So this is a very interesting announcement.
I agree with the other commenter above, as I noted in my
most recent post on "Final Week to the Meeting", that the response from the Board has been unexpectedly invested and emotive.
Why?
This latest announcement has a big statement "vote now to protect your investment". That says to me that the Board believes that a change of Directors will lose our investment. That's a big call. It's also a big implication, on the facts that have otherwise been disclosed about the company's current position, to suggest the proposed Directors aren't capable of returning some cash and escrowed shares.
Why do the current Directors care so strongly? They're smart, capable, well connected, professional people. No one likes losing a gig, but these things (shareholder backlash and getting potentially pushed out) happen as part of the role. They'd have other opportunities ongoing and lined up. Why not the usual cool, calm, collected "water off a duck's back, we think you shouldn't do this but hey whatever" response you'd get from Directors? The same sort of response we've had before when far worse news has had to be delivered to shareholders.
In my recent post on "Final Week" I've also outlined why the remaining Directors don't generally have
huge financial stakes at risk relative to what they've already made, and in any case why, on the facts that have been shared, anyone should be able to return cash and shares to get them their remaining investment back. So I don't think it's personal financial stakes they're worried about. And why would it be: they're professionals who wouldn't let personal gain influence their conduct.
I've also outlined why I think reputationally there's as much at risk from looking so affected by this as calmly bowing out, and perhaps even more at risk from continuing in the seats.
So what is driving the Directors to this level - a level other long-term investors have noted they've not seen in comparable situations with Directors in other companies before?
Right now we are told:
(1) the remaining investment is some cash in the bank and escrowed shares,
(2) we are seeking nominal consideration for the remaining nil valued mining assets out of the goodness of wanting to make sure someone good takes on those permits, but we don't actually have to do this given we don't have liability.
With respect to the proposed Directors, anyone could return cash and escrowed shares.
- You don't really need ASX Director experience to turn up, hold some meetings, make sure you have the Company Secretary and legal eyes keeping everything above board, and return the Australian held assets
- You don't need mining industry experience: the Board has said our mining assets are only worth nominal consideration and don't carry liability, and we've otherwise ceased mining activity.
- You don't need experience conducting business in Africa for the same reason - the Board have written it off.
- And again for the same reason you don't need experience implementing material corporate transactions.
So if this was really about protecting out investment, it would mean that the Board believe implementing a material corporate transaction in Africa related to mining is critical to our investment being protected.
Or to put it another way, for the Board to believe protecting our investment requires keeping the existing Board in place due to having the experience in the dot points they've highlighted, they must presumably believe, contrary to the announcements, that our investment is currently at risk unless we can give away the mining subsidiaries, including one that's already been written off and we've apparently lost control of.
For that to be true, there would have to be either some way that this impacts the LLL holding (impacting the value of the escrowed shares), or some way that FFX is likely to be liable for something that would require handing over either cash or the escrowed shares unless the current Directors stay on and complete their goal of divesting away the subsidaries. But we've not had anything like that disclosed, and surely it would have to be.
And even then the passion seems far more invested than we've seen publicly previously. We didn't get this same emotive passion when weeks after announcing everything was fantastic we were advised that the Board had found out the mining operation was basically going to end up insolvent unless we could negotiate a bail out. Nor did we get it when those recapitalisation efforts failed, far more of the investment than is currently left was written off, and we apparently lost control of the entity we'd invested $200m+ in. If protecting the investment was the most important thing, the thing that's getting the Board worked up to inform recent emotive communications, surely that was the time to get worked up. But by and large they handled that fairly typically for Directors: calm statements of matters of fact, "here's where we've landed", and "here's what's next".
So if this is about protecting the investment first and foremost, it seems inconsistent with the facts that have been disclosed about the current risk to the investment, while the communication seems inconsistent with the history of what we have seen when the investment has been at greater risk and realised far greater loss.
But if it is not about protecting the investments, then what is it about protecting? What's so important that it's driving these unusual communications?
The only way I am able to make sense of the Board's recent statements is if there is key information that has not been shared. But surely the Board would disclose any such key information as they are presumably legally required to?
So how do we make sense of the atypically highly invested and emotive statements?
(20min delay)