Baffinland consultant accused of insider tipping

Workers plant explosives at the Mary River iron ore site on northern Baffin Island in an April, 2008 file photo. Now the Ontario Securities Commission alleges that a former Baffinland consultant used confidential information to launch a take-over bid of the mining company that is developing the iron ore deposit. (FILE PHOTO)

Two men who launched a bid to acquire Baffinland Iron Mines Corp. have been accused of insider tipping and trading by the Ontario Securities Commission.

The OSC’s 18-page statement of allegations, released Jan. 9, claims Jowdat Waheed and Bruce Walter used confidential information to launch a take-over bid of Baffinland, the mining company that is developing the Mary River iron ore deposit south of Pond Inlet.

Jowdat Waheed was a consultant at Baffinland from February to April 2010, the statement says. That’s where he learned confidential information about Baffinland, such as the company’s budgets, business and exploration plans and details about Baffinland’s ongoing negotiations with ArcelorMittal regarding a potential joint venture.

The statement alleges that Waheed shared some of those material facts with Walter in July 2010.

The following month, the business partners incorporated Nunavut Iron Ore Acquisition Inc.

The OSC statement alleges Waheed and Walter acted contrary to public interest when they used confidential information to purchase a toe-hold (less than five per cent of a company’s stock) and launch a take-over bid for Baffinland in September 2010.

The OSC argues that the purchase of Nunavut Iron’s toehold position in Baffinland was strategic , designed to reduce the overall cost of Nunavut Iron’s bid.

“Walter and Waheed knew the hostile take-over bid would disrupt the joint venture negotiations between Baffinland and ArcelorMittal,” the statement said. “Waheed and Walter knew that launching the bid for BIM would create benefits and opportunities for Nunavut [Iron Ore] at the expense of Baffinland shareholders.”

In an unexpected turn, ArcelorMittal and Nunavut Iron Ore joined made a joint-bid take over of Baffinland Iron Mines Corp. in January 2011.

But Nunavut Iron Ore, now called WW Mines Inc., denied the allegations, saying the toe-hold purchase was done lawfully and fully disclosed.

“The company strongly believes the allegations made by [the OSC] are completely without merit and will not withstand scrutiny by a Hearing Panel of Commissioners,” said WW Mines in a news release Jan. 9.

“WW Mines continues to own all of its investment in Baffinland and is fully committed to funding its share of the development of one of Canada’s largest mining projects in history and the first of its kind in the High Arctic.”

Read the OSC’s full statement here.