Tangled web of companies behind Magnis Energy’s failures

Magnis Energy chairman Frank Poullas outside their office in Sydney. Picture: Britta Campion

• By DAVID ROSS

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• UPDATED 8:16PM NOVEMBER 19, 2023, FIRST PUBLISHED AT 8:00PM NOVEMBER 19, 2023
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It was all so different in late 2021 as Magnis Energy shareholders converged on one of Marrickville’s hottest Greek restaurants, gathering to celebrate the performance of their investments in the company, which had rocketed past a $500m valuation over the year.

The chair, Frank Poullas, had called them to the dinner to recognise a handful of the truest believers in the company, who had backed its dreams of building a world-leading battery factory, centred on cutting edge “fast-charging” technology, and plans to be a heavy-hitter in graphite thanks to its Tanzanian mine Nachu.

In pursuit of these dreams, the company had raised more than $100m from shareholders and borrowed even more. But as the year draws to a close, shareholders have been left to wonder why lenders are knocking on the door and why flagship projects have failed to turn a profit, as a tangled web of companies diverts resources and attention.

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The $78m market cap company is a far cry from the $500m milestone hit in mid-2021, which saw Poullas handed almost $320,000 worth of shares in a performance bonus.

Among the crowd were many in the Magnis orbit, including those who followed the chairman into other speculative mining small caps, some claiming to have done very well from the plays. Small caps Gladiator Minerals, Adavale Resources and Cassius Mining have all come under the shadow of Magnis. Some of these companies have seen hostile takeovers by Magnis-aligned figures, while others have come seeking assistance.

Some Magnis backers have even stepped up to run the companies as Poullas and his comrades seized control.

READ MORE: Magnis factory leaders depart | Magnis in danger of debt breach over US factory | Doubts over Magnis battery payday | Magnis returns to ASX after securing audit change | We’re solvent and negotiating funds, insists Magnis |

But few appreciated the success of these businesses may have come at the expense of Magnis, now staggering under the weight of debt and desperate for more cash.

Magnis now faces the loss of its flagship battery factory iM3NY, built in upstate New York, after breaching the terms on a $100m loan.

Atlas Credit Partners alleges iM3NY owes it almost $3.3m in payments, and suppliers a further $6.9m.

Magnis seized control of iM3NY in response to the troubles, tipping out its local leadership in favour of company veterans.

The lenders also claim the factory, which Magnis purchased from a failed battery operation in South Carolina, is failing to deliver, with more than half the machines not “performing to specification”.

Magnis Resources’ Nachu graphite project in Tanzania.

Despite years of work and millions poured into project Nachu, Magnis’s mine in Tanzania, no graphite has ever been sold.

Magnis has posted almost $114m in losses in just the past four years, with not a dollar of revenue from iM3NY or Nachu.

Despite this, some Magnis directors and key shareholders have done very well from the company, riding waves of market optimism to bank millions.

The company revealed in the last year it paid directors $1.6m, including $243,246 in breach of its constitution. In the past four years, Magnis has paid directors at least $4.7m.

In that time Magnis has seen directors come and go, with the company burning through 14 senior figures, including its latest chief executive David Taylor, who finishes his notice period on December 1.

Operating from offices on Sydney’s Castlereagh Street, Poullas has made optimistic forecasts of Magnis’s potential, telling shareholders “money will be flowing through the door” from iM3NY.

But many shareholders have been burned on Magnis’s wild ride after investing their life savings in the company.

At one stage the Australian Securities & Investments Commission was forced to intervene to warn a group of 400 or so traders to stop their campaign to “pump and dump” Magnis stock.

ASIC has previously investigated Poullas over allegations he shared market-sensitive information with shareholders.

A parliamentary committee has heard from a whistleblower that Poullas repeatedly shared sensitive information with shareholders, something the Magnis chair denies.

The Australian has previously revealed how AL Capital boss and major investor Wayne Mo scolded Poullas after he encouraged him to buy ahead of a proposed share placement.

This came as Magnis negotiated a $30m deal with China Light and Power in 2019, with Poullas telling Mo “AL Capital can increase their stake now on market at considerably lower prices to the placement”.

Several former Magnis figures report having been confronted by shareholders who claimed Poullas had told them announcements were pending and bought shares on the expectation of a price jump.

ASIC dropped its initial investigation into Poullas, which saw the regulator raid his Marrickville home, after finding that although he shared information, it amounted to attempts to promote buying Magnis shares or did not influence the market.

“To the extent that any information was later announced to the market, it did not appear to generate any significant market reaction,” ASIC said.

However, ASIC has confirmed it is again investigating Magnis over alleged false and misleading statements and breaches of continuous disclosure obligations.

Magnis director Peter Tsegas, left, with Hakan Arif.

Magnis has made repeated announcements to the market, including a litany of offtake deals, trials and company appointments, before quietly moving on.

The company has repeatedly pointed to deals with customers, set to deliver a windfall, but payments never arrived. As revealed in The Australian, iM3NY’s largest single customer, Sukh Energy, which has placed orders for $US243m ($373m) in batteries, is run by a part-time IT worker. Many of Sukh Energy’s claimed clients say they’ve never dealt with the business.

Poullas and Magnis director Peter Tsegas even engaged with Australian drug lord Hakan Arif, who was recently arrested in police raids in Turkey, as the company explored building a plant.

Poullas, Tsegas and other Magnis directors and shareholders are also linked to a number of corporate plays, including Optimal Mining, an ill-fated company set up to build a cobalt mine in the Democratic Republic of the Congo, which collapsed amid acrimony and missing millions.

Email correspondence concerning Optimal Mining shows Poullas was included in an email to directors concerning the appointment of an auditor to the company, despite him not being a director.

These Optimal Mining directors were later criticised by liquidators for failing to account for the company’s assets and the matter was reported to ASIC. No action was taken.

Now Poullas, Tsegas and several other Magnis figures including Rod Chittenden, who is part of the Nachu graphite mine project, and key shareholders Matthew Boysen and Tony Mazotta, have all joined in piling into several companies, including Gladiator Resources, Adavale Resources, and Cassius Mining.

Magnis has supported these investments, with audits identifying funds flowing from the business or resources and office space being handed over.

An internal Magnis audit, prepared by a former director and executive, identified resources previously being transferred to support Adavale, with Tanzanian staff being directed to work for this “new venture of Peter Tsegas and Frank Poullas”.

“MNS (Magnis) has paid the full fee for these staff members,” the audit claimed. However, Poullas claims Adavale “paid rent during that time”.

Magnis has also supported Tsegas, providing interest-free loans to his company Olympic Exploration Tanzania and funnelling cash to Tanzania for “personal expenses … such as rent, water, electricity, garbage collection, his partner’s gym membership, drinks, cigarettes” which were “submitted for reimbursement”, according to the audit.

In a tweet on social media platform X, formerly Twitter, Boysen claimed “key shareholders received their funds back and more!” from investments in Adavale and Cassius Mining.

Boysen said Adavale “was a Disallowed for me” and Cassius “has been a great investment so far doubling in value”. Poullas and his Magnis associates played a role in funding Cassius Mining after the gold miner locked horns in a $395m dispute in Ghana, after Chinese mining company Shaanxi Mining Company allegedly stole gold from their claim.

The potential for Cassius to deliver a payday enticed Poullas and his backers. Cassius boss James Arkoudis repeatedly met with Poullas and several others at the company’s Sydney office, who put up cash to fund the troubled mining stock’s legal woes.

Cassisus shares Magnis’s Tanzanian office for a “portion of the monthly rent”, according to Poullas.

The Magnis iM3NY plant in the US.

Arkoudis is also on the board of Gladiator, which Poullas and his backers also invested in.

Gladiator picked up uranium licences in Tanzania, which were previously held by Magnis, before they were spun off to a company called Uranium Africa, of which Tsegas, Poullas, Chittenden and major Magnis shareholder Tony Mazotta were directors.

But Poullas said 80 per cent of Gladiator’s flagship uranium projects were never owned by Magnis and those that were had been in the possession of “a local Tanzanian for over three years”.

Sources have told The Australian Poullas and Tsegas were instrumental to sealing the deal for the assets, which they had been looking to shift for some time, making an earlier overture to Adavale Resources to pick up the Tanzanian uranium tenements.

Gladiator has faced a choppy ride on the market since, with chair Ian Hoskins leaving the company after clashing with Boysen, who is now on the board.

“Just like any large shareholder of any company, Frank speaks to members of the board for updates,” Poullas said when asked about Gladiator.

Boysen has been a controversial figure in the Magnis orbit, with several former company figures reportedly clashing with the Melbourne-based furniture salesman, who has attempted to gain a seat on the Magnis board.

The move to appoint Julian Rockett as Magnis’s company secretary was seen internally as a move to placate Boysen, who had used the Sydney lawyer as his representative in a skirmish with directors.

Former Magnis figures said they had heated conversations with Boysen, with several leaving the company soon after.

Boysen has repeatedly contacted The Australian demanding “fair coverage” of Magnis and told his followers on X “Magnis will correct all lies and innuendo”.

But when questions were sent to Boysen he told followers on X he had been subjected to a “highly unprofessional and intimidatory email” and did not respond.