ASM and Woodall go separate waysManaging Director & CEO...

ASM and Woodall go separate ways

Managing Director & CEO Transition

Mr Ian Gandel, Chair of Australian Strategic Materials Limited today announced that Managing Director & Chief Executive Officer, Mr David Woodall, has advised the Board of his intention to step down from both roles, and would be leaving the Company immediately.

In accepting Mr Woodall’s decision, the Board thanked him for his contribution to ASM, particularly for laying the foundations for the Company to take advantage of the global demand for critical metals.

Mr Gandel also announced that Ms Rowena Smith, ASM’s Chief Operating Officer, has accepted the appointment of Chief Executive Officer.

Did ASM’s share price development perhaps play a role? We think so.

Who is ASM’s major shareholder?

Chairman of ASMand concurrently alsochairman of Alkane ResourcesisIan Gandel, who has a history with Alkane Resourcessince July 2006when he acquired 15% of Alkane’s shares and became a director, long before ASM was spun-off from gold miner Alkane Resources in 2020.

CurrentlyMr Gandel’s shareholding of Alkane Resources is 25.32%, according to aresearch noteof Edison, dating July 7, 2022.

Upon spin-off from Alkane and separate listing of ASM in July 2020, Mr Gandel became ASM’s largest shareholder by holding directly 23.1% of ASM shares:

Source: ASX pre-quotation disclosure of ASM on Jul 29, 2020

However, the companyChapelgreenmentioned above as (5) and (7) lists as directorsAaron (John) GandelandPauline Gandel,the parents of Ian Gandel.

Both are exceptional philanthropists from Melbourne with Australia’s highest civil honours bestowed on them. John Gandel is onAustralia’s top ten richest persons list.

We assume theGandel familyjointly controlledat least 25.89% of ASMupon listing.

In this regard, note this article of April 9, 2021:

Australian Strategic Materials gains strong endorsement of metals strategy by attracting two new substantial holders

FIL Limited and its related entities now hold a 5.82% stake whileChapelgreen Pty Ltdand its related entities hold a 5.66% stake.

Why a shareholding of just above 25% matters in Australia

According to the Australian Corporations Act there areSpecial Resolutionsregarding decisions deemed critical for a company’s business. Such resolutions require a majority of 75% of the votes. What a critical decision is, is usually defined in the shareholder agreement or in the company constitution, but in general includes:

• Modifying or adopting the company constitution;

• Changing the company’s name;

• Changing the company type;

• Changes to the company’s share structure;

• Decision on selective reduction of capital;

• Decision on buy-back of shares;

• Decision on a takeover offer;

• Decisions about the company’s future.

In other words, in terms of Australia, a shareholding of 25% plus one share can be understood as a “blocking minority.”

Losses

Year-to-date the Gandel family probably has endured non-realised losses of -70% equivalent to ca. -A$300 mio for the ASM shareholding:

Understandably Ian Gandel may well be a bit unhappy about it.

Expensive project

The Dubbo project has a really low TREO of ~0.74%. They call it a “polymetallic” deposit, i.e. it contains zirconium, hafnium, niobium, tantalum and rare earths. Its commercial success depends on all metals contained being profitably produced and sold, in the one or the other form.

There is no one-fits-all process for all the metals. Therefore the Dubbo project would require an investment of almost A$1.7 billion (~US$1.16 billion), according to “Dubbo Project Optimisation Delivers Strong Financials” of December 7, 2021.

The large investment amount seems to be somehow absent fromASM’s recent investor presentation,but we are sure Mrs. Smith will mend that.

Updated plan

In April ASM filed an updated plan for approval at the NSW Planing Portal which is now in the decision process. You can find the complete filing here:https://www.planningportal.nsw.gov.au/major-projects/projects/dubbo-project-formerly-known-dubbo-zirconia-mine

We wish Mrs Smith the best of luck. Perhaps she will be for ASM what Mrs Lacaze is at Lynas.