Yes, factsand data analysis are often open to interpretation.
However,when “all roads lead to Rome”, i.e. when there are many, many examples of acertain type of behavior then most people would agree that it’s safe to generalise?
We don’tsee how anyone can continue to give the Board of AML the benefit of doubt,particularly with respect to their interaction with OCP?
Thedifficulty here isn’t in finding examples/evidence, it is in deciding which ofthe many and on-going examples to highlight.
HamishCollins, the M.D. had a pre-existing relationship with OCP.
Inaddition, we consider it unusual that a Board Member would have a paid consultancyarrangement with a shareholder/creditor yet Paul Harris, the Board Chairman didjust that with OCP.
So that’s 2people out of a 4-person Board with the Chairman having the casting vote.
OK, so nowthe alarm bells might be ringing?
So, let’slook at the dealings between the Board and OCP.
The biggestrecent deal was the loan extension of the $27.68m for 2 years.
As ourprevious post highlighted, the terms of the deal done by the Board were not‘commercial’ terms. They were unbelievably generous to OCP. Proof of this isthe 29% interest rate equivalent paid to OCP for the deferment.
But waitthere’s more.
The Boardhave a duty to present information on a deal like this in a clear and directway to shareholders.
Did thishappen?
You be thejudge.
Have a lookat the 170-page document put out by the Board: http://www.aeonmetals.com.au/assets/uploads/2017/07/2017-Jul-14-Notice-of-General-Meeting.pdf
Thedocument is attached to an EGM with resolutions covering the issue of 85warrants to OCP; for OCP to go over 20% share; and for the 2,500,000 shares givento each Director with interest free loans etc. (i.e. essentially “free”shares).
Now, thisnext bit is really significant (especially for the regulators).
The documentdoes not clearly spell out the terms of this outrageous deal! (in fact, wewould argue that it would appear deliberate in not doing so).
In the ‘disadvantages’section of the analysis on page 34 – the auditors opine that the issue is notfair because it gives OCP the opportunity to go from 23.24% to 47.22% of AMLwith non-OCP shareholders diluted from 76.76% to 52.78%.
They alsoadmit that the exercise price for the warrants of $0.16 is too low for the 2-yearperiod in question.
HOWEVER, THEIRSTATEMENT MAKES NO ATTEMPT TO PROVIDE ANY VISIBILITY OR ANALYSIS OF BOTH PARTSOF THE DEAL!
Not one ofthe 30 (or so) shareholders that we’ve spoken to was aware that the “deal”recommended by the AML Board was in fact: 12% interest (capitalized quarterly)PLUS the 85m warrants!!!
12%interest capitalized quarterly is just under 13% interest PLUS the value of thewarrants which was stated as $9,000,000.
Convertingthe value of the warrants to an interest rate equivalent works out around 16%.
Therefore13% direct interest payable + 16% interest rate equivalent works out to bearound 29% actual or total interest which IMO is extortionate and completelyunfair.
Moreover,as the auditor did volunteer when just analysing the 85m warrants part of thedeal, the issue price was too cheap at $0.16.
Why didn’tthey also analyse the 12% capitalized quarterly interest rate and then makevisible and analyse the combined effect of both parts of the deal?
How couldthey possibly not do this unless it was a deliberate attempt to mislead anddeceive?
At today’sprice of $0. 34, the profit to OCP just on the 85m warrants is $15,300,000 orif we convert that back to the same interest rate equivalent is 27% PLUS the13% capitalised interest = 40% total interest P/A!
We regardthe document put out by the Board to be misleading and deceptive and a veryserious breach indeed.
But waitthere’s more.
So, let’ssay that there is agreement (now that the actual terms of the deal are clear tosee) that the deal put together by the Directors was overly favourable to OCP.
Did theDirectors then get something in return for being so generous to OCP?
Yes, theyget 2,500,000 shares each and interest free loans i.e. IMO ‘free shares’/remuneration.
What’s morethey were issued at a very low price of 14.5c each by their own choosing.
Make nomistake this is part of the Directors’ remuneration and there are strictaccounting standards regarding this. The Directors also gave themselvesinterest free loans, so they don’t actually pay for the shares. The 2.500,00shares each, and interest free loans are paid for, not just by OCP, but by allshareholders (i.e. you and me/us). How can this be?
Such a cosyarrangement; the AML Board give OCP unbelievably favourable terms and in returnOCP support the Director's 2,500,000 shares each (now worth $850,000 each).
Ordinaryshareholders voted strongly against this arrangement with about 43 million NOvotes each but with OCP's massive voting power it was always going to gothrough (as planned).
Even thoughin many peoples' opinion these are clearly 'associated party' dealings, theBoard were happy to accept OCP's votes. Is this fair?
We view thiswhole thing as a rort (and a potentially criminal one at that?)
Unfortunately,there is a lot more evidence of the Director’s intent around this extremelyfavourable deal for OCP and for themselves.
Previously,shareholders could vote on-line, quickly and easily.
In votingin subsequent matters, shareholders could also vote on-line.
However,for this very important matter, the AML Board stopped on-line voting.
We onlyknow this because we were frustrated by not being able to do so and wecontacted AML’s registry office, “The Boardroom”, who told us that AML hadspecifically told them NOT to open on-line voting for these resolutions.
Now, whywould the AML Board do this?..........
But waitthere’s still more.
The votingfor these resolutions closed 9/8/17.
Unbeknownstto ordinary shareholders, at the same time, the Board had organised a largeplacement of 39m shares to institutional investors at the very low (too low)price of 14c (but didn’t announce this until 11/8/17). AML had been trading in the low 20’s so thiswas a 35% discount to the SP which then subsequently crashed and took 3 monthsto recover.
We wonderwhy the Board waited until immediately after the voting on OCP’s deal and theirshares had closed to announce the placement at, in our view, give-away prices?
So, perhapssome people reading this might think (as we do) that the Board’s dealings areunfair and display clear bias to OCP and themselves and against all othershareholders?
This might thenexplain the Board’s extreme reluctance to promote Walford Creek.
Given theirreluctance to do this for years now, shareholders have taken it upon themselvesto write various proposals to the Board about the value of doing at least somepromotion (including the negotiation of some test market, rock-bottom pricedopportunities to prove the positive effect of promotion) but the Board simplyare not interested, would not even bother to respond to these initiatives and simplywill not do any ‘normal’ promotion.
Might it bebecause promotion would most likely lift the SP which would make it moreexpensive for OCP to keep acquiring shares?
Simply put,in our opinion, the evidence proves that the Board look after OCP and inreturn, OCP look after the Board.
Where doesthat leave everyone else?
If youagree that shareholders need to work together against this type of behaviourthen you might consider firing off a quick complaint to ASIC and the ASX whoare already looking into these breaches:
[email protected];@asx.com.au>
https://compliance.asic.gov.au/#/form/583b77dc397bbc319837ea2a/app/5bc2afc7bb212117a84c2e8e
You mightalso consider voting NO to the remuneration resolution and NO to there-election of Paul Harris.
P.S. HamishCollins had previously been given 4,000,000 shares with interest free loans, sohe has now been given 6,500,000 shares (worth $2.2m as part of his, in ouropinion, overly generous remuneration package).
NB this isan exploration company not making any money whatsoever.
To berewarding the Directors and, in particular, the Non-Executive Directors solavishly is virtually without precedent and, in our view is totallyunjustifiable.
Lastly, youmight consider coming along to the AGM on Monday Nov 12 at 10.00am – It shouldbe very interesting.
WalfordCreek is an amazing, absolutely world class resource which is probably evenbetter than any of us realise (which is why OCP are so keen to get to 50%?).We’re confident that we can do something about the way it’s being run tobenefit all shareholders; so, if you agree, help us do something; have a go!
That way wecan work together for the common good?
(20min delay)
