Here is what happened at the Tuesday hearing. The three of us were waiting outside the court room when Woods turned up with his legal entourage of senior barrister (Pike) another barrister along with half a dozen other legals, and a trolley full of folders. There was also a representative from EDF with his barrister.
We had presumed we would sit at the back of the court in case there was a question about our submission. However as I had made the submission I was invited to sit on a bench alongside the barristers, the EDF man and our other guy "Ron". After first asking me which court cost option I would prefer (which made weak at the knees - still worried about this) Justice Black spent many minutes receiving a stack of affidavits from Pike and from the EDF barrister.
Our submission, ratified and sent to the Woods legals only in late afternoon Monday, had forced them to work late into Monday night compiling these affidavits. They had to provide proof that KPMG had made many genuine attempts to sell assets etc. The EDF man and barrister had also to come and apply for confidentiality over the deal done with Deutsche Bank in December since that had been raised in our submission.
Then I was surprised to find that Ron and I would be allowed to question the witnesses Mr Woods and Mr Jasci who provided the Independent Expert Report (IER) upon which the zero valuation of shares is based. I went first, my aim being to show that Woods had neglected to include in his report that CNNC had not paid its share of costs in running LHM. That meant existence of a possible $100M still owing to PDN which had been overlooked both in his report and in the accounting by Mr Jasci. That $100M was as of March 2017 so its more like $130M now (25% of $30/lb all in cash costs x say 5M lb/ year x 3 years and now nearly 4 years).
The first 2 questions I asked of Woods were objected to by Pike on the grounds of implication or relying on a conclusion ( the judge was helpful in explaining the correct form of question). When asked had he accounted for this fact, he made some tortuous explanation as to how the loan no longer existed (item 54 of judges summation) which seemed to both to confuse and convince the court. I had only raised the $90M loan to indicate that part of the debt could be wiped if CNNC had paid these costs. Then I got done purely on a technicality. In trying to prove that the CNNC obligation still existed as stated by Molyneux in his announcement, 23 March 2017, I asked Woods if he had seen that announcement. Pike objected and asked for a copy of the announcement. I had only the detailed reference to it in my submission, not a paper copy. The court took it that the document did not exist. This was an announcement made to shareholders by Molyneux through the ASX which imposes severe penalties for untruths and could have been quickly downloaded by the court yet could not be considered.
When I asked Mr Jasci if he had taken CNNC's obligation into account, he said he was not sure! In the afternoon I was given the chance to make an oral submission (unexpected again). The main points I made were: (a) if there was any chance of omission or inaccuracy in the IER and since this is the absolute foundation of the DOCA ( where the shareholder is assured his shares have zero value) then it cannot be accepted by the court. (b) The real value of a share is what the market will pay for it. For example the last price of 4.7c was the markets value with all of PDN's debts taken into account. I pointed out that many companies whose shares have high value would also have zero value if subjected to this same calculation ( the only difference being their debts not having been called in). I gave example of a top iron ore miner where liabilities greatly exceeded asset values which was only saved by a return to favourable iron ore prices. (c) We share holders who have no say under administration are given the ultimatum by Woods, either it's DOCA or liquidation. I put it to the judge that liquidation would be unlikely because that is not the prize sought by the Ad Hoc Committee (AHC) and they are in the driver's seat. If the DOCA was not approved that would allow shareholders to negotiate with Woods/ AHC for a fairer deal eg last price of 4.7c takeover.
Those options towards the end of my submission were proposed in the assumption that we would have no chance of halting the DOA. Although I felt like an ice cube hoping to sink the titanic we were really in a position to achieve something but that would all depended on the judge.
This what we achieved:
1. We got our submission documented by the court.
2. We forced them to authenticate claims they had tried alternatives such asset sales etc.
3. My query as to how the $115 note raise happened before the DOCA and could DB or members of the AHC have subscribed to it, forced the admission that they were "not excluded from subscribing to it". In other words they were quick to put in another $115M of their own money to pull this off!
4. On technicality the court was able to ignore the fact that CNNC still owed their share of LHM running costs to PDN. Woods, in his report, but especially Mr Jasci may not have accounted for approximately $100M in his IER. The IER was likely therefore to be inaccurate. Although this shortfall in potential credits may not however change the share value being calculated as zero in view of the large debt owed by PDN to creditors, if the IER is deficient ie. inaccurate, it should not be accepted by the court..
5. Indication EDF were determined to hide details of their deal with DB in acquiring their demand on PDN. The details whereby DB on sold it to another remains confidential. The implication is that it must be an attractive buy for someone.
6. Ron made confident and specific submissions concerning change in uranium price since completion of the IER, reference points for valuation by Mr Jasci, all to do with questioning the accuracy of the IER.
On Thursday 18th January, the judge ruled in favour of the DOCA. I have only just looked carefully at his summing up, but it appears we have been dispatched through interpretations some of which are worth reviewing in a separate post. The judge was most helpful with court procedure. He intervened when Pike seemed to misinterpret some points in the submission and also when Pike claimed Ron was not a qualified expert on valuation thereby allowing continuation of his submission.
PDN Price at posting:
4.7¢ Sentiment: Hold Disclosure: Held
(20min delay)
