By James Kwantes
Published first at Patreon

The arrival of Muddy Waters on a shareholder registry tends to send shivers down the spines of CEOs. The Texas-based hedge fund headed by Carson Block specializes in short selling and has taken down a number of public companies including, famously, TSX-listed Sino-Forest (peak market cap $6 billion).

Not Patrick Evans. On May 3, 2023, the CEO of Mayfair Gold (MFG.V) hosted Carson Block and Freddy Brick of Muddy Waters on a site visit to Mayfair’s Fenn-Gib gold project in Ontario’s Timmins mining camp.

Muddy Waters had earlier become a shareholder by acquiring a block of Mayfair shares from K2 & Associates. After the site visit, Muddy Waters purchased further Mayfair Gold shares in financings and introduced Mayfair to other financiers.

The details are included in a management information circular issued by Mayfair Gold in response to a proxy fight with … Muddy Waters. In my June 7, 2023 article, A Golden Foray in Muddy Waters, I wrote that the arrival of Muddy Waters on the scene feels like a “pay attention” moment. I didn’t expect the nasty fight that has resulted.

Carson Block of Muddy Waters Research                                                                                                                             Institutional Investor

On March 14 of this year, according to a company timeline, the hedge fund demanded Mayfair install its nominee Darren McLean, a former vice-president with K2 & Associates, as board chairman. When Mayfair refused, Muddy Waters doubled down. The hedge fund is now demanding the ouster of existing directors, including Evans, and proposing Block, Brick, McLean and Anthony Jew as directors. Block has cited delays on key company objectives and options awards as reasons for the control fight.

Game, set, match. Muddy Waters owns, controls or has voting support from shareholders representing 50.68% of Mayfair’s 100.6 million issued and outstanding shares – including company co-founders Henry Heeney (who was key to sourcing the Fenn-Gib deposit from Pan American Silver) and Sean Pi. The hedge fund’s power play appears to be a done deal.

Related reading: The Rage of Carson Block / Institutional Investor

Outgoing executives including Evans are resigning, triggering change of control payments in excess of $4 million -- a good chunk of the current treasury. Exiting insiders are also dumping stock in the market.

It’s not Muddy Waters’s first foray into gold mining. Asanko Gold was a Muddy Waters short casualty. On the long side, Muddy Waters and K2 were pushing for board changes at GT Gold when Newmont bought the company for $400 million (interestingly, current Mayfair chairman Harry Pokrandt was one of their nominees).

K2/Muddy Waters also backed the recent combination of Moneta Gold and Nighthawk Gold to form STLLR Gold (STLR.T), according to a recent Northern Miner article.

STLLR Gold’s Garrison and Golden Highway open-pittable gold deposits (Tower gold project) are located just down Highway 101 from Fenn-Gib, near infrastructure in an established mining district. Tower hosts a combined 12.8 million ounces (all categories, open pit and underground) at a grade of about 1 g/t – similar to Fenn-Gib.

Fenn-Gib hosts about 3.5 million ounces (mostly Indicated) at 0.93 g/t gold in an open-pittable deposit. Mayfair has been hitting higher grades (including 1.97 g/t over 68.9m and 6.59 g/t over 19.6m) at its nearby Footwall Zone, where a maiden resource was expected by mid-2024. It seems likely Mayfair has at least 4M oz at Fenn-Gib.

The open-pit ounces are adding up at Garrison, Golden Highway and Fenn-Gib. A packaging of the three deposits could prove alluring to a suitor.

As for Fenn-Gib, the deposit doesn’t know about the takeover battle or who owns the stock. Mayfair Gold went public at $1.85 back in March 2021 and traded as high as $2.74 back in January, with gold at about US$2,050 an ounce.

Mayfair Gold shares now trade at $2 in a $2,350 gold price environment. The value of this formerly stranded asset continues to grow.

For more background on Fenn-Gib and Mayfair Gold, read Whale Watching and Lateral Thinking.

Disclosure: I own Mayfair Gold shares and have no business relationship with any company mentioned. This is not financial advice and all investors need to do their own due diligence.