MARKET RELEASE 07 August 2013 Response to the Article in the Australian Financial Review (AFR) today on the CuDeco Buy-Back and Employee Share Scheme AFR Claim: The AFR claimed in their article that CuDeco Ltd expended $10m on acquiring shares under the Companies Employee Share Scheme. The AFR article claimed that the employee shares were purchased by the company only for executives. Response: The employee share scheme is a scheme approved by CuDeco Shareholders at the 2011 AGM for the company to purchase shares for employees of CuDeco. The company has purchased shares on behalf of the company’s employees under the employee share scheme. The scheme consists of a loan to the employee by CuDeco, which is re-paid in full, back to CuDeco upon the sale of any of those employee shares. Approximately fifty (50) CuDeco long term permanent employees are included as recipients of the employee share scheme. The employee share scheme is a form of compensation and incentive for employees to live and work in the harsh conditions of the outback. The company does not provide a camp facility on site nor does the company offer fly-in fly-out conditions. AFR Claim: The AFR claimed that the company had expended $10m buying shares under the scheme solely for Executives of CuDeco Ltd CuDeco Response: Again, the Directors believe this to be incorrect. The company purchased 800,000 shares for the executives and 2,800,000 (2.8m shares) for its employees, (from a total of 3.6m shares purchased) including, truck drivers, boiler makers, geologist, admin staff, diesel fitters, core cutters, field hands, excavator drivers, surveyors, mine supervisors, metallurgists gate guards and others. The shares were all purchased under the same conditions. ie: no shares can be sold until after the process plant reaches full production of copper. If employees or directors sell their shares after full production is achieved, the employees must repay in full all loans from the company used to acquire the shares. The $10m of shares were not purchased for executives as reported in the AFR today. The employee repays the loan for the difference between the selling price and the price of the shares issued to the employee. Page 2 of 3 AFR Claim: The article claims CuDeco Ltd spent $36.6m buying back shares and loss of $23m. CuDeco Response: Under the buy-back scheme, the company purchased 11,333,453 shares on market @ $3.25c per share for $37.592m. What the article in the AFR, failed to disclose was that the company wisely, replaced those shares during the 12 months period as the market improved, with a placement of 11,333,333 shares @ $3.97c (average) per share for $45m. The result was a gain of $8.052m. Not a loss of $23m for those transactions as reported by the AFR. The current share price is irrelevant to those transactions and is outside the fiscal year for the transactions. The AFR is also aware that the reason for the current share price drop is because of a major shareholder of CuDeco selling heavy quantities of shares in CuDeco on a daily basis at a rate of four to ten times our normal average daily turnover. The placement of the shares to replace the buy-back had no effect of the comparison with the buy-back and the expenditure on the project as the re-placement of the buy-back shares negated the comparison. The end result was that the company had an extra $8.052m to expend on the project that it didn’t have before. AFR Claim: The AFR article claimed “ CuDeco, which has never had a producing mine, faced criticism over the buy-back” CuDeco Response: CuDeco has had a producing mine, producing the world’s highest grade copper sulphate pentahydrate processed at its Mt Norma Mine and processing plant near Cloncurry. The mine was sold upon the acquisition of the Rocklands Project. Secondly, the company has never received a single criticism for the buy-back scheme, only congratulations for making a $8.052m gain. AFR Claim: In an email by the AFR to the company, prior to the article being printed, the AFR stated, “it appears that the Buyback and the employee share scheme appears to have been unwise”. CuDeco Response: On the contrary, it has been a great success with an $8.052m gain on the buy-back scheme, combined with full repayment of the monies loaned to the employees under the terms of the scheme. With the $8.052m gain on the buy-back, the company has only had to outlay approx. $2m on the $10.059m employee share scheme, a reduction of approx. $8m less than anticipated. The employees are grateful for the employee shares scheme. There has never been a single complaint from shareholders under either of these approved schemes. AFR Claim: CuDeco started buying shares for an executive share plan, which meant it does not have to report daily trading of its shares, or prices paid for the shares. CuDeco Response: CuDeco does not have an executive share plan and never has had an executive share plan. The statement by the AFR is totally false. Note: The company has been extremely conservative in its approach to both these schemes. Under the terms of the buy-back rules a company can purchase up to 10% of the company’s shares on issue. CuDeco has chosen to take up only 50% of that entitlement. Under the terms Page 3 of 3 of the employee share scheme the company is entitled to purchase up to 5% of the shares on issue and has chosen to only purchase to date approx 30% of the entitlement. The buy-back share scheme and the employee share scheme is used by Australian Listed Companies and is not unique to CuDeco. The only thing that is unique to CuDeco is that the company booked a gain instead of a loss on the re-placement of the shares bought under the buy-back scheme due to the timing of the placements. In the case of the employee share scheme, it is an incentive to attract employees to work in the outback and to bring their families to remote regional towns like Cloncurry, the hottest recorded temperature ever recorded in Australia. The continuous negativity and half-truth stories in articles are what is undermining the confidence of investors in Australia. Of the many of companies that have these schemes and much large buy-backs with hundreds of millions of dollars buying their stock back and CuDeco with only a $10m buy-back, why, is Cudeco having to carry the flag? CuDeco Ltd (ASX CDU)
CDU Price at posting:
$1.50 Sentiment: LT Buy Disclosure: Held
