Karelian shareholders allege funds used for directors’ salaries

Group demanding egm at exploration company to remove a majority of existing board

A group of shareholders at Irish explorer Karelian Diamond Resources are seeking to remove the company's board after alleging that large amounts of money raised for development have instead been spent on directors' salaries.

The shareholders, who collectively have a more than 17 per cent stake in the company, have demanded an emergency general meeting (egm) to table a motion for a vote of no confidence in the existing board.

A further motion would then propose that a majority of the existing board, which is chaired by Irish businessman Prof Richard Conroy, be replaced by a new team that would "refocus operations and reduce operating costs".

A Karelian spokesman said it had no comment to make except to say it “does not believe the proposed change of board is in the interests of company’s shareholders as a whole”.

The shareholders have set up a website outlining their alleged grievances with the current board. They say they are “extremely unhappy with the businesses performance and resulting share price”.

“After 14 years of zero returns shareholders are now facing substantial loses – while the board of directors continues to assure us of ‘excellent progress,” they say. “It’s very clear there has been little to no progress to benefit shareholders, large amounts of money raised for development have instead gone on directors salaries. The time has come for all shareholders to unite to force a change of management and direction for the company.”

They say the current price to sell shares values the business at about £840,000 (€943,000), down from historical highs of more than £5 million.

“Most investors are 70 per cent or more down on their investment,” they say.

“Cash reserves are nonexistent, meaning that further business progress can only mean more dilution at significant discounts to the current share price.”

The shareholders allege that about 70 per cent of cash raised has been spent on wages and office costs, leaving “very little for real exploration work”. They contend that only about 30-35 per cent of all cash raised is being put into “real exploration work”.

“An analysis of historical RNS’s shows that since inception the company has raised £7.9 million and circa £4.1 million of that has been spent on directors/management salaries and pensions etc.”

Separate motion

Shareholders Alan Osborne, Richie Taberner, Steve Coomber and Kevin Taylor wish to remove Prof Conroy, Maureen Jones, Séamus FitzPatrick, Dr Sorca Conroy and Louis J Maguire as directors at the egm.

A separate motion would then seek to appoint Mr Osborne, Mr Taylor, Stephen Grimmer and Martin Doyle to the board.

The shareholders propose that Mr Grimmer would run operations and largely base himself in Finland. A part-time finance/company secretary would be employed to manage remaining office operations "at a much reduced cost".

A finance director would also join the board down the line on the same terms as outlined above.

They also say the new directors would not take formal remuneration but instead be paid in equity based on share price performance, apart from Mr Grimmer who would also take “a small salary to cover his costs of living and working in Finland”.

This is the second shareholder dispute involving Prof Conroy following a separate boardroom coup attempt in 2017 when an investor successfully unseated six directors at Irish-headquartered Conroy Gold, of which Prof Conroy is also chairman.

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter