The game heats up. Don't expect great things for the SP this week. Look at it as short term pain for long term gain.
Philip Wen
April 18, 2011
SHAREHOLDERS have threatened legal action against the rare earths miner Lynas over the proposed sale of a polymetallic resource to Forge Resources which has raised conflict of interest concerns.
The Lynas executive chairman, Nicholas Curtis, a director and 15 per cent shareholder of Forge, stands to vest 24 million in Forge performance shares worth $30 million if the deal succeeds.
In a letter to Lynas obtained by BusinessDay, the law firm Turner Freeman, acting for shareholders Surpion Pty Ltd, Aliana Pty Ltd and Daleford Way Pty Ltd, claimed that information made available to Lynas shareholders, including an explanatory memorandum and a notice of an extraordinary general meeting had been misleading.
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It also did not adequately convey the ''extraordinary'' financial benefit Mr Curtis stood to gain when an ordinary shareholder ''scans or reads the document quickly'', the letter stated, raising concern over the valuation of the deal by independent consultants Grant Samuel.
''Our clients are very concerned about the proposal and are of the considered opinion that it is not in the best interests of Lynas shareholders,'' the letter said.
The transaction's explanatory memorandum sent to shareholders discloses on page four that ''it is arguable that Forge is a related party of Lynas because they share a director in Mr Nicholas Curtis'' and that he owns a ''significant number'' of performance shares in Forge.
The Grant Samuel report judged the deal to be ''fair and reasonable'' but noted the proposal ''must be
carefully scrutinised'' because of Mr Curtis's personal gain. It also said the ''only way to reliably determine the market value of the sublease deposits would be through an open sale process'', which did not occur.
A director of Forge, Emmanuel Correia, told BusinessDay all corporate governance requirements had been undertaken ''over and above what the book requires''.
''I've got full confidence in the governance process and ultimately the shareholders will have an opportunity to vote one way or another, both from a Forge and Lynas perspective,'' Mr Correia said.
Mr Correia said the performance shares were issued to Mr Curtis before Forge listed on the stock exchange in September 2009 as an incentive for him to bring a successful resource project to Forge, when the shares were worth much less.
He said there was no discussion of the Crown resource as a viable option until much later.
''Definitely not,'' Mr Correia said. ''It was many months afterwards.''
Mr Curtis's performance shares will vest on the condition that Forge obtains a JORC-approved resource that is able to support a capital raising of $15 million at no less than 35? a share. Forge shares last traded at $1.15.
The sale of the Crown polymetallic and heavy rare earths resource is worth $20.7 million - less than 1 per cent of the market capitalisation of Lynas, which has seen its share price rise in line with surging demand for rare earth minerals used in mobile phones and laptops.
But concern over the deal has mounted since it was announced last month, with momentum for a vote against it gathering on online share forums.
As one shareholder put it: ''We wish Lynas no harm - we just want a fair deal for the owners of the company. The board, including the chairman [Mr Curtis], needs to be aware and listen to the shareholders.''
Mr Curtis could not be reached for comment yesterday.
Read more:
http://www.smh.com.au/business/shar...-lynas-sale-20110417-1djr3.html#ixzz1JobaNGaA