IKN

This is part of IKN328, out this weekend. I mentioned in the Weekly that it would make the open blog and here it is.

Minera IRL (IRL.to) (MIRL.L) Redux

Between the acting of a dreadful
thing
and the first motion, all the interim is
Like a phantasma, or a hideous dream.
The genius and the mortal instruments
Are then in council, and the state of a man,
Like to a little kingdom, suffers then
the nature of an insurrection.

Julius Caesar, Act 2, Sc1, LL65-71

I’ve had a whole stack of feedback,
comments and reaction from the coverage of Minera IRL (MIRL.L) (IRL.to) in last
week’s edition of The IKN Weekly and on the open IKN blog. What this note today
does is collate that feedback and pass on the important stuff. This isn’t going
to be the carefully constructed narrative like last week, more a coming
together of notes. Some things are connected, others are outliers, but it’s all
about the situation at Minera IRL with an emphasis on the situation of its
executive chair, Daryl Hodges.

I’ve now heard way more than enough
evidence, anecdotal or otherwise, to underscore just how poisonous the presence
of Daryl Hodges in any company is, let alone in IRL. It’s not an understatement
to say he’s despised by those who have worked with him in other places and
those with the misfortune of working with him now. The somehow insular nature
of junior mining and its related capital markets means that in normal
circumstances it’s not easy for me to get people to blow the whistle on others
working at any given company, with the typical scenario at IKN being someone, a
single person or perhaps two, coming forward with information about one of
mining’s negative characters. Not so with Daryl Hodges, I’ve had a host of
people coming to me with unsolicited mails and it’s all of the same ilk. Many
are simple “congrats/thanks on shining the light on him” and are
greatly appreciated, several others have come forward with new information
about Hodges and his modus operandi. All those sources are off-record for
today’s piece, but I will say that the information that’s made it to these
pages either comes from reliable places or it’s come from people whose
information has checked out.

I’ve chopped the notes into three
rough categories for what follows, which are:

·     Hodges today at Minera IRL

·     Hodges previously at Jennings Capital

·     The upcoming AGM

Hodges
today at Minera IRL: Here are a few pearls to give you an idea of what Hodges
has been up to while running IRL.

Via the contract he drew up for
himself when taking over as Exec Chair at IRL he claimed a $100,000 bonus for
closing the COFIDE financing deal when in fact he had virtually nothing to do
with the deal which was already in place before he took over. All the work had
already been done by Courtney Chamberlain (QEPD) and Diego Benavides, but
Hodges walked in on the last minute, signed the papers at the bottom and made
off with $100,000 in cash of the money from COFIDE.

Internally, several IRL technical
staff have raised serious doubts in the way the tender for the upcoming (now
postponed) drilling program at Ollachea was conducted. Over the complaints of its technical
team, Hodges selected a drill company that was offering far inferior service for a
lot higher billing than others who applied for the contract.

He’s recently spent U$33,000 of IRL
money on a feature in a UK
based business magazine, which turned out to be no more or less than a personal
puff-piece. Thirty-three thousand (!!)…and here’s me giving him space on IKN
for free 🙂.

There was a fascinating little
episode in the IRL offices a couple of weeks ago, one that demonstrates once
again the total lack of understanding that Hodges has about working in a mining
company in Peru.
What happens is the Ministry of the Interior will come around to companies in Lima with foreign
nationals working in them and “ask nicely” for a “small
donation” to this-or-that charity, or perhaps a donation that helps fund
their Christmas party, or perhaps they give the office a chance to purchase one
of their newly printed 2016 calendars. Look people, life is like this in Peru,
it’s not bribery by any shape or measure but it is the type of “social
lubricant” that makes things work smoothly and without frets. However,
when one such moment came up the other day while Hodges was present, he refused
to buy or donate and sent the Interior Ministry people on their way, claiming
it wasn’t ethical for the company to do such things. We can debate that point
if you like, but the consequence of Hodges’ decision is far more interesting. Just a couple of days later, the Lima
head office got a visit from Interpol who asked to see the work visas of the
foreign nationals at the company, people such as the new COO Eric Olson who was
there that day. But of course, all the new foreigners there had got into the
country on the free and easy 90 day vacationers stamp and not bothered to pay
money and spend time doing their entry visas correctly. The result: the new COO
and a couple of other individuals were obliged
to leave the country that same day and can’t get back into Peru. Or in other words, because of
Hodges’ utter tone-deafness on how to do business in Peru (not to mention that he speaks
no Spanish at all), not only is the head of company not allowed to visit its flagship project but the company COO can’t even get into
the country now!

Unknown to the world and as yet
undisclosed even to the other members of the board, Daryl Hodges has nominated
a new director to the company. His name is Jaime Pinto, he’s been chosen as
he’s an ally of Hodges (i.e. in cahoots), he won’t have to go through the
tedious affair of being ratified at the upcoming AGM (according to Hodges at
least), he’s coming from the Peru-based disaster stock Lupaka Gold, and his
plan is that as soon as the AGM is done he’ll be added as another lapdog member
of the board in order to rubber-stamp any decision Hodges makes. We also note
Hodges has already hired Carlos Yrigoyen, ex-Lupaka Gold, to be his country
manager. Something else he has yet to disclose to stakeholders or the market.

The press release from the
community of Ollachea that deemed Hodges “persona non grata” at the
town and the project, the one that made official that the project was paralyzed
by the community, was by any measure a new material event for the company.
However, Hodges has not passed on the information to the market by way of a
material change filing. On this subject, it’s worth making 100% clear that the
community of Ollachea is not against the Ollachea mining project. As made clear
in its correspondence (21) the community is supportive of the mine. Its
objection is to Daryl Hodges, no more nor less and once he’s removed, things
can get back to normal.

Hodges
previously at Jennings
Capital:
On the blog last week (22) I ran some of the background of Hodges’s time at
Jennings Capital, when he was made CEO and proceeded to run the shop into the
ground and get fired. Since that post I’ve received plenty more. As you’ll see,
it’s very safe to say that Hodges’ made himself a whole stack of enemies while
there.

One source joined the company from another brokerage just after the time Hodges
was made CEO and headed the Toronto
shop. He joined as a high-ranking senior member of the new Jennings
team and soon realized the new people coming in were of higher quality than those
in Jennings at
that time. The problem is that Hodges reacted badly to the new levels of
quality, as he wanted people that weren’t as smart as him, not better. He felt
threatened by the new arrivals and quickly went about sabotaging their work. He
fired an excellent (according to my source) new head of sales and when he fired
the head of equities it resulted in a wrongful dismissal suit that, to the
knowledge of my source, is still outstanding today (Mackie having taken over
the defunct Jennings when it went under after Hodges’s treatment of it).

The trickle of leavers from Jennings became a steady
stream, as those with talent didn’t want to work under Hodges. When employees
who had also bought shares in the privately controlled Jennings
left, Hodges bullied them into accepting less than face or market value for
their shares, often using Jennings
treasury to hire the lawyers at Fasken to help with the bullying bargain-down
tactics. And again even today there is one ex-member of Jennings who was a shareholder and has held
out for full payment of his shares, the case outstanding under new owners
Mackie and dating from Hodges’s time. To give an idea of how bad it was, one
source flabbergasted me when he said that for
a short period there were more shares of Jennings
held by people outside the company than in it.

The final straw for my source came
when Hodges, who watched all around as the Jennings
team made money in the bull market days for the miners, decided to get his cut
of their action by imposing a 5% management fee on any deal income into Jennings, all of which
went to him. It was at that point the trickle of talent leaving became a river
and my source was one of several to leave for better pastures.

In sum and according to a reliable
source that’s checked out well, Daryl Hodges decimated the Jennings Capital Toronto office, all the best
talent left and anyone who opposed him or who was considered a threat to his
position was fired. The end came when the Calgary
office came in with the Jennings
directors and fired him, but by then too much damage had been done to the
integrity of the firm and a little while later, what was left was sold for
residual value. My source ended his part of the exchange by issuing a warning;
that if you are a Minera IRL shareholder and Hodges is left in power at the
company, the only way the share price will go is down. In his parting words to
me, “Watch out”.

The
upcoming AGM: Last week I wrote that even if Hodges survives the AGM vote, he’ll
eventually get shown the door anyway and I still think that’s true. The problem
is that after collecting an extra week’s worth of information on the person
it’s more than a little worrying to consider what state he’d leave the company
if he gets a pass vote at the AGM on Thursday and then has time to wreak the
type of havoc he managed to do while at Jennings.
So I again ask all shareholders of IRL to get their votes in and make sure they
vote wisely on each item on the agenda, as the AGM vote is clearly more
important to the well-being of this company than I’d supposed this time last
weekend.

The bottom line: We should pay
attention to what happens at the AGM this Thursday coming. It has the makings
of a critical juncture in the history and future of Minera IRL.