Battle for control of Chariot Resources a close one

Peter Koven, Financial Post  Published: Tuesday, September 01, 2009

Simon Hayter for National Post ?What happens Friday, I don?t know,? said Brian Edgar, a former lawyer who launched the proxy action alongside Lukas Lundin (pictured).

The battle for control of Chariot Resources Ltd. is a close one that will come down to the wire, both sides say, as they mount furious PR campaigns ahead of Friday's vote count.

"What happens Friday, I don't know," said Brian Edgar, a former lawyer who launched the proxy action alongside Lukas Lundin.

"But I know we have a lot of support. And it should be embarrassing to current management regardless of whether we win or not."

Mr. Edgar and Mr. Lundin are attempting to replace Chariot's board and chief executive Ulli Rath with a slate of senior executives from the Lundin Group of Companies. They claim the incumbents are mismanaging the company's Marcona project in Peru.

Mr. Edgar said he knew going in that it would be a difficult battle, and it has been just that. The Lundin Group got a late start, as it did not put its plan into motion until early August. It is also up against a charismatic figure in Mr. Rath, who Mr. Edgar acknowledged is running a very good campaign.

Mr. Rath has stuck to one simple message: that Lundin Mining Corp., which owns about 18% of Chariot, is trying to get control of the company without paying a premium (something the Lundin side vehemently denies).

He has also won the support of proxy voting firms RiskMetrics and Glass Lewis, which said that the Lundin slate did not make a convincing case to overhaul the board. RiskMetrics also raised concerns about potential conflicts of interest with Lundin Mining and the rest of Chariot's shareholders.

"I'm feeling very confident," Mr. Rath said. "It's definitely going to be down to the wire, but I'm very pleased with the response we've had."

He expressed remorse that the two sides did not resolve their differences amicably, since they both seem to have the same goal: to sell Chariot to the highest bidder, at a much higher price than the current one.

In order to do that, the company needs a strong feasibility study that shows the potential of the project. Mr. Rath said that the existing study is a very convincing document, while the Lundin side has poked holes in it and insisted that much more work needs to be done.

The biggest factor working against the Lundin Group is likely Chariot's shareholder base, which includes few institutional investors and an almost endless number of small retail investors. Convincing enough of them to bother voting their shares is a big challenge, and Mr. Rath is popular with many of them as well.

"He's a bit like the pied piper. Whether he's doing the right thing or not, he's got a following that he'll take down whatever path he chooses," Mr. Edgar said.

Financial Post

pkoven@nationalpost.com

CHARIOT RESOURCES LTD.

Ticker CHD/TSX