezulwini mine, located west of Johannesburg, to Chinese-owned Gold One for $70-million and Mine Waste Solutions to AngloGold Ashanti for $335-million, saying the assets are worth more.

Russia’s Olma Investments has raised questions over whether First Uranium tried hard enough to find viable bidders for the operations. The investment adviser, along with other companies claiming to hold 18% of First Uranium’s shares said they will vote against the sales.

Glass Lewis said management had done enough.

“The board's process was sufficiently robust to ensure that substantially all capable and interested buyers had an opportunity to express an interest in the assets to be disposed,” First Uranium quoted the proxy advisory firm as saying.

“There is, on balance, sufficient cause for shareholders to support the contemplated reorganization.”

ISS held a similar view, saying: “Given the lengthy, public process by which the board arrived at both these agreements, moreover, the probability of another credible offer – for either business – emerging now at a meaningfully higher valuation appears thin.”

Both advisory firms cautioned about the risks of voting against the sales and forcing First Uranium into bankruptcy.

“Given the uncertainties of (the gold and uranium) markets and the very limited timeframe in which First Uranium must complete a strategic transaction, we do not find the potential benefits of rejecting the current reorganization in any way mitigates the overwhelming risks and costs attendant to a bankruptcy proceeding,” Glass Lewis said.

Earlier this week, Olma sent a proposal to First Uranium asking for Gold One and AngloGold Ashanti to pay 15% more for the assets, and for debt holders to take haircuts of between 5% and 10%. First Uranium dismissed the proposal as unrealistic and having “zero chance of success”.

“Gaining support from both Glass Lewis and ISS underscores the benefits of the transactions. These recommendations are clear evidence that First Uranium's board is acting in the best interests of all shareholders,” said John Hick, First Uranium’s lead independent director.

Shareholders will vote on June 13 in Toronto.