The potential profits were getting bigger, and also getting further away. With no prospect of evicting the miners, the stock continuing its slide southward, James Sinclair threw down the gauntlet.
On December 11, as Sutton’s stock fell to one of its lowest levels, Barbara Sinclair called a meeting of the board to demand their resignation and the appointment of a new board hand-picked by Sinclair. Instead, the board voted down her proposal and immediately stripped Mr. Sinclair of his chairmanship.
Sinclair was not to be thwarted. He founded the Sutton Action Group to unseat the board.
“Under the stewardship of current management, there has been a precipitous decline in Sutton’s share price from US $40.75 at March 29, 1994 to approximately US $12.00 today,” he noted on March 8,1996.
With the dissident investors, Sinclair attacked the entire approach of Sutton’s management. An information circular, filed with the BC Securities Commission, was sent to all investors, accusing the board of being out of their depth at Bulyanhulu. He cited the well-documented “political problems” at the site and alleged “Sutton’s managers have built no relationship on the ground with local personnel at the site of Bulyanhulu, a critical step in the development of any business in Africa.”
The core of his argument was that his experience and partnership with a company who knew the area better would save Sutton—its stock was valued primarily for the unmined gold beneath Bulyanhulu.
But Sinclair’s rivals on Sutton’s board didn’t want a partner. They wanted to issue several million dollars in new stock to finance construction. On April 11, 1996, the battle came to a head.
Forty-six per cent of shareholders voted with Mr. Sinclair to remove Sutton’s board. Under British Columbia’s securities legislation, 75 per cent of shareholder approval is required to unseat a company’s board of directors.
Sinclair vowed to fight on at the company’s annual general meeting on July 30. The revolt put pressure on Sutton’s management. With Sinclair planning another challenge, and with nearly half of the shareholders opposed to their leadership, management had to prove they were in control of the situation.
Sutton’s president was supplied with two pages of detailed questions about Bulyanhulu and whether the internal conflict at Sutton Resources affected how the company proceeded with the evictions. He declined to comment.
The Canadian Government Steps in
While James Sinclair lobbied Sutton’s shareholders, the Canadian government threw its weight behind Sutton’s management to convince the Tanzanian government to remove the miners.
Boxes of heavily censored correspondence of the Canadian High Commissioner, obtained by Probe International under Access to Information legislation, tell of the intense lobbying efforts to remove the miners. They show a government that wanted a peaceful solution to the problem, but was desperate to ensure investor confidence in the mines.
“Sutton [censored words] is ready to go to stock market [censored words] but cannot / not do so in absence of Tanz govt action to remove 7,000/10,000/ illegal miners…” said a report to the Department of Foreign Affairs and International Trade in December 1995.
The demands of the stock market were delayed by the court. The Canadian High Commission reported back to Ottawa, “Sutton has appealed to High Court for panel hearing. We do not / not believe that judicial action on injunction need impede action by govt to resolve situ[ation].”
The Canadian government and Sutton launched a series of meetings in early 1996 to urge the Tanzanian government to evict the miners. The court ruling defining the matter as a constitutional issue did not seem to be of concern in the correspondence of the Canadian High Commission that has been obtained by reporters.
In mid-May 1996, the Canadian High Commission wrote to the Canadian government to tell them the evictions would soon occur. “Although rumoured to happen many times in the past, it appears that Tanzanian Government will be clearing mining site of illegal miners beginning 20 of May.” Sutton’s subsequent actions seem to indicate that the Canadian government had been persuasive.
On May 22, Kahama dropped its appeal of the High Court ruling that recognized the case as a constitutional one. On May 31, Sutton Resources issued $23 million in special warrants (stocks) to finance the Bulyanhulu mine. Despite Sinclair’s advice to find a partner with more experience, management had decided to go it alone.
The evictions were delayed twice again while the Canadian government worked to “underline Canada’s preference for a peaceful solution, and to ensure that the miners do not simply vacate one mine site for another,” according to the Assistant High Commissioner.
Tanzanian public opinion also needed to be softened. The High Commission published a special supplement in the Tanzanian press in early July, and the High Commissioner appeared in a half-hour TV interview.
“In short, with this full court press, the decision makers will be fully aware of how important this mining sector, Cdn participation, and rule of law is to their economy,” the Canadian High Commission wrote in a June 28 memo to Ottawa.
Reporters on this story were unable to obtain clarification from the then-High Commissioner as to why the government seemed prepared to see the evictions progress without the constitutional panel having convened. Attempts to contact the former High Commissioner were not successful.
Click here to read Evicted
