02/10/2008 - 10:11

Cape Lambert deal under the spotlight

02/10/2008 - 10:11

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Disgruntled shareholder Power United Ltd has stepped up its calls to remove the board of Cape Lambert Iron Ore Ltd after it formalised a $250 million deal to acquire a stake in an African iron ore project.

Cape Lambert deal under the spotlight

Disgruntled shareholder Power United Ltd has stepped up its calls to remove the board of Cape Lambert Iron Ore Ltd after it formalised a $250 million deal to acquire a stake in an African iron ore project.

Power, which holds an 11.5 per cent stake in Cape Lambert, said the removal of the board is the "only way" for a proper review of the investment decision, which was not subject to shareholder approval.

Power also reiterated that it believed adequate due diligence was not undertaken into the investment, which was announced early last month.

Yesterday Cape Lambert sealed the deal on a 30 per cent acquisition of the Marampa iron ore project, in a cash and scrip deal valued at around $US45 million with owner African Minerals Ltd, a company controlled by Frank Timis.

Under the deal, Cape Lambert has also committed $US25 million towards a definitive feasibility.

Cape Lambert has also been granted the exclusive option to take its interest in the project to 100 per cent for consideration of $US200 million ($A250 million).

The transaction has always been opposed by Power, which last month called for the removal of executive chairman Tony Sage and directors Brian Maher and Timothy Turner.

It also applied for an interim court injunction on the deal some two weeks ago, however mediation talks between both companies saw that injunction dropped last week.

Power has always maintained its opposition to the transaction, saying it was concerned it was taking place so soon after the $400 million sale of the Cape Lambert iron ore project to Chinese company MCC Mining.

The shareholder was also concerned that African Minerals had become embroiled in a public and potentially legal stoush with another company over the ownership of the project, located in Sierra Leone.

Power has called a shareholders meeting on October 15 to replace the Cape Lambert directors with four of its nominees including Melbourne identity Leo Khouri, Tony Roberts and Lavan Legal's Martin Bennet.

"We still do not know why the Cape Lambert Board has refused to ask for shareholder approval on such a potentially company transforming deal, however we do know that we have lost faith in the current Board," Mr Roberts said.

"Without an independent valuer's report we do not know how Cape Lambert's Board has valued the transaction, and we have concerns over the due diligence process.

"The only way to prevent this deal progressing without shareholder approval is to support the Power United proposal to remove the current board."

 

Below is the full Power statement:

 

Power United Limited (Power United) today urged Cape Lambert shareholders to remove their Board saying it is the only way for them to review Cape Lambert's decision to spend US$200 million on an investment in West African State of Sierra Leone, without adequate due diligence or shareholder approval.

Power United, Cape Lambert's second largest shareholder, has called a shareholder vote on 15 October 2008, to replace most of the Board so a new board can review Cape Lambert's plan to spend US$200 million, including issuing another 10% of Cape Lambert shares in return for an investment in West Africa.

One of Power United's nominees for the Cape Lambert Board, Mr Tony Roberts said: "We still do not know why the Cape Lambert Board has refused to ask for shareholder approval on such a potentially company transforming deal, however we do know that we have lost faith in the current Board.

"Without an independent valuer's report we do not know how Cape Lambert's Board has valued the transaction, and we have concerns over the due diligence process."

"The only way to prevent this deal progressing without shareholder approval is to support the Power United proposal to remove the current board," Mr Roberts said.

Major concerns

- The Board of Cape Lambert is rushing the proposal that will commit up to US$200 million of the maximum possible A$400 million proceeds receivable from the sale of its magnetite mine last July.

- Cape Lambert's Board has promised a capital return to shareholders of $100 million and faces a significant tax payment, estimated at A$80 million, from the recent sale meaning that all the company's capital appears to be committed.

- The Sierra Leone plan represents a company changing proposal by moving off-shore.

- The proposed investment includes the allocation of new shares equivalent to 10 per cent of Cape Lambert to African Minerals, which will dilute the existing Cape Lambert shareholders.

- There has been inadequate due diligence on the tenements, including on the ownership title, and we are concerned that the Cape Lambert Board intends to initiate the investment before the tenements' value is established.

- Power United is concerned that former Cape Lambert Chairman, Mr Ian Burston, who undertook site inspections on behalf of Cape Lambert, is no longer on the Cape Lambert Board.

Power United has requisitioned a Shareholder Meeting to remove the most of the Cape Lambert Board and replace it with directors who can better represent the interests of Cape Lambert shareholders.

Power United's Injunction

When Power raised its concerns with Cape Lambert its lawyers refused to give any undertakings in relation to the proposed investment and as a consequence we obtained an interim injunction against the Company which lead to the Company providing more information in relation to the Marampa proposal. After further discussions we agreed to the discharge of the injunction after receiving appropriate assurances from the Company but we nonetheless oppose the Company committing to the Marampa investment until appropriate due diligence and corporate governance procedures have been followed including shareholder approval.

Stated Strategy if New Board Appointed

- Immediately conduct a review of proposed Marampa Iron Ore deal, including an independent valuation report by an international geological firm that would be sent to all shareholders

- Put the Marampa deal vote to a shareholder vote ahead of any final investment decision. - Focus the business predominantly on other exploration projects, including the company's existing tenement in Western Australia's Pilbara region.

- Ensure shareholders are fully informed about major transactions, and are part of the final decision making process, including conducting proper due diligence, putting deals to shareholders, and commissioning independent geological firms

- Review the current dividend policy with a view to having future dividends fully franked for both Australian and overseas residents

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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