Sanjeev Gupta’s $100 million deal to invest in Havilah Resources is a huge opportunity, chairman says, while former boss Bob Johnson launches broadsides
Havilah Resources’ chairman Mark Stewart says the company shouldn’t let a deal with Sanjeev Gupta’s GFG Alliance slip away.
A $100 million deal with Sanjeev Gupta’s SIMEC Mining would “turbocharge” Havilah Resources’s iron ore and copper projects, and presents the best option for shareholders, Havilah chairman Mark Stewart says.
Mr Stewart and fellow independent director Martin Janes are recommending shareholders support the deal, which they will be asked to vote on, on September 12.
The deal has concerned some shareholders, because if all milestones are met by SIMEC, to fully fund two South Australian projects through to the definitive feasibility stage, SIMEC, part of the GFG Alliance, will end up with 51 per cent of the company, without launching a full takeover bid.
Major shareholder and director Chris Giles has not shown his hand on how he’ll vote his 19.22 per cent stake in the company, and controversial former executive chairman Bob Johnson is agitating to block the deal, and has set up a website arguing against it.
Dr Johnson is currently the subject of an Australian Federal Police Investigation, which has frozen his substantial assets across the globe and has been ongoing since late 2014.
No charges have been laid, and he is still able to vote his shares if he gets permission from the AFP.
But Mr Stewart says the deal is a great opportunity for Havilah shareholders, and makes the point that a competing deal, or alternative path to development of the assets, in SA’s east, has not arisen.
“Havilah has developed a portfolio of quality assets over the past 20 years,’’ Mr Stewart said.
“But the problem has been is that they’ve been unable to bring them to account for various reasons, and the reason for that is that I think the founding shareholders or the people who have been running Havilah have had a view of how valuable these assets might be, which didn’t necessarily equate to how the market was viewing them.
“For one reason or another these assets stayed in the company and weren’t taken forward and developed.
“In that regard this opportunity is transformational for Havilah because it will allow Havilah to do exactly that.’’
The transaction involves an initial $6 million investment, followed by $44 million dependent on reaching certain milestones.
Of that $50 million, $15 million will be used to progress the company’s Copper Aura project to DFS stage, and $33 million for the same process with the Iron Genesis asset.
A further $50 million would be split among $17 million for contingency, $8 million corporate and exploration and $25 million for the mine development of Copper Aura.
If fully invested, GFG would move to a 51 per cent stake in the company, however the board would retain a majority of independent directors.
The deal size dwarfs Havilah’s current $30.5 million market valuation, and GFG could arguably buy the entire company through a takeover for less than the deal is worth.
Mr Stewart said capital had been a key issue for the company, which was “why this is such a game-changer’’.
“In an environment where access to capital is challenging, this kind of funding can take these two projects through to completion of a definitive feasibility study in three years which is really, really fast.
“It’s like a turbocharging of these projects and of Havilah. And if that can be achieved Havilah will be in the position of having three substantial projects ready for development.
“I just can’t contemplate another scenario where that might happen.’’
Mr Stewart said as a director with an obligation to consider the best interests of all shareholders, the decision to support the deal was compelling.
Dr Johnson, who controls about 13 per cent of the company as calculated by The Advertiser, argues on his Save Havilah website that the deal “greatly undervalues Havilah” and will put a cap on its share price.
Mr Stewart said Dr Johnson had not proposed an alternative route to development and it was disappointing that he was criticising it rather than engaging closely with the company.
The independent expert’s report into the proposed transaction says it is “not fair but reasonable” and says “the position of the shareholders if the transaction is approved is more advantageous than the position if the transaction is not approved’’.
Havilah shares closed at 14c yesterday.