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Many Elmore shareholders believe ASIC needs to do more. Photo: Attila Csaszar

Shareholder concern over Elmore probe

The chief executive of iron ore exploration and development company Elmore, formerly IndiOre, has confirmed his brother’s law firm undertook the independent review into the business’s failed project expansion, which was approved and under construction despite no adequate mineralisation being discovered.

Numerous shareholders in Elmore expressed discontent with the company’s board and the Australian Securities and Investments Commission after Business News revealed on July 15 that Elmore was using its own solicitors and senior counsel, with no objections from the regulator, to conduct the investigation into the circumstances surrounding board approval for the Kurnool wet plant phase three expansion in India.

“I for one, would not believe any investigation by the company’s own solicitor is actually independent,” shareholder David Salmon told Business News.

Fellow shareholder Rob Hurn said ASIC should be conducting the review itself.

In May 2018, a $10 million capital raising was undertaken to fund the phase-three expansion.

In September, Elmore said it had ordered equipment for the expansion that was being manufactured and fabricated by a Chinese supplier, and ongoing detailed engineering and design works by Essar Projects were set to be complete by the end of that month.

David Mendelawitz took over as the company’s chief executive in October, replacing Cedric Goode.

In early January, the Kurnool project was cancelled and an internal review was immediately announced.

“The company has initiated an independent review in both Australia and India into the history that has led to the decision to build the project, in particular the phase expansion, without sufficient defined resources," the company said.

Remaining on the board since Elmore announced it had secured capital for the phase-three expansion in May 2018 are Peter Richards (now as chair) and Sean Henbury, who is company secretary.

Last month, Business News asked Elmore for the name of the law firm involved in the investigation.

While Steinepreis Paganin had appeared as solicitors on Elmore’s website and financial reports, a spokesperson for Elmore told Business News that this relationship no longer existed.

However, the company would not disclose who the solicitors and senior counsel investigating the matter were.

Earlier this month, Business News sighted an email, which claimed that law firm Mendelawitz Morton was undertaking legal work for Elmore.

Mark Mendelawitz is a principal of Mendelawitz Morton, and he is the brother of Elmore chief executive David Mendelawitz.

After Business News sent queries to David Mendelawitz, he confirmed that the investigation into the phase-three expansion was “primarily done by my brother’s law firm”.

He emphasised that the investigation was not personally carried out by his brother, and estimated using a different law firm to Mendelawitz Morton would cost Elmore “tenfold”.

“[Using a big law firm] would’ve pushed the company into a position of insolvency,” David Mendelawitz told Business News.

He stated that Francis and Burt Chambers’ representative Stephen Davies oversaw the investigation process.

“Not with a large amount of involvement though, because it [the investigation] hasn’t really needed it,” David Mendelawitz said.

He said contents of the investigation had been submitted to ASIC on July 4.

A spokesperson for ASIC said it did not wish to respond to enquiries by Business News to verify this claim.

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IndiOre (IOR)

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05/07/18
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