Half Yearly P&L, page-14

The property venture is a side-show and not the cause of the low share price.

The real issue is that institutional investors are staying away because they don’t trust the board to act in the interests of all shareholders rather than prioritising the interests of the major shareholder.

Shagang is one of the largest steelmakers in China and their investment in Grange is immaterial in a financial sense. What’s likely more important to them is securing a long-term supply of high grade material for their operations. This is where the real conflict with the interests of other shareholders arises.

The board needs to demonstrate that they are not going to invest the cash holdings in sub-optimal projects that extend mine-life but don’t deliver strong returns to shareholders. Take the investment of $10m in the initial stages of a pre-feasibility study for underground mining in the North Pit. How much more investment will it take to complete pre-feasibility and feasibility studies? Where’s the business case justification for that expenditure and where is the independent expert report that can re-assure minority investors that this money isn’t simply being spent to secure longer term supply for Shagang?

The board should be looking to invest their cash holdings to diversify Grange’s income streams and, in so doing, enable them to operate with a more efficient balance sheet and improved shareholder returns. That, however, would not serve the interests of the major shareholder.

If shareholders want to get serious about doing something to improve the share price, we should pursue a case against the board members for minority oppression.