http://www.thewest.com.au/20040909/business/tw-business-home-sto1...

http://www.thewest.com.au/20040909/business/tw-business-home-sto129290.html

ASIC acts over Gwalia collapse, blocks Chemeq

MICHAEL WEIR


The Australian Securities & Investments Commission has finally come clean, publicly confirming for the first time yesterday that it is looking into biotech Chemeq and collapsed gold and tantalum miner Sons of Gwalia.

The corporate watchdog's surprise bout of openness came as it dealt Chemeq another setback by temporarily blocking the company's much-needed $20 million rights issue amid concerns over statements in its prospectus.

The interim stop order on the issue puts a cloud of doubt over Chemeq's plan to bank the cash by the end of this month with the aim of ramping up production at its Rockingham plant and locking in firm orders for its ground-breaking polymeric anti-microbial.

The regulator also said it was looking at other Chemeq issues, most likely related to the company's disclosure of its financial position in the lead-up to the issue.

The Chemeq news coincided with separate confirmation that the watchdog is probing the events leading up to last month's collapse of Sons of Gwalia.

"We are making inquiries," a spokeswoman said in reference to the crippled miner.

ASIC declined to detail its concerns over the Chemeq prospectus, but they are believed to relate to revenue forecasts and the company's comments about the market potential for its animal drug.

"Beyond the interim stop order we can now say on the record that we are making inquiries into Chemeq, (but) we can't say what the nature of those inquiries are,'' a spokeswoman said.

These presumably relate to the shock revelations of a big blow-out in construction costs for the Rockingham plant and the company's dwindling cash position, which was first detailed in private briefings with favoured investors before Chemeq's equity raising.

"Depending on the issues, we could confirm an investigation, but it's also possible that if we did commence a formal investigation then we wouldn't necessarily announce that anyway," the ASIC spokeswoman said.

Trading continued in Chemeq shares, but the stock fell 15¢ to $2.08 on news of the stop order.

Major shareholder and executive chairman Graham Melrose did not return calls from WestBusiness, but the company said in a market statement it disagreed with the ASIC move.

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Cheers,

Fig Jam