Baffinland consultant accused of leaking Inuit org’s royalty proposal

The lay down area at Milne Inlet, which Baffinland hopes to use for the shipping of iron ore under its scaled-back proposal for Mary River. (FILE PHOTO)

The Ontario Securities Commission alleges that a former consultant to the Baffinland Iron Mines Corp., Jowdat Waheed, in 2010 disclosed confidential information on the proposed royalties that the Qikiqtani Inuit Association hoped to receive from Baffinland’s Mary River iron project.

That allegation, and others, lie at the heart of an OSC hearing that reconvened June 5 at the commission offices in Toronto.

Waheed is accused of insider trading and tipping in connection with a hostile takeover bid for Baffinland that he and business partner Bruce Walter launched in the late summer of 2010.

The company they formed in August of that year, Nunavut Iron Ore, now controls 50 per cent of Baffinland, while their former takeover rival, Arcelor Mittal, holds the other 50 per cent.

The OSC alleges that Waheed, who worked as a consultant for Baffinland from Feb. 18, 2010 to April 30, 2010, breached confidentiality obligations by using inside information acquired through his consulting work with Baffinland.

That included information about Baffinland’s early negotiations with Arcelor Mittal, which began in early 2010 but were not then known to the public.

And the OSC also alleges Waheed “used the royalty rates being proposed by the QIA in his planning of the hostile take-over bid.”

Baffinland told Waheed about QIA’s royalty bid in February 2010.

The OSC alleges that on Aug. 20, 2010, about a week before he and Walter formed Nunavut Iron Ore for the sole purpose of acquiring Baffinland, Waheed told Walter in an email about QIA’s royalty proposal.

“On August 20, 2010, Waheed sent an email to Walter and Calvert in which he stated that the current ask from the Inuit association for royalties was ‘probably around $30mm,’” the OSC said in it statement of allegations.

It’s not clear what the amount given, “$30mm” may mean, though “mm” is often used as shorthand for “million.”

But the OSC said Waheed’s figure was accurate.

“In fact, this was the current ask by the QIA. This was a confidential fact that had not been generally disclosed,” the OSC said.

At the time of those royalty talks, the scope of the Mary River project was much bigger than it is now.

Earlier this year, Baffinland announced plans for a radically scaled-down version of the Mary River mine that eliminates a proposed railway, Steensby Inlet port and year-round shipping.

That includes cut in proposed iron ore production from 18 million tonnes a year to 3.5 million tonnes per year — which would likely reduce the value of any royalties that might flow into QIA’s coffers.

The mineral royalty negotiations between QIA and Baffinland, part of talks aimed at an Inuit benefit and impact agreement, were and are intended to be confidential and not disclosed to the public.

The OSC also alleges that Waheed and Walter made use of an internal Baffinland financial model that included:

• the company’s revenues;
• the company’s tax reserves
• the cost estimates for building a port;
• the cost estimates for shipping;
• capital and operating costs.

After launching competing takeover bids in 2010, Nunavut Iron Ore and Arcelor Mittal ended their bidding war and launched a joint takeover bid for Baffinland.

Baffinland shareholders received $1.50 per share under the joint bid, much higher than the 60 cents per share that Nunavut Iron Ore paid in 2010 to acquire a toehold in the company.

The hostile take-over bid was launched by them knowing it would disrupt the joint venture negotiations between Baffinland and ArcelorMittal. By their actions, Waheed and Walter deprived Baffinland shareholders of the opportunity and ability to benefit from future developments of the Mary River Project as a joint venture partner with ArcelorMittal,” the OSC alleges.

None of the OSC’s allegations have been proven and the commission’s hearing on the matter is not yet concluded.