Question and Answers between Ben Donovan and 'us', Company Secretary!
cam_cams - "why has there been a lack of transparency in general in informing the market about what NMDC are actually doing for LCY? from a market perspective, or perhaps just my perspective, at this junction i feel like we gave NMDC, 50% of the company for 19million which was well undervalued, what are we really getting it for it, both the company and LCY shareholders?"
ben - "During the process of formalising agreements with NMDC, both parties were bound by sensitivities at each end. What might have been perceived by the market as a lack of transparency, is actually, both NMDC and Legacy being bound by various aspects of the Share Subscription Agreement ("SSA") and from NMDC's perspective, strict guidelines that they had to have had to meet upon getting approval from the Indian Government.
The NDMC investment into Legacy is the first ever of its type by an Indian government company, and as such there has been a lot of work done by Legacy to ensure that there have been no hiccups in terms of leaked disclosure or reporting to the market which may have had the effect of terminating the agreement. The reason being that management know the benefits that NMDC can and will bring to the table.
If this has been perceived by the market as a lack of transperancy, then the only comment I can provide is that it has been in accordance with the need for confidentiality. As we move away from the SSA and the EGM, Legacy will be in a position to provide better updates and communications to the market.
In terms of what Legacy and shareholders get in return, the union with NMDC cannot be underestimated. Australian companies open their doors for NMDC in Australia, which Legacy could not get opened due to its size. You realise this, when you know that NMDC have been in discussions with Minemakers and Atlas on various projects as reported in the papers when Mr Rana Som visited Perth in 2011. Projects which require several billion dollars in funding.
Whilst shareholders are faced with dilution at present, the ongoing development of Mt Bevan for example will require up to $1.3bn to be invested. Would it be better for shareholders to be diluted by a group who can potentially debt finance a large portion of that expenditure an save ongoing dilution, or is it better to have ongoing dilution as Legacy tries to raise $1.3bn on its own through ongoing share placements?
NDMC are actively seeking projects to purchase and invest in as a means to secure end product for India and their growing population. And Australia has some of the best large scale projects in iron ore and coal. NMDC officilals have been recently quoted in various papers presenting their views on why Australia is one of the best locations to find and secure large scale resource projects."
cam_cams - "Does LCY Plan to in-specie distribution the 60% shareholding in Hawthorn back to shareholders?"
ben - "In regards to your question about the in-specie of shares, the agreement requires HAW to approve the proposed placement by Legacy.
Upon this occuring, Legacy will own 60% of the issued capital in Haw.
The board of Legacy will then determine whether it will in-specie those shares to its shareholders.
The asx listing rules have a specified timing/ structure on how any in-specie is to be undertaken, with a record date for entitlement to be at a time following the approval of the in-specie by legacy shareholdere at a meeting to consider a return of capital.
So the record date will be set after any such meeting and will provide shareholders with sufficient warning if they wish to increase their Legacy shareholding prior to the record date.
In addition, the corporations act 2001 only allows shareholders to participate in the in-specie, so option holders would need to convert their options prior to the record date to be entitled."
cam_cams - "In regards to the share price, what will generate support and how far off is this from happening?"
ben - "My hands are tied here a little ,in terms of discussing what there is in the pipeline. Needless to say that NMDC and Legacy are well aware of the share price and believe that the various projects which are in the process of being reviewed, will be of benefit to shareholders if completed. NMDC has $4-5bn in cash reserves and are actively seeking projects that can provide cash flow oppotunities in a short period of time. Such fundamentals and revenue generation will provide suport to the share price and allow for a re-valuation.
In addition, as noted in various announcements, an updated JORC resource is being calculated by Legacy on the Mt Bevan project, and is due to be released to the market shortly (end of January).
Since the EGM, the company has also had calls from various brokers who are aware of the benefits of having NDMC on the register and the ability of NMDC to purchase large projects that only a few companies in the world can attempt to buy. These brokers have had preliminary discussions with the company with a view to providing some support."
cam_cams - "NMDC claims to want to use LCY as its exclusive vehicle for Australian acquisitions, does that mean the current MAK phosphate or AGO ridley acquisition 'could' be structured through LCY?"
ben - "NMDC have publicly come out in the newspapers and expressed this view of their own accord, and this has further been communicated to the Legacy board by NMDC. I am limited as to what else I can say on these proposed acquisitions at the moment."
cam_cams - "Just curious, is the spingtree arrangement still neccesary since nmdc have joined?"
ben - "Again, this is an internal matter for the Legacy board to discuss."
cam_cams - "has LCY thought about giving new options to lcyo holders?"
ben - "Management is aware that whilst the LCYO options traded at a high of 7-8c at one point, there was a limited window where the shares were sufficiently in the money to make the options worth exercising. None more so than Ms Heng, who was the largest holder of the LCYO options. The company will advise the market when appropriate."
cam_cams - "Are discussions being made about any possible JORC Coal Acquisitions?"
ben - "NMDC have an appetite for large scale projects with coal being one of them. NMDC has recently entered into agreements to purchase a large coal project in Africa for circa $300m, and this provides a good indication of the scale and scope of project that NMDC is actively reviewing in Australia.
The board of Legacy is scheduled for a board meeting in the month of January, and many of these questions will be discussed at various points through out the meeting, and Legacy will be in a position to provide an update to shareholders now that a lot of the restrictions of the Share Subscription Agreement are resolved.
All the management of Legacy are shareholders in the company, and therefore have a vested interest in making this union work, as indicated by the fact there has been no selling by directors since the announcement of the deal with NMDC."
Ben If you do read HotCopper, keep up the good work mate :)
LCY Price at posting:
11.0¢ Sentiment: LT Buy Disclosure: Held
