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Not fair

Saturday, 12th October, 2019

By Callum Marshall

The co-founder of mining company Havilah Resources has laid out his reasons for why he voted against a proposed $100m investment into the company, a day after Havilah’s two independent non-executive directors resigned.

The investment - which would’ve seen GFG Alliance’s subsidiary SIMEC Mining potentially contribute $100m over a staged, three-year process towards Havilah’s copper and iron ore assets in the region - was voted down at a meeting of shareholders last month.

Co-founder Dr Chris Giles directed his shares against the vote, with his final voting intentions surprising the non-executive independent directors who’d been relying on his earlier support in helping push forward with the deal.

However, speaking to the BDT this week, Dr Giles said he’d only supported the deal in concept and that the findings of an independent expert’s report into it had highlighted that the deal was not fair to shareholders.

“I only supported it in the concept that it was a good idea for Havilah to be associated with SIMEC Mining at Whyalla to assist in the development of our iron ore projects,” said Dr Giles.

“But, it was always subject to the caveat that the deal or the transaction had to be fair for our shareholders, so it had to be fair deal in other words. 

“And then we subsequently got an independent expert’s report, and also I did some of my own research, and it was clear that the proposal wasn’t fair for our shareholders and so on the basis of that I did not recommend the transaction to our shareholders.

“And then ultimately I voted against it for that reason.”

However, in a letter sent to shareholders by then-Chairman Mark Stewart before the transaction’s vote, he also used findings within the independent expert’s report to justify the transaction going ahead.

“The independent expert has concluded in its report that ‘in the absence of a superior offer and any other relevant information, the transaction is not fair but reasonable to the shareholders of Havilah.’

“In the independent expert’s opinion: ‘the position of shareholders if the transaction is approved is more advantageous than the position if the transaction is not approved.’”

When this was put to Dr Giles, he said the terminology of an ‘absence of a superior offer’ was crucial, and that there were other deals the company could pursue, including one with their Kalkaroo asset.

“The key word quoted is, ‘in the absence of any other offers or alternatives,’” he said.

“That’s the only reason it was reasonable was because there were no other alternatives on the table and the other directors hadn’t actually gone out and canvassed and looked for other opportunity.

“And because the transaction was not fair I felt that it should be possible to actually find better arrangements, which allowed Havilah to continue on with its work and to value add and to make it’s own discoveries.

“And that in fact, in my opinion, there was a very plausible alternative. And therefore, on that basis, that ‘reasonable’ reason fell away.”

In August, then-Chairman Mark Stewart and CEO Walter Richards argued that the SIMEC transaction was a “once in a lifetime opportunity” for Havilah and could’ve potentially brought up to 3000 local construction jobs and 600 post-construction jobs to Broken Hill, amongst other benefits. 

However, that “once-in-a-lifetime opportunity” comment was disputed by Dr Giles.

“Well, honestly, that’s just an opinion, that’s not fact,” he said. 

“The key point was that the money that SIMEC were going to put in was conditional on Havilah reaching certain milestones and it being decided that the financial hurdles were being met.

“And if they weren’t, well then SIMEC had the opportunity to not contribute any further.

“So there was absolutely no guarantee in this deal that the whole 50-odd million dollars (initial outlay) was going to be put in, it could’ve been stopped at any time. 

“To say that it was a ‘once-in-a-lifetime’ (deal), it may have been but who’s to know? 

“And I consider that there are plenty of other once-in-a-lifetime opportunities in Havilah, and that’s if we could do a deal on Kalkaroo or we could make another major discovery.”

The fallout from the vote has also seen Mr Stewart, and the company’s other non-executive director Martin Janes, resign from Havilah.

The two were set to face a company vote on November 12 on whether they should remain in their roles after company co-founder Dr Bob Johnson, and his associates, put in a requisition notice seeking their removal.

Dr Johnson had also sought Mr Stewart’s removal earlier this year, but shareholders voted to keep Mr Stewart in the role when his position was put to a vote, with Dr Giles publically backing Mr Stewart during that vote.

After their resignation on Wednesday though, Mr Stewart and Mr Janes released a statement saying that the vote against the SIMEC transaction was not in the best interests of all shareholders.

“The rejection of the potentially transformational investment by GFG was largely due to the decision of our fellow director and major shareholder, Dr Chris Giles not to support this investment,” they said.

“This was despite his earlier publicly stated support of the transaction.

“We are deeply disappointed by this outcome and are of the opinion that the intended reversion to Havilah’s prior business model is not in the best interests of all shareholders and as such we are not prepared to support that approach or to continue to remain on the board of Havilah. 

“Given this situation and our lack of confidence in the future management of the Company, we can see no alternative but to step down and to let Dr Giles and Dr (Bob) Johnson, as the dominant shareholder block, determine the future of Havilah.”

Victor Previn and Simon Gray will now occupy the non-executive director roles within the company.

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