1/3 production daveyhurst sold for a song Daveyhurst produced...

1/3 production daveyhurst sold for a song Daveyhurst produced 1/3 of CRS gold, and sold for a song to MRS ;))

More to come?

www.theaustralian.com.au

MICHAEL WEST
Someone's out of step in the booty parade
MARGIN CALL
Michael West
March 25, 2006

LETTER to shareholders from AGL: "You will have noticed that Alinta has declared its intention to make a takeover offer for your company. Your directors strongly recommend that you take no action in relation to the Alinta offer - unless you like a good laugh." (Picture of board of directors laughing and slapping their legs).

Now that's how AGL should have responded to the cheeky assault from Alinta. After all, this tearaway from the West - geared to the hilt and offering paper - is trying to swallow a $9 billion gas and electricity leviathan, a company no less than three times its own size.

But what does AGL do? They take it seriously! They panic, make a counter-bid for Alinta and turn the whole show into a beauty parade.

Now we've got Alinta's Bobby Browning - who looks like he's stepped off the set of Melrose Place - up against Paul Anthony and Mark Johnston, CEO and chairman of AGL.

Browning argues that Alinta might be three times smaller than AGL but it has also done three times better for its shareholders over the past three years.

The question is: how have they done it?

Bob wasn't fielding questions on Thursday or Friday this week about this claim of $30 million in costs savings from the Duke acquisitions, a claim which goes to the heart of the "our management is better than yours" strategy.

But if the information memorandum from the Duke sale and the prospectus for AIH are any guide it seems that Alinta has been pretty cute on the accounting front - on the published information, that is.

Then there's the financial engineering, the transparency issue of a slather of minority holdings, the fees and the fact that while Alinta has been operating in a small and protected West Coast market AGL has been up against the likes of TXU, Integral Energy and Energy Australia.

Hedge of darkness

HISTORIC Central Norseman, Australia's oldest operating underground gold mine, has all but bit the dust, with its owner Croesus Mining the latest to succumb to its hedge books.

It follows Sons of Gwalia, Selwyn and Pasminco as victims of fancy derivatives concocted by the banks. Not that Croesus was cruising on the operational front. This is an ancient underground mine whose narrow stopes are mechanically mined. It might have been high-grade quartz but it was also high-cost and hard work.

Still, there was much ducking and weaving this week, much passing of the buck, and many a back-to-back meeting. Working backwards, Croesus chairman Michael Kiernan says the hedge book was not his fault. As he only turned up last year he probably got the hospital pass.

"You'll have to ask the previous directors about that," said a curt Kiernan. Then there's Gerry Anderson, the ex-Normandy hero who was last seen on the crystal white beaches of Geraldton. Can't be contacted. Michael Ivey was not up for a comment - he never liked the media anyway - and his offsider Graeme Smith was on a plane on the way back from the wilds of the West on a mission for Jabiru Metals.

Topping it off, Ronny Manners, who started Croesus around his kitchen table in Kalgoorlie, wasn't returning calls either. Surely it was easier to find gold at Norseman than a former director. Piecing things together, then, with the aid of hedge book guru Franky Sources, this is what appears to have happened.

Macquarie Bank kindly lent Croesus $15 million last June and took a charge over its assets. Croesus didn't appear to be hankering after cash, as it had $13 million in working capital. With the stock price around 36c and the market cap at $120 million, production was roughly 13,000 ounces a month, of which a third was coming from Daveyhurst. Daveyhurst was sold to Monarch, where Kiernan was a director, with normal board approvals from Croesus.

Why Croesus allowed Maccas to stump up the funding rather than fronting shareholders with a 1-for-10 rights issue, or even a 1-for-5 on the proviso there were bumps ahead, is anyone's guess.

Instead, Maccas got total security over Croesus for one-tenth of its market value.

In June 2005, Croesus had 60,000 call options (delivering the bank the right to buy gold at $613) and 128,750 forwards at $578. The calls were actionable over the next year - to be precise, actionable over the last six months of the year only (ie 10,000oz a month). Bad news if there was a disruption in supply. Both the timing and the prices of the hedges seem to defy logic but that didn't stop Croesus from taking out another 35,000-odd forward contracts after the June year end.

This month it all shuddered to a halt, for now, after Croesus went into suspension. It could only fill 7000 of the 10,000 ounces of gold into its hedge book. Hedged to the hilt it was, despite the raging gold price.

How did the board allow this to happen? How about the accountants? It is high time these hedge books were disclosed for full public scrutiny.

Cole mining

NOW that the nexus between trust and government is entirely, irreparably severed - with nary a point in the polls conceded - it is time to break into song.

We bring to you, dear readers, The Way We Were (the AWB mix) track on the Margin Call debut album I Can't Recall by the Cole Commission Quintet. Other tracks include some of Marge's greatest hits such as Jodee, Don't be a Hero, the Brady Bunch (Eisa mix), I Still Call the Caymans Home (with the Qantas Mangy Roo Singers).

THE WAY WE WERE

Memories, slip the corners of my mind
Misty, watercolour memories,
of the way we were
Scattered pictures of the bribes
we left behind
Bribes we gave to one another
From the way we were
Can it be that it was so simple then?
Or has Cole rewritten every line?
If we had the chance to make it all again,
Tell me could we, would we?
Memories, can be beautiful and yet
What's too painful to reme-ember
We simply choose to fo-orget
For it's the Department
PM&C, WEA and D-ee-ee-FAT,
Whenever we remember
The way we were