You won't be upsetting me, as I agree with the Incentive Reward package per sé, but I generally disagree with Short & Long Term Incentive Programs basically because of how easy tigger targets are achieved, this Incentive Award is no different as 2 of the 5 KPI's have already been met but a totally different set of circumstances.
Firstly though, for all those accusing Simon Hay of rewarding himself!!!!
The policy, procedure and protocols for Executive Remunerations (KMP's);
Renumeration and Nomination Committee, members being Baxter (Chairman) Borg & Crabb
https://www.leolithium.com/wp-content/uploads/LeoLithiumRemunerationAndNominationCommitteeCharter.pdf- It is the role of the Remuneration and Nomination Committee ("RNC") to make recommendations to the board for initial contracts and any alterations / amendments thereafter to current contract agreement/s between the Company and Executive/s.
- I will also make an assumption until confirmation (pending any reply, post sending an email to the Company) that as per previous years the RNC has engaged independent executive remuneration consultants, re;
- The Rewards Practice was previously contracted to provide services in;
- 2022 ($26,000) to review of the design of the employee incentive scheme and the development of documentation, and;
- 2023 $21,050) to review the Company's Non-Executive Director individual and committee fees, KMP remuneration benchmarking regarding incentive outcomes.
- https://www.therewardpractice.com.au/
- BDO was previously contracted to provide services in;
- 2022 ($19,000) to review the Company's Non-Executive Director remunerations framework and Executive Remuneration, and;
- 2023 ($2,300) for a subscription to BDO Rewards remuneration benchmarking report.
- https://www.bdo.com.au/en-au/services/advisory/consulting/remuneration-reward
The RNC will then make recommendations to the Board of Directors based of any guidance from consultants which would (
opinion) have included compensation for the cessation of conditional rights to securities (Performance Rights) because the conditions have become incapable of being satisfied after the
change of control event, which was essentially a financial loss of circa $184,000 (based in a calculated price of $0.4925 when granted)
https://announcements.asx.com.au/asxpdf/20240308/pdf/0619scl6brcjzc.pdfFurthermore, consideration (opinion) would have been given to;
- time spent in Mali above what would be normal in his contracted duties for site visits (project overview / progress), regular government engagement, continued community engagement, planning & progressing important community projects, socio-economic surveys and health needs studies for the region, etc.
- continuing in his contractual role of project development on schedule and on budget whilst concurrently negotiating with the Government of Mali towards a settlement for Leo Lithium and by default Firefinch Limited.
- The community engagement, consultation & projects are all part of the sustainability KPI's for Key Management Personnel, and also part of the new Local Content Laws as well as being vital for the updated Environment and Social Impact Assessment.
- Just for information, in 2023 the Company spent US$918,000 on community projects.
The current outcry at Simon Hay's "Incentive Reward" is understandable, I can only assume the anger is the timing coupled with the circumstances (sale of Goulamina & investment depreciation) versus the monetary amount? as shareholders have overwhelmingly voted in favour of previous Short & Long Term incentive packages for Hay and note those incentives were taken as equity in the Company versus being in 50% equity & 50% cash as per the STI award.
Hays remuneration; that shareholders agreed to the incentive components;
Meeting approved LTI award plan (2023 -2025) to issue Performance Rights 90.35% v 9.43%, STI (2023) 94.67% v 5.33%, STI (2022) 94.68% v 5.32%
2022
- Fixed = $627,976, Superannuation $24,430, Incentives (Options & Performance Rights) $759,910 = Total: $1,412,316
2023
- Fixed = $639,435, Superannuation $40,802, Incentives: Cash $25,052 (Options & Performance Rights) $1,241,357 = Total $1,946,646
* Hay elected to receive 100% of his Short Term Incentives as equity (excluding cash component)
* Hay has been issued 5 million options but these will no doubt expire under current circumstances (not being listed) and with a strike price of $0.644
* Remaining KMP's STI's were paid 50% cash & 50% equity.
Hay was only weeks away from reaching another Key Performance Indicator to his overall Corporate and Individual Scorecards, and had already achieved 60% on both scorecards which would have increased to 85% had there been loads of DSO leave the site.
- my calculations only, Hay was inline to receive his 2023 STI, this incentive award is circa $700,000 above what he would have received (happy for anyone to do calculations and make corrections)
- IS the payment of an extra $700k above what he would have been entitled to worth it for the extra time spent in Mali and all the additional activities (negotiations, meetings with Ganfeng & advisors, lawyers, etc) to get out of the grip of the Malian Government? and to get some capital back?
In a nut shell, shareholders were happy to reward Hay in 2022 with $759,910 in incentive bonuses, and again in 2023 with $1,241,357 but draw the line at the current $1,150,000 after he has continued to complete the contractual obligations in his agreement but also the added 12 months of negotiating with the Government of Mali in trying to reach a settlement outcome that benefitted the shareholders of Leo Lithium.
However, it is obvious to the Board (and should be to shareholders as well) that the importance of retaining Hay to continue under the service agreement with Ganfeng during the transition of ownership and up to receiving the first trance payment is critical.
When I spoke with Simon after the Company released the sale of a further 5% of the Goulamina project to JV Partner Ganfeng that was to cover any settlement with the Malian Government (and included the Company anticipated the settlement would be reached in the coming weeks) he was confident they were very close to settling. The mood of the room changed (obviously) and the swing coincided with (information I received) that the Morila mine management after not having any success with trying to negotiate with Firefinch Limited, reached out to Government for assistance (intervention).
Misdirecting your anger towards Hay when it should be directed at the Board of Firefinch Limited as somewhat being instigators in this whole debacle and/or the Remuneration and Nomination Committee members for making the recommendation and/or the Board of Leo Lithium for approving it would be more applicable, opinion.
Salary IncreaseIncreasing base salary from $639,435 to $738,318 ($98,883) equates to a 15.46% raise,
which is unreasonable given the economic climate;
- the Australian Wage Price Index (WPI) rising 4.2% YoY
- the Consumer Price Index (CPI) increasing 3.6% over the 12 months to March 2024 quarter.
Sale of remaining 40% of the Goulamina projectContrary to some commentators, the payments in 2 tranches was at the beckoning of Ganfeng and not the preferred option of Leo Lithium and it was a negotiated point, Ganfeng have large capex requirements on projects worldwide and are still required for solely fund the Goulamina project.
~ my napkin calculations have Ganfeng costs (including sale proceeds) @ US$1.4b and counting.
- also bear in mind that the "tranche 2" payment (in full) is to be received no later than 30 June 2025, there is no provisions or penalty for earlier payment
- once the tranche 1 payment is received, Ganfeng will be the owner along with the Government of Mali, Leo Lithium will be completely out and the tranche 2 US$171.2m is an interest bearing debt owed to Leo Lithium.
NegotiationsSimon Hay made it clear in conversations that the lead in negotiating with the Mali Government was handed to Ganfeng, who were happy to leave Leo negotiate, (and take this as you will) this was after the Leo Lithium team and the Government reached a impasse and needed something to break the deadlock.
Simon Hay knew what he was getting into, he would have been aware of the unstable political landscape and the history of the Country being throw into turmoil on the back of 3 coup e'tats since 2012. He would also been aware that regardless to political instability, the sitting governments, whether democratically appointed or military induced has always honoured that stable tax regimes, convention agreements, and mining codes under what was in force at the time of issuing a mining a licence and establishment agreements
- forcing the project onto the 2023 mining code after questioning the validity of the licence transfer was detrimental to the bulk of the metrics of the project decreasing the viability Leo Lithiums share to the obvious point of withdrawing.
- coupling that with the deterioration of the LLL/Government to being an acrimonious relationship.
@red-frog re: "210m LLL shares come out of escrow in time for a vote"
~ my understanding is there is no voting restrictions of these escrow shares.
cheers
(20min delay)