From The Australian 11/10/16
There’s more to Syrah leadership puzzle than meets the eye
Bridget Carter
Mergers & Acquisitions Editor
Oh, to have been a fly on the wall.
Syrah Resources chairman Jim Askew and his former managing director, Tolga Kumova, apparently copped an absolute roasting at a lunch with a roomful of fund managers at Credit Suisse’s Sydney office yesterday, as the pair tried to unwind some of the damage caused by last week’s ham-fisted and clumsy leadership change.
One fund manager who attended the lunch said he’d never seen anything like the grilling the pair received.
“It was the biggest train crash I’ve ever seen,” he said.
Syrah last Wednesday announced that Mr Kumova would step down from the board effective immediately, just nine months after Mr Kumova signed a new employment agreement to almost triple his base salary to $450,000 a year. Mr Askew will take on executive responsibilities while the company searches for Mr Kumova’s successor.
Mr Kumova, a former stockbroker, had been instrumental in building Syrah into Australia’s largest graphite play on the back of its big Balama deposit in Mozambique and his sudden departure triggered a deep bout of panicked selling. The resulting bloodbath in the Syrah share price wiped an eye-watering $270 million off its market cap destroying almost a quarter of its value in just one day.
The lunch at Credit Suisse, which back in June helped Syrah raise $194m in fresh equity at $6.05 a share, significantly higher than the $3.35 low reached in the wake of last week’s announcement — was meant to shed more light on the reasons for the decision and reassure the investors about the direction of the company.
According to one person at the lunch, Mr Kumova explained that it was during an intense technical discussion about the mining works in progress at Balama at a recent board meeting in Mozambique that made him realise he was out of his depth.
But it doesn’t completely explain why, if it was that simple, he did not simply announce his intention to stand down and remain in the role while a successor was found.
It is also interesting to note the termination provisions from Mr Kumova’s new contract at the start of the year.
That agreement stipulates Mr Kumova is to provide six months’ notice, or that he be paid six-months salary in the event he is terminated on notice by Syrah. The company could also terminate Mr Kumova’s employment without notice for defined causes such as serious misconduct or wilful neglect.
Mr Kumova won’t receive any payout for leaving Syrah immediately. Instead, he will become a consultant to Syrah for at least 12 months, and will earn $225,000 a year for those services.
While Syrah shares have made something of a recovery in recent days, last trading at $3.70 apiece, there is still plenty of talk that there must be some a factor or factors behind the change.
Veteran stockpicker Warwick Grigor, who has long taken a somewhat sceptical view on Syrah, told clients at the weekend that Mr Kumova’s departure
left plenty of unanswered questions.
“While the ASX release was reasonably diplomatic it reads as if there was some frogmarching going on.
“ It wasn’t a planned event and it obviously occurred as a result of differences of opinion,” Mr Grigor says.
Mr Grigor believes there will be more to the story, which will eventually come to the surface.
“Getting the real story takes some digging but I am sure it is going to get more interesting,” he says.
(20min delay)