First we need to get others up to speed. Here’s the long note on Minera IRL (MIRL.cse) that appeared in IN638, last weekend. It outlines the corporate wrongdoings at Minera IRL, which are more than enough to get CEO Diego Benavides fired with cause. It then goes into the latest information received, regarding the likelihood of a multi-million dollar fraud at MIRL.
Minera IRL (MIRL.cse): Why Diego Benavides must go
This hasn’t been an easy note to write, not a scrap of pleasure involved either, so I’ve decided to get the nonsense out the way first, which will allow us to focus on the real issue. Today’s note has three parts:
- Personal stuff: To my distaste, explanations are required
- The stuff that matters: Ultimately, this is a case of corporate wrongdoing and is actionable. CEO Diego Benavides has become an entrenched liability to the company and we are better off without him, however his recent excesses of personal greed mean we can do something about it. We already have the evidence to cause his resignation, effective immediately.
- Other stuff: However, his excesses are not limited to three friends getting cushy jobs. This desk has gathered evidence of other, long-standing activities that, if gathered in one place, amount to a multi-million dollar fraud.
I consider myself typical in keeping personal and business matters as separate as possible. However, last week the people in Minera IRL, via a deliberately worded reply to shareholders regarding my repeated request for a face-to-face meeting with them, decided to mix the personal and the professional in order to spin matters to their own satisfaction. Due to that, I’m going to take a paragraph to explain what happened from my perspective.
A few days ago, I was presented with facts that made CEO Benavides look bad. I will be honest and say by that time (mid-2021) I wasn’t surprised about the details, but they were new to me and learn them I did. At that point, I tried to contact CEO Benavides to get his side of the story. He refused to answer his phone and eventually blocked my number. My next idea was to contact his partner Trish Kent, as the information received directly involved that person as well. I tried to contact her, but with the same non-response. After trying and failing multiple times to phone through to both people, I started getting English language messages from a phone carrier. My strong suspicions the couple were once again in The USA on vacation were confirmed later, added to something I already knew, that this was another of a whole string of quietly-taken vacations in the last two years, during which time CEO Benavides hasn’t done a scrap of work. For example and according to publicly available Peru migratory records, CEO Benavides spent the whole of February this year on vacation, also in The USA. Anyway, long story short at that point a few days ago I hit the roof, you can see some of the text messages I sent (without knowing they were being picked up, even less that they’d be published by a VP of Investor Relations). As stated in the public blog post I’m not at all proud about the language I used, particularly when personal messages are used as a public weapon. However, and knowing their meaning was understood at both ends, I stand by them all.
The stuff that matters
Bleating and hand-wringing over, that’s all the personal you get (hopefully). Instead, the task today is to report corporate misdeeds and, thanks to CEO Benavides’ greed and over-reach, we the shareholders can now do something about his presence at Minera IRL. It has been clear for an extended time MIRL CEO Diego Benavides is a liability, rather than an asset, to the company. His removal would allow progress to happen and shareholder value built, instead CEO Benavides has entrenched himself and now puts his concerns long before those of the company. However, his recent decision to hire unqualified personal friends for executive positions allows us the formal mechanism to remove the CEO, with cause and without MIRL having to pay his Change of Control parachute. Simple examination of the CVs of Steve Ngatai, Susan Gabbie and Pedro Valdez demonstrate their patent lack of qualifications and experience for their executive positions at the company. Combined with the obvious and long-standing close personal relationship between the new employees and CEO Benavides gives a prima facie case of company ethics violation. Therefore, the CVs of the three new officers at Minera IRL are not merely curiosities to laugh over; they are the weak link that allows us to get rid of them all, so here comes background on all three:
Steve Ngatai: Of the three, Ngatai is the one that can reasonable claim experience in mining, He is a machine operator by training and from that point, moved to mid-level management at Stracon GyM where he has been a project member (never a boss) for seven years. However, he has no relevant qualifications for an executive role in a public company according to Peruvian law and cannot be offered an executive post, the law design to stop exactly the type of “friendly posts” we see here today. There is reason to consider him a competent mining guy and he would bring hands-on operating experience to the company. But he’s a machinist, with know-how in only one area of many he needs to head up a project in Peru. The fact he is the sentimental partner of Susan Gabbie is not irrelevant.
Pedro Valdez: It’s almost ironic Pedro Valdez wrote in his reply to shareholders last week that the CVs and work experience records of the new executives are available for viewing online and in social media, and that the company could not be more transparent. In fact, the day before writing those words Pedro Valdez altered several of his social media accounts, including his FaceBook account, and has adjusted his LinkedIn account for people expecting a mining executive, rather than a sworn translator, as VP IR. Also Pedro Valdez has added another qualification to his thin CV, a “diploma in business administration” taken in 2015 so let’s cover this new information: For the record, this 16 week online course is still available from Louisville University, total cost U$655 (six hundred and fifty-five dollars) (14). However, Valdez’s suitably massaged business profile now leaves out most of the man’s business career:
He is a translator. His company, TISOL (an active company, as seen here (15)), once used things like this photo to drum up business, a now scrubbed 2019 FaceBook entry at a trade fair in 2019 (presumably Covid-19 did for the 2020 conferences). He holds no qualifications in communications, marketing or investor relations, he is not a mining professional of any type and hold no relevant experience. If he were to enter a company like Minera IRL it would be for a junior or mid-level post and even then, his lack of experience would require a monitored trial period before becoming a full-time member of the team. Peruvian labour laws (not codebooks or suggestions, but law) are clear on these points but instead, Valdez was inserted directly at an officer level with a large US Dollar salary to match.
Susan Gabbie: With Ms. Gabbie, we let her CV speak for itself:
Before joining Minera IRL, Gabbie was in part-time retail sales at “Interiors by Forma” in Hamilton, New Zealand. Prior to that, she worked for Pedro Valdez as proofreader at his translation firm. Prior to that we find potentially relevant work experience, two years at Aden Services attached to Minera Cobre project in Panama (“Clients of all sizes from a wide range of industries, including many listed on the CAC40, FTSE100, Forbes Global 2000, and Fortune 500, count on ADEN for strategic outsourcing.”) but as anyone who has been on a mine site visit knows, merely being in the location of a mine doesn’t make you an expert. The facts are clear, Susan Gabbie has no qualifications at all to support her position of Chief Communications Officer at Minera IRL. She does not have the experience for such a job, either, and while we are on the subject can anyone explain what the difference between “VP Investor Relations” and “Chief Communications Officer” is, please? As they sound like very similar roles, this desk would have much preferred MIRL hire a real person for a job a mining company truly requires. It’s worth reflecting that Minera IRL now has two people running corporate communications in executive positions but no COO, no VP Exploration, not even a single qualified geologist at officer level! However, according to CEO Benavides it needs both a VP Investor Relations and a Chief Communications Officer and…well!…it just so happens some friends are in town…
Returning to the mail sent by Pedro Valdez to Minera IRL shareholders, specifically his patronizing tone as he explained to veteran mining investors that companies sometimes hire their friends, should be addressed. The long-standing, obvious and clearly close friendship of the people at the centre of this mess…
…is a factor that brings its own suspicions, but we underscore that if the people concerned were qualified and able to do their job the issue would be of less concern. Those images from a 2015 edition of Peru’s “Hola!” magazine. However, the clear and long-standing friendships also provide motive to give them officer roles and explains why they managed to enter, despite lacking the relevant experience or know-how for their new executive positions in a publically traded operating mining company. This ethics violation is serious enough to get MIRL suspended from trading at the Bolsa de Valores de Lima (BVL). Here’s the relevant document (16) and if you like your Spanish dry, check out item 51 on page 25 which explains this:
a) Los directores y gerentes están prohibidos de recibir en préstamo dinero o bienes de la sociedad, o usar “en provecho propio, o de quienes tengan con ellos vinculación, los bienes, servicios o créditos de la sociedad, sin contar con autorización del Directorio”;
b) Los directores y gerentes están prohibidos de valerse del cargo para, por cualquier otro medio y con perjuicio del interés social, obtener ventajas indebidas para sí o para personas con las que tengan vinculación
Clause B hits the nail on the head, you cannot do favours for friends. We now expect CEO Benavides will try to use his black hole company, Kuri Kullu, to file their woefully lacking CVs and try to keep them away from public examination. We shareholders cannot allow him to do this, instead we should require both him and his managerial team to provide details of their true work experience and qualifications, unhidden behind semantics and platitudes.
Summing up, CEO Benavides has made error after error during his term as CEO of MIRL, but his latest mistake was to overstretch his greed. We now have cause to remove him from the company and, as this would be the first necessary step to reclaiming shareholder value, it is better for the company that it happens as soon as possible. As a small sidebar, please do not forget that the asset at the centre of all this Ollachea, is a fully permitted project that could be producing in less than 18 months. It may not get much attention from the Canadian market or overseas companies, but the project is well-known and understood in Peru and there would be plenty of local interest if it came up for grabs, either via a break-up or through a new and competent management team entering the company. Also, Corihuarmi is an operating and profitable mine, it’s not as if this stock is worth zero even without Ollachea. The reason to remove Diego Benavides from the company is strictly business, I’m a shareholder and under him the stock is going to zero. Under new management, there’s value to be made.
However and as stated above, it’s not just the entry of three personal friends in fake executive roles that is in play here. They provide more than enough reason to get rid of the man, but there are other matters to consider as well.
We preface this information with noting that another problem now facing CEO Benavides are his shareholders in Lima. They were previously loyal to his cause, but due to the way the company has been managed, many have abandoned the company and sold their shares. This abandonment has also manifested in new information arriving at this desk, specifically regarding the way the local Kuri Kullu subsidiary is used to keep names away from the spotlight. By using Kuri Kullu to shield disclosure from the public, Minera IRL has for many years hired and retained several members of his close entourage, who have been paid via opaque consultancy fees and third party companies. The people who have quietly benefitted from being hired off-book and away from the public light include his partner, Patricia Kent. They also include his housekeeper, his chauffeur and several members of the Benavides family, ostensibly hired and kept on retainers for legal work. Just as one example, his partner Patricia Kent has received U$5,000 per month via an ongoing consultancy contract, every month since late 2015 when she left the company. Fees paid to her alone are likely to cover move than a third of a million US Dollars, none of which was ever explained or declared by the company to stakeholders or authorities. I am not privy to all the information, however I am privy to more than enough to allow the burden of proof to shift. This is not a criminal case and much better that way, because CEO Diego Benavides does not have the luxury of the presumption of innocence. Quite the contrary, he as CEO should address his long-standing and highly suspicious behaviour around the way the books are run at Minera IRL, with an important focus on its wholly-owned subsidiary Kuri Kullu. For example he needs to explain why, from the month she left formal employment at Minera IRL in 2015 and to this day, his long-term partner Patricia Kent has been on $5,000/month consultancy fee at the company from then until now. He needs to tell us why he has kept this obvious conflict from the knowledge of shareholders for all this time. Do the math and we are over a third of a million US Dollars, this alone is a breach of ethics which allows us, the shareholders of this company, to hand him his dismissal with cause and subsequent non-indemnity of what would otherwise be a golden parachute of around U$1.5m.
However, he has also surreptitiously employed several members of his own family in other high paying consultancy roles, including his own sons, all again without any sort of declaration to the outside world. He may of course claim his position to be legal, but it is a breach of ethical business practices that once again allows us the opportunity to save $1.5m this year. If we start adding up the “consultancy fees” paid to his family and friends over the years it is no exaggeration to talk about a multi-million dollar fraud happening under our noses at Minera IRL. Though it’s impossible to know for sure, maybe that was his whole plan: A CEO busy siphoning off as much cash as possible before the banks foreclose on Ollachea, at which point he shrugs his shoulders, apologizes and exits, stage left with our money. This simply has to stop and with CEO Benavides now officially overstepping the mark and employing three long-term family friends to executive posts in the company to which none have the required experience or qualifications, we now have the means to get Minera IRL moving again.
It will be interesting to see if the largely ignorant “independent” directors at MIRL continue to sign off on Benavides’ largesse, as they should now consider carefully any document they are handed in the near future (or have signed in the past). Directors Armando Lema and Chair Gerardo Perez are friends of Diego Benavides, they may want to consider their loyalties. This desk would also urge officers at Minera IRL to consider their positions, those inside the company may or may not have known or suspected or heard such talk of quiet payments to family members previously, but from now on ignorance isn’t going to be a useful defence. For example, CFO Carlos Ruiz del Castillo may have accepted incomplete financials from MIRL subsidiaries through ignorance, not knowing the shell game behind hides a non-stop constant stream of “consultancy fees” to the CEO’s own sons and partner, among others. Also, while doing the rounds and reconnecting with people last week I also found out he’s even lost favour with the legal community; He tried to skip paying the legal fees for the Cofide settlement deal, with the firm eventually having to start legal actions against Minera IRL before finally getting their money.
Finally, by revealing what I have published today, I’m under no illusions as to what may happen next, now up against a rich oligarch with a vested interest to keep him and his family connected to the cash cow. Liars don’t suddenly get bouts of contrition when confronted by their lies, he will try hard to protect what he considers his own personal property. A lawyer by qualification, his likely course of attack will be to litigate me to kingdom come but frankly, I do not care. This person simply cannot continue doing what he is doing, the truth will be known and if all that sounds overly dramatic, then so be it and a little dramatic flair as we close out this sorry tale leavens the narrative a little. We require the resignation of Diego Benavides from Minera IRL. He has broken the company’s ethics laws, he has broken the country’s labour laws and he has crossed the BVL to the point where the stock now gets suspended from trading. More than enough to fire the man with cause and not pay his exit fee. At that point, and with an Ollachea suddenly unencumbered by its worst liability, Minera IRL the company would be able to start adding value back to its shareholders. However, hiring ineffective crony pals to fill nonexistent and irrelevant jobs is a business strategy that will reap as it sows.