World’s largest kyanite miner to be wound-up for mismanagement

By Laura Syrett
Published: Monday, 01 October 2012

At the end of August US-based Kyanite Mining Corp. (KMC) was ordered to “wind up and liquidate the business and affairs of the corporation” following a 14-day trial.

At the end of August US-based Kyanite Mining Corp. (KMC) was ordered to “wind up and liquidate the business and affairs of the corporation” following a 14-day trial. The court decision stated that the company mismanaged its assets and treated its shareholders unfairly.

In the ruling, Fairfax County circuit judge, Jane Marun Roush, said that the case had shown that the private family-run business had a long history of stock manipulation, exorbitant salaries for company officers and inappropriate use of company assets.

Roush named the Baltimore-based risk and business consulting firm Protiviti as the receiver, and ordered KMC to be turned over to the firm for liquidation proceedings to begin.

Evidence of the corporation’s mismanagement included using KMC assets to embellish the estates of company leaders, while allowing other assets to languish unproductively, the judge said.

The decision was the culmination of years of wrangling between shareholders of KMC.

 
 
End of an era: KMC’s assets, including the magnetic separation
house (pictured above) constructed at the Ridge East facility in
2009 are now in the hands of the receivers.
KMC.

The case continues


A week after the court issued its ruling, IM learned that the company had filed a Notice of Appeal with the Virginia Supreme Court. KMC’s lawyers later confirmed that they would be appealing Roush’s decision and said that the dissolution of the company would stop if an appeal is granted.

Hank Jamerson, KMC’s vice president for sales and marketing explained that KMC, and its holding company, the Disthene Group, was “two years into an on-going legal dispute between its controlling and minority shareholders”.

“This dispute is unfortunate,” Jamerson said, insisting that “as it has done for the last seven decades, KMC will continue to meet the needs of its global customer base, look out for the interests of its employees and meet its environmental and community obligations well into the future”.

Speaking outside the court, KMC’s former CEO, Gene Dixon Jr, spoke of his determination to remain part of the Buckingham mining scene: “We’ve been dug-in there a long time,” he said, adding, “We’re the same people we’ve always been”.

Both Dixon and the plaintiffs stressed that the court’s decision is unlikely to affect either mining operations or employment levels at KMC.

However, if the liquidation process goes ahead, day-to-day operations at KMC will continue under Protviti, which has the power to sell off assets Ð thought to total around $200m - and analyse all operations of the company.

Years of litigation

The case against KMC was brought by three of the company’s minority shareholders - all of whom are related to the Dixon family - who claimed that the actions of the majority shareholders defrauded them and went against their interests.

The lead plaintiff in the case is 86-year-old Marion Colgate, who was married to the now deceased sister of KMC’s founder, Gene Dixon Sr, and has spent a decade litigating KMC’s stock transactions and company dealings.

“All we wanted all these years was just to be treated fairly,” Colgate told the Richmond Dispatch local newspaper after the court decision had been announced.

Amongst other conclusions drawn from evidence heard during the three-week trial, the judge found that KMC’s company assets were used to pay premiums on multimillion-dollar life insurance policies for the Dixons in an effort to minimise the impact of estate taxes.

The court also found that the majority shareholders retaliated against Colgate and others for filing legal actions by refusing to value their stockholdings at levels reflecting the company’s true worth.

In her ruling, Roush said that the actions of KMC’s majority shareholders, Gene Dixon Jr, and his son, Guy, the company’s president, were “motivated not by the best interests of the corporation but by their personal interest”.

She added that “the corporation is controlled by a domineering shareholder who is unlikely ever to treat the minority shareholders fairly.”

Since being turned over to the receivers, KMC has filed a request with the Virginia Supreme Court to halt liquidation proceedings until the company’s appeal against the county court’s decision has been heard.

In its appeal, the Dixon family asserted that it was willing to cut back on expenses and address the management of the business to stay in control of the company.

A Supreme Court decision on the request had not been issued at the time of going to press.

A kyanite dynasty

KMC’s operations were started in Buckingham County, Virginia, US, in 1945 by the Dixon family, and it has remained a private, family-run firm for three generations spanning almost 70 years.

The company is currently the leading international producer of kyanite, a mineral essential to heat-resistant manufacturing processes such as steel making, as well as casting, abrasives and ceramic applications.

Disthene controls a number of kyanite surface mines in Buckingham County and is the world’s largest producer of the mineral, which is used in refractory linings for steel making, casting, abrasives and ceramic applications.