Predators on the prowl at Monarch PREDATORS tend to give monarch...

Predators on the prowl at Monarch


PREDATORS tend to give monarch butterflies a wide berth because they are poisonous, largely thanks to the milkweed they feed and breed upon.

There seems to be somewhat more appetite for Monarch Gold Mining Co, judging by what Lancelot hears of the numbers that have indicated their interest in buying all or part since the company was put into administration in July.

More than 100 groups and individuals have contacted Bryan Hughes and Chris Munday at Pitcher Partners in Perth, although how many follow through with due diligence on information memorandums remains to be seen.

Hughes, who spoke with Lancelot from a Pitchers team-building exercise in Bali, says the sale process will easily run out into next year - if for no other reason than in current market circumstances they need to make sure whoever buys the assets can deliver the money.

One proposal Pitcher is likely to have to deal with will come from Michael Kiernan, who (to stretch a metaphor) guided Monarch through the pupal stage and reckons it was just short of cracking open the chrysalis when things went awry.

Kiernan, who in his own words is "not the most popular" bloke in Perth mining these days, reckons he has fought back from cancer in the past year and will fight back corporately, too.

Just days before the Monarch board called in administrators, and after the company's major lender Territory Resources had already begun making threatening noises over wanting its millions back, Kiernan proposed a $30 million "go forward" financing package for the key Mt Ida and Mt Magnet gold projects. It didn't go anywhere.

He says Territory, where he was replaced as chairman in late June, wanted terms and conditions to which the Monarch board (where Kiernan was chairman and had just become managing director) could not agree, forcing Monarch to call in administrators.

Territory's just-released annual report discloses that it had $18.5 million of shares and $21.5 million of loans, plus another $1 million in interest and rent owing, with Monarch. That's largely why the junior iron ore producer reported a loss of almost $50 million in the latest year.

Territory's new chairman, Andrew Simpson, has shared boardrooms with Kiernan for several years but seems unlikely to do so in the future. Simpson also took over from Kiernan as chairman of India Resources, another Territory associate that got burned lending money to Monarch. Territory is, in its turn, an associate of the multibillion-dollar Hong Kong-based Noble Group.
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PREDATORS tend to give monarch butterflies a wide berth because they are poisonous, largely thanks to the milkweed they feed and breed upon.

There seems to be somewhat more appetite for Monarch Gold Mining Co, judging by what Lancelot hears of the numbers that have indicated their interest in buying all or part since the company was put into administration in July.

More than 100 groups and individuals have contacted Bryan Hughes and Chris Munday at Pitcher Partners in Perth, although how many follow through with due diligence on information memorandums remains to be seen.

Hughes, who spoke with Lancelot from a Pitchers team-building exercise in Bali, says the sale process will easily run out into next year - if for no other reason than in current market circumstances they need to make sure whoever buys the assets can deliver the money.

One proposal Pitcher is likely to have to deal with will come from Michael Kiernan, who (to stretch a metaphor) guided Monarch through the pupal stage and reckons it was just short of cracking open the chrysalis when things went awry.

Kiernan, who in his own words is "not the most popular" bloke in Perth mining these days, reckons he has fought back from cancer in the past year and will fight back corporately, too.

Just days before the Monarch board called in administrators, and after the company's major lender Territory Resources had already begun making threatening noises over wanting its millions back, Kiernan proposed a $30 million "go forward" financing package for the key Mt Ida and Mt Magnet gold projects. It didn't go anywhere.

He says Territory, where he was replaced as chairman in late June, wanted terms and conditions to which the Monarch board (where Kiernan was chairman and had just become managing director) could not agree, forcing Monarch to call in administrators.

Territory's just-released annual report discloses that it had $18.5 million of shares and $21.5 million of loans, plus another $1 million in interest and rent owing, with Monarch. That's largely why the junior iron ore producer reported a loss of almost $50 million in the latest year.

Territory's new chairman, Andrew Simpson, has shared boardrooms with Kiernan for several years but seems unlikely to do so in the future. Simpson also took over from Kiernan as chairman of India Resources, another Territory associate that got burned lending money to Monarch. Territory is, in its turn, an associate of the multibillion-dollar Hong Kong-based Noble Group.

Simpson also sits on the board of Matilda Minerals (Kiernan quit in late June), which this week went into administration, caught between the jaws of currency effects and a tougher Chinese market for its Tiwi Islands zircon output. Territory is exposed to Matilda, through shares rather than debt, but still has a stake on the books at $6.5 million after making a $4.6 million provision for the year to June 30.

Territory can hope that its 27.4% holding might have some value restored thanks to the reverse swing in the Australian dollar and delivery of stockpiles by Matilda to Chinese customers over the next few months. That might mean the administrators from Ferrier Hodgson hand back the keys to Matilda's boardroom.

Territory's bigger problem is a bizarre wrinkle in what seemed like a secured charge against assets at Monarch to cover its loans.

Lancelot, who is often critical of the Australian Securities Exchange for perceived inaction, must acknowledge that it was only questioning by the ASX of the loan relationship between Monarch and Territory that elicited the following fascinating paragraph from Monarch's operations director Ian Huitson: "On 14 February 2008 Monarch granted a fixed charge over the property known as the Minjar Gold Project. Monarch notes that it does not, and has never had either legal or beneficial interest in the property known as the Minjar Gold Project."

Eh? Lancelot thought this must be a mistake as Monarch announced in April it was selling Minjar to Fred Swaab's fledgling float Aard Metals for $11 million in cash and shares, but as it turns out Monarch is, in a legal sense, correct. (Aard, by the way, has deferred its float and is staying away from Minjar.)

Minjar was housed in a wholly owned subsidiary called Minjar Gold Pty Ltd and Territory's security arrangements were with Monarch, so technically it has no call on the Minjar assets. To try to protect its interests, Territory has put receivers in at Minjar Gold.

Meanwhile, Michael Kiernan and his son, James, have gone on the board at Alexander Securities and taken shares and options that could effectively give them control there.

Kiernan still thinks there's a beautiful butterfly within Monarch, and that he can deliver value to shareholders by getting control using Alexanders (subject to the rest of the board and shareholders agreeing, of course) or his family company, Crawley Investments. Others might prefer Kiernan just bugged out.

by the Age from 24.10.