Short attack on Piedmont Lithium and Atlantic Lithium halts shares
Texas based short seller Blue Orca has levelled corruption claims against Atlantic Lithium and dubs Piedmont Lithium’s near term production hopes “a fantasy”.
Shares in Piedmont Lithium and Atlantic Lithium have been placed in trading halts following Texas-based activist investor Blue Orca launching incendiary claims that Atlantic promised millions of dollars to the son of a Ghanaian politician.
Blue Orca, which is run by a former director of fellow short seller Glaucus Investments, has released a 22 page report alleging that Atlantic obtained key mining leases in Ghana by “making secret payments and promises of payment to the immediate family of a high-level Ghana politician’’.
“Specifically, Atlantic paid and promised tens of millions of dollars in potential royalties to a company secretly owned by the son of a leading politician known as General Mosquito, who previously served in Ghana’s parliament as Chair of the Mines and Energy Committee,’’ the report says.
“In our opinion, evidence of Atlantic’s payments to the son of a high-level politician for mining licenses is textbook evidence of corruption.’’
Blue Orca says its is shorting Piedmont stock because without the promised spodumene ore supply from Atlantic’s mine, “any promise of near-term revenue from its much-hyped Tennessee facility are dead on arrival’’.
Blue Orca also says that freedom of information requests to the US Department of Energy suggested that the Ghanaian spodumene was central to the awarding of a $US141.7m grant to construct Piedmont’s Tennessee lithium production facility.
Piedmont’s annual report says that the payment of grant was still subject to “specific terms and conditions’’.
“Ultimately, the premise of Piedmont’s valuation is the company’s claim that it will soon leverage spodumene from Ghana to become a fully integrated lithium hydroxide producer,’’ Blue Orca says. “We think not.”
Blue Orca says Piedmont agreed to invest $US15.9m directly into Atlantic for a 9.9 per cent equity stake and another $US87m to invest in the Ghana project.
“In exchange, Piedmont received the right to a 50 per cent stake in the Ghana assets along with the right to 50 per cent spodumene offtake at market value for the life of the mine.
“Piedmont has made its interest in Atlantic’s Ghana mine, and its crucial Ghana offtake agreement, the centrepiece of its promise to deliver near term lithium hydroxide to EV battery producers,’’ Blue Orca says.
“After announcing the Ghana deal, Piedmont announced a new flagship hydroxide conversion facility in Tennessee, to be supplied from Ghana and funded in large part by government loans and a Department of Energy cost-sharing grant.’’
Blue Orca says even in the absence of the “corruption’’ issues, Piedmont’s timeline to produce lithium by 2025 was “unreasonably aggressive ... given that construction has not yet started in either Ghana or Tennessee and neither project has obtained any key permits.’’
The crux of the corruption allegations centres around Atlantic’s acquisition of a Ghanaian entity - Joy Transporters - which Blue Orca says was used to acquire the mineral rights and licenses on two of the four tenements on which Atlantic’s lithium project are situated.
“To acquire Joy Transporters, Atlantic paid the owners $US730,000 in stock and promised the sellers an additional 2.5 per cent production royalty potentially worth tens of millions of dollars,’’ Blue Orca alleges.
“Atlantic never directly disclosed the names of Joy Transporters’ principals, but our extensive due diligence of public information, databases and corporate records in Ghana indicates that Joy Transporters was owned by the son of a high-ranking politician: Johnson Asiedu Nketiah (aka General Mosquito), the national chairman of the National Democratic Congress, one of Ghana’s two main political parties.’’
Blue Orca says the evidence is “overwhelming’’ and is backed by Atlantic’s own documentation in a September 2022 prospectus.
“Buried in this report was a schedule identifying the principals of Joy Transporters and the sellers of the mineral rights and prospecting licenses to Atlantic,’’ Blue Orca says.
“The ‘Share Sale and Purchase Agreement dated March 11th, 2020,’ was between ‘Kwaku Asiedu-Nketiah, Albert Kwateng, IronRidge Resources Limited and Joy Transporters.’’’
“Kwaku Asiedu-Nketiah, the seller of the mineral rights and prospecting licenses listed in the share purchase agreement with Atlantic, is the son of Johnson Asiedu Nketiah (aka General Mosquito), the National Chairman of Ghana’s National Democratic Congress political party.
“On his LinkedIn, Kwaku states that he is the President of a holding company that owns Joy Transporters.’’
The Australian has verified through the documents listed with the ASX that Atlantic claims 100 per cent ownership of Joy Transporters, which in turn owns the tenements specified by Blue Orca.
The Blue Orca report says General Mosquito’s Wikipedia page lists Kwaku as one of his children and says photos of the two have been published in the media.
“We suspect that Atlantic made these payments to secure the mining permits because, at the time of the transaction, the father was not only a senior party functionary and former chairman of the Mines and Energy Committee of Ghana’s parliament, but a high-profile figure with particular influence within Ghana’s mining sector,’’ the report says.
Blue Orca also points to a publicly available press release from Atlantic in 2018, setting out the royalty return due to Joy, and says it estimates the net smelter return as having a value of more than $US40m.
Blue Orca further alleges that another part of Atlantic’s Ghanaian lithium portfolio was acquired through the purchase of a company called Barari, which held tenements adjacent to those owned by Joy.
“Barari appears to have been secretly owned by a high-level official,’’ the report says.
“Specifically, Atlantic’s Legal Report states that Barari is 10 per cent owned by Ben Nunoo Mensah.
“Our research shows that Ben Nunoo Mensah is the president of the executive board of the Ghana Olympic Committee. A former insurance executive, Mensah previously held various positions in Ghanaian sports organisations, which have historically been coveted government appointments.
Blue Orca says given the various issues which it has brought to light, and based on precedent in Ghana, there is a material risk that the government will reject Atlantic’s pending licence application to mine lithium.
On Piedmont, Blue Orca says that if it loses the spodumene supply from Ghana, “as we suspect it will, the Tennessee facility becomes a $US572 million lemonade stand without access to lemons’’.
“Piedmont cannot simply replace the Ghana spodumene offtake with a different spodumene producer’s offtake.
“It’s too late for that – there is no longer enough near term spodumene production available for offtake.’’
Blue Orca says in its report that it is “biased’’ and seeks to make money by pushing Piedmont shares lower.
“Just because we are biased does not mean that we are wrong,’’ it says.
“Our opinions are held in good faith, and we have based them upon publicly available evidence, which we set out in our research report to support our opinions.
“We are prepared to support everything we say, if necessary, in a court of law.’’
Piedmont shares last traded at 87.5c, valuing the company at $1.67bn, and well up on the 9c level it was trading at in late 2020.
Atlantic stock last changed hands at 65c, valuing that company at 65c.
Both companies placed their shares in a trading halt on Thursday “pending a response being prepared to an online report’’.