19/08/2015 - 15:51

Spalvins, Fogarty attack Aditya

19/08/2015 - 15:51

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Famed 1980s deal maker John Spalvins and Perth investor Brettney Fogarty pushed today for major changes at embattled copper mine Aditya Birla Minerals, putting dozens of questions to directors and the auditor at a four-hour shareholder meeting.

Spalvins, Fogarty attack Aditya
John Spalvins flew into Perth for the meeting. Photo: Attila Csaszar

Famed 1980s deal maker John Spalvins and Perth investor Brettney Fogarty pushed today for major changes at embattled copper mine Aditya Birla Minerals, putting dozens of questions to directors and the auditor at a four-hour shareholder meeting.

They criticised both the operational performance and governance of Aditya, which is controlled by Indian company Hindalco Industries with a 51 per cent stake.

Dissident shareholders voted against all three resolutions at today’s annual meeting, with the company incurring a ‘first strike’ after 29.1 per cent of shares were voted against its remuneration report.

Similarly, about 27 per cent of shares were voted against the re-election of chairman Debu Bhattacharya and director Jagadish Chandra Laddha.

With Mr Fogarty holding a 7.9 per cent stake through 3rd Wave Capital (via related entity 3rd Wave Investors) and Mr Spalvins holding a 1.1 per cent stake through his company Galufo, they were clearly joined by many other investors in opposing the resolutions.

One of their concerns is the close relationship between Aditya and Hindalco.

Aditya chairman Mr Bhattacharya is also managing director of Hindalco, which has a life-of-mine off-take deal for all copper concentrate produced at Aditya’s Nifty mine in the Pilbara.

Adelaide-based Mr Spalvins, who was one of Australia’s most prominent deal makers in the 1980s, told the meeting that Aditya’s financial reports “are a long way from acceptable levels of transparency given the large amount of related party transactions”.

“Mr chairman, the way you are carrying on is like a private company, not like a public company in this county,” Mr Spalvins said.

He called for the appointment of an independent non-executive chairman and for at least three replacement directors to be elected by minority shareholders, with Hindalco abstaining.

Today’s meeting is not the first time Mr Spalvins has agitated for change.

In 2012 he proposed changes to Aditya’s constitution to provide for the appointment of ‘minority’ directors.

“The formal resolutions at the 2012 AGM were quashed by the 51 per cent vote of Hindalco and not helped by the so-called independent directors who also sided with Hindalco,” he told today's meeting.

Mr Spalvins said an alternative option was for Hindalco to make a takeover based on the company’s estimate of net assets in its March 2015 balance sheet.

Aditya’s net assets equate to 90.8 cents per share, whereas the company’s shares are trading at just 15.5 cents.

Mr Fogarty told Business News after the meeting that the large discount was one reason he started buying Aditya shares 18 months ago.

“There is a massive gap in the directors’ valuation of NTA and the share price,” Mr Fogarty said.

“We still think the long-term value of the copper business is extremely valuable and that’s why were involved, but we don’t want to see further deterioration.”

Aditya reported a net loss of $219 million for the year to 31 March 2015, with an underlying trading loss and large write-downs.

Its Nifty mine was closed for four months last year after a collapse, and has suffered more problems this year after a mine site fatality.

The company said it has been cutting costs at Nifty to try and improve returns at a time of weak copper prices.

It’s Mt Gordon mine in Queensland is on care and maintenance and the miner is continuing to work with ANZ Corporate Advisory on a possible sale.

Managing director Neela Patnaik said the company was continuing to evaluate strategic options, including the possibility of selling all of its operations, but its preference was to resolve the situation at Mt Gordon first.

He said the company would appoint a corporate adviser for Nifty and/or residual company assets once a final decision was taken on Mt Gordon.

Mr Fogarty said he was encouraged by changes at the company.

“We will continue to have our say and hopefully the company takes it on board,” he told Business News.

“Already what we’ve seen is vastly improved transparency in their accounts, EY (company auditor) has definitely sharpened its focus, and that’s a good thing.”

He said there was long-term value in the company’s assets.

“We are very positive on copper on a two to five years view…..and we’re very positive about resource assets in Australia because they are irreplaceable.

“They have an extreme value premium to second and third world assets and that’s why we’re here.

“It’s still a magnificent resource.”

Inside the meeting, Mr Fogarty in tandem with lawyer Martin Bennett repeatedly probed and challenged the directors and auditor, EY partner Gavin Buckingham.

On the operational front, he believes the production problems at Nifty were not unforeseen, as the company maintains.

“We think they accelerated production way too hard,” Mr Fogarty said.

The dissident shareholders all expressed scepticism about large asset write-downs in the 2015 accounts, arguing there should have been gradual write-downs over several years.

They also sought more information about Aditya's copper sales to its major shareholder.

Mr Patnaik told the meeting that copper sales to Hindalco were conducted on an arms-length basis at market prices, and that Aditya sought to maximise revenue from copper sales.

Prior to the meeting, Mr Fogarty submitted 88 written questions to Mr Buckingham and 53 questions to the directors.

That followed a situation last year, when questions submitted to the company one week before the AGM were misplaced.

Independent director Maurice Anghie, who chaired last year's meeting, said a receptionist had misplaced the letter.

The father-son relationship between Mr Anghie and EY's Perth managing partner Michael Anghie was one of the numerous matters raised in Mr Fogarty's written questions.

Mr Buckingham told the meeting he was satisfied that EY's independence was not compromised by this relationship.

Aditya Birla raised $300 million in an initial public offering in 2006 at $1.95 per share.

Its shares closed today at 15.5 cents.

 

 

 

 

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