Hopes for peace and iron ore prosperity after Carpentaria battle
The Brisbane junior has a new chairman and big ambitions for its iron ore mine.
An acrimonious battle for control of the Carpentaria Resources board has led to the installation of a new chairman who is committed to progressing what the company says is one of the world’s best undeveloped iron ore projects.
The Brisbane-based junior iron ore developer, with a market cap of just $14m, has big plans, releasing a prefeasibility study for its Hawsons iron ore project in NSW, 60km from Broken Hill, back in 2017.
The company is envisaging a 10-million-tonne-a-year iron ore concentrate and pellet feed operation, exporting its so-called “Supergrade” product through Port Pirie in South Australia for an initial 20 years.
As with most iron ore projects, the upfront capital costs, at $US1.4bn, are large, and while investors such as Japan’s Mitsui have been attached in the past, Carpentaria is yet to deliver a bankable feasibility study on Hawsons.
Carpentaria told the ASX on December 23 that Mitsui, which had committed, with conditions, $5.4m to a BFS process and had an option to contribute $US60m in debt funding to the construction process, in return for a 2Mtpa offtake agreement, had reserved its right to halt that process while the company’s board ructions continued.
Indeed, 2020 has been a turbulent year for the board.
In late April, John Anderson retired from the board for personal reasons after being appointed as non-executive chairman in November 2019.
His exit led to Jon Parker being appointed as interim chairman.
In early May, Peter Graham joined the board as a non-executive director and Mr Parker left.
Mr Graham, who the company said had significant experience and knowledge in the finance industry, including as a research analyst and corporate adviser, took over the role of chair on May 12. Mr Graham is also non-executive chairman of TZ Limited.
In the company’s annual report filed in August, Carpentaria said it was looking at “non-dilutive funding” to progress the BFS and had been talking to “a number of parties’’.
“The company remains confident the project can attract strategic investment to unlock value for shareholders, additional to Mitsui’s commitment,’’ the company said.
The company also this year moved to take back a larger stake of the Hawsons project, with shareholders voting at the November 2 AGM to grant Pure Metals, which owned 24.1 per cent of the project, more than 90 million shares, in return for Carpentaria moving to a 93.9 per cent stake.
Pure Metals’ Linda Lau would also be granted a board seat as part of the transaction, subject to shareholder approval.
That deal was voted in. However, director Paul Cholakos just scraped in for re-election as a director at the AGM with the help of discretionary votes which brought him to 57.7 per cent for, 42.3 per cent against.
Mr Graham’s address to the meeting, lodged with the ASX, was unexceptional, but the board ructions began, at least in public, just eight days later, on November 10.
A shareholder notice, lodged by SGH Emerging Companies Fund, Technical Investing and Exelmont — entities later revealed to be supportive of Mr Graham — called for a meeting to vote on removing Mr Cholakos from the board.
A second shareholder notice was lodged on November 23, by shareholders Adam and Nicolas Wheatley, asking that a meeting be held to consider voting out Mr Graham as chairman and appointing Bryan Granzien as a director.
Bob Hair, a shareholder and also the company secretary, wrote in a follow-up letter to the ASX that Mr Graham had a “central role creating board instability”, a “lack of a coherent plan” and was trying to remove the company’s only independent director in Mr Cholakos.
“He has sought to terminate the contracts of the managing director and the company secretary and likely will again,’’ the letter says.
The letter says Mr Graham worked with Ms Lau, of Pure Metals, to put together that deal, and “Mr Graham is seeking to remove the only independent director, and if successful, Mr Graham and Ms Lau would gain control of the board and significant levels of control of your company’’.
John Lynch, of Exelmont, fired back with a letter saying he was concerned about the company’s management, with costs, capital raisings, and performance all flagging the need for change.
He backed Mr Graham as the right person to lead this charge.
Mr Cholakos put his case in a letter dated December 16, saying Mr Graham’s tenure as chair had “resulted in a period of instability and division’’, and he was “seemingly incapable of progressing Hawsons in a timely way’’.
He said Mr Graham was “a close associate of Pure Metals” and “is proposing a board controlled by Pure Metals and himself’’.
Managing director Quentin Hill echoed this sentiment in his own statement, saying during Mr Graham’s tenure “the board has been dysfunctional and not operating as it should’’.
“Mr Graham has shown little interest in collaborative decision-making, little interest in engaging in my plan to move the project forward, and has not put forward his own plan,’’ Mr Hill writes.
“His agenda is not clear.
“He criticises performance, yet has run interference that torpedoed a mature, carefully constructed offtake deal that shareholders were waiting for and would have propelled the company forward.’’
Mr Hill said in the letter he would rather quit than continue with Mr Graham as chair.
Mr Graham’s own letter, lodged on December 21, says he was not trying to destabilise anything, but the project was “well and truly stalled’’.
He said the management team was “blindly focused” on funding a BFS, but after seven years, “they have not been able to raise the finance’’.
“The Hawsons project and hence Carpentaria Resources, was stalled and the current business plan was bleeding funds raised from shareholders,’’ he wrote.
“If the incumbent management remains, then I expect the trend of recent years to continue.
“If the recent share price rally subsides, and no development of any significance in the next 18 months — what share price for the next capital raise? One cent?’’
Mr Graham said the board did not receive the message well that a new management team was necessary, hence the ensuing state of affairs.
In the end, the tilt which started with investors who backed Mr Graham’s message, and aimed for the removal of Mr Cholakos, lost the day. This week, a day before the extraordinary general meeting to vote on who should remain on the board, Mr Graham resigned.
He would have been voted out at the meeting on December 30, where there was a 64.6 per cent vote of shares in favour of his removal.
Mr Cholakos retained his seat, with 63 per cent voting against him being spilled, and Mr Granzien was elected, and became none-executive chair, with a 65.1 per cent vote in favour.
“It is now the board and management’s clear task to use this strong mandate to refocus on working as a cohesive management and board, to realise the value promised by the world-class Hawsons project,’’ he said in a statement to the ASX on December 30.
“We also acknowledge the clear message that all stakeholders expect the board to get down to business and move the company forward as soon as possible. Fundamental to our activities going forward will be a comprehensive review of strategy and plans in mid-January 2021 to ensure optimum outcomes are achieved.’’
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