SINGAPORE-based commodities trader Sin Tang Developments has shown once more that there is no such thing as a white knight, only shades of grey. In November last year, iron ore hopeful Ferrowest placed 10 million shares, or 10 per cent of its capital, with Sin Tang to allow the company to expand its exploration activities and boost working capital.
Ferrowest welcomed Sin Tang, which it said was supported by Chinese steelmills such as Tianjin Metallurgy Group and Hebei Tangshan Gangiu Iron & Steel, and claimed it underlined the potential of the company's iron ore projects. Ferrowest also said that it was holding discussions with another party in relation to an investment and offtake arrangement.
In June, Ferrowest announced it had entered into a conditional heads of agreement with Sichuan Taifeng Group under which the privately owned Chinese group would invest $29m to earn a 50 per cent joint venture in the company's iron ore projects and emerge with up to 30.26 per cent of the capital.
Sichuan Taifeng was to subscribe immediately for 14 million shares at 20c a share, to give it 12.6 per cent, a further 10 million shares also at 20c a share, subject to shareholder approval, which would take its stake to 19.32 per cent and a further 18 million options, exercisable at 24c a share over the next two years, which would lift its stake to 30.26 per cent.
Last month, Ferrowest advised that Sin Tang had lodged a requisition for a shareholders meeting to replace three of the four board members, including chairman Barry Wyatt and managing director Brett Manning. Only days later Ferrowest announced it had signed the implementation agreement which had been revised so that Taifeng would take a 66.7 per cent interest in the Yogi magnetite joint venture, which planned to triple production from 1.3 million tonnes per annum to 4.5 million tonnes per annum, and Ferrowest would retain 100 per cent of the Eradu pig iron project.
The announcement also revealed that the first 14 million tranche of shares had not yet been placed because it required approvals from the FIRB, the WA Minister for Mines to transfer tenement interests, and a "minor" third party.
Ferrowest yesterday set the meeting date for November 2. It revealed that Sin Tang had nominated two representatives, Brett Clark and Pewter Cunningham, which means that, if successful, the board would reduce to three and its nominees would be in the majority.
Ferrowest said Sin Tang had not provided a statement of its intentions or the background on its nominees but it had previously made proposals that would be inconsistent with the agreement reached with Taifeng and which had been rejected by the board.
With the signing of the investment agreement with Taifeng, the company's strategy had moved from planning to one of implementation and action, but based on proposals presented by Sin Tang, the commodities trader's vision for Ferrowest was significantly different to that of the board.
Sin Tang has other resources investments in Australia but is perhaps best known for its eleventh-hour attempt late last year to derail a takeover of Sphere Minerals by Xstrata.
Sin Tang, backed by a Chinese consortium including Tianjin and Hebei Tangshu, came up with a counter-proposal. Xstrata prevailed and ended up with 88 per cent of the capital. Sphere remains listed on the ASX.
Interestingly, Sin Tang held 12.8 per cent of Ferrowest when it lodged its requisition but has been selling down over the past three months, from 13 million shares to 10.6 million, reducing its stake to 10.57 per cent, which appears to be an odd strategy when your seeking to win a shareholder vote. Ferrowest's share price has fallen during that time from 16c to the current price of 6.4c.
LCG Price at posting:
5.4¢ Sentiment: Hold Disclosure: Held
