Institutional Shareholder Services has recommended replacing half of TNR Gold board while retaining Executive Chairman Kirill Klip, handing neither management nor activist shareholder Eucalyptus Resources the clean endorsement each sought ahead of a September 22 shareholder vote.
According to disclosures from both sides on Monday, ISS recommended a four-member board consisting of incumbent directors Klip and Leopold Sutton, alongside Eucalyptus nominees Sandra Bates and Dušan Petković. It did not endorse incumbent directors John Davies and Konstantin Klip or Eucalyptus nominees Michael Horner and Jon Christian “JC” Evensen.
The recommendation amounts to a rejection of Eucalyptus’s attempt to replace the full board, but it also calls for substantially more change than TNR is asking shareholders to accept. TNR’s management slate consists of Davies, Kirill Klip, Konstantin Klip, and Sutton.
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That distinction produced two sharply different descriptions of the same ISS report Monday. TNR said ISS had rejected Eucalyptus’s demand for full board change and backed continuity under Klip. Eucalyptus highlighted ISS’s conclusion that the activist had presented a “compelling case for change.”
READ: TNR Gold Board Attacks Dissident Investor as ‘Someone Posing as a Koala’
ISS faults governance but credits Klip with Altius deal
The most consequential part of the ISS assessment may be the distinction it drew between TNR’s operating and share-price record and its corporate governance.
Eucalyptus’s account of the report said ISS criticized a series of governance practices during Klip’s tenure, including the disappearance of separate compensation and nominating committees, Klip’s service on the audit committee while CEO, board independence, director qualifications, executive compensation, the company’s shareholder rights plan, and a casting vote given to the board chair.
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ISS nevertheless recommended that Klip remain a director.
TNR said ISS also concluded that Eucalyptus had “failed to articulate an adequate go-forward plan” and identified the company’s strategic investment from Altius Minerals Corp. as the clearest value-creation event associated with Klip’s tenure.
That transaction brought TNR approximately $4.17 million in May through the issuance of 23.5 million shares to an Altius subsidiary. Altius subsequently purchased another 7.44 million shares in July, taking its position to 30.94 million shares.
The investment also sits at the center of the governance dispute. As part of the transaction, Altius received a right of first offer covering TNR’s interests in the Mariana lithium and Los Azules copper royalties. A separate five-year agreement requires Altius to vote its TNR shares for management-nominated directors and matters unanimously recommended by the board, subject to specified exceptions. The agreements terminate if Altius’s ownership falls below 6%.
Eucalyptus argues the arrangement entrenches management. TNR has described the investment as external validation of its royalty strategy.
775% return meets governance challenge
TNR has centered much of its defense on shareholder returns. The company calculates that its shares generated a 775% cumulative return over the five years through August 18, compared with 161% for an equal-weighted royalty peer group, 252% for a market-cap-weighted royalty peer group, and 207% for the VanEck Junior Gold Miners ETF.
Over three years, TNR reported a 438% return, while its one-year return was 312%.
ISS appears to have accepted part of that argument. TNR said the proxy adviser determined that the company outperformed its peer group over the three- and five-year periods ending August 13.
But Eucalyptus cited another portion of the ISS report saying TNR’s share price had been stagnant for much of Klip’s tenure before developing sustained momentum after the dissident became publicly involved.
The timing matters because TNR’s 775% figure extends through August 18, four days after Eucalyptus announced its four director nominees. TNR’s own table shows the five-year return at 700% as of August 13, before rising to 775% by August 18.
Activist claims 43% support
The fight is now moving from governance arguments to vote arithmetic. Eucalyptus said Monday that proxies and voting instructions representing approximately 43% of TNR’s outstanding shares had already been submitted in favor of its nominees.
The activist group and its joint actors disclosed control over 33.21 million shares when it presented its slate, meaning its claimed proxy support would include a substantially larger block than its own position if the figure is accurate.
ISS’s recommendation creates an additional procedural wrinkle. Eucalyptus says ISS recommended voting on its GREEN universal proxy, which permits shareholders to select candidates from both competing slates. TNR’s BLUE proxy lists only management’s nominees. ISS’s preferred combination of Klip, Sutton, Bates, and Petković therefore cannot be replicated by simply voting for all four names on TNR’s card.
TNR continues to urge shareholders to vote only its BLUE proxy by September 18, ahead of the September 22 annual and special meeting.
The resulting ISS recommendation leaves shareholders with a third option between the two campaigns: retain the executive at the center of TNR’s recent value creation while replacing half of the board that governed alongside him.
Information for this briefing was found via the sources and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
