Wayne McCrae, the maverick executive chairman of Queensland copper developer Cudeco, has never been one for sticking to convention. But he has reached a new pinnacle in asking the Australian Securities and Investments Commission to exempt his company from being targeted by short sellers.
ASIC imposed a blanket ban on short selling during the global financial crisis to ensure the fair and orderly operation of the sharemarket. But never before has it been asked to exempt a specific stock.
In a letter to shareholders on Friday, McCrae revealed he had made the request, ostensibly designed to arrest the steep decline in Cudeco’s share price since mid-May.
“The relentless selling and short selling of shares by a group of hedge funds and our largest shareholders is allowable without interference from the regulators,” he writes in the letter.
“The company has an independent analytical report indicating blatant manipulation by four funds and this has been handed to ASIC for investigation.”
“I, as chairman, can only apologise for the conduct of these company’s [sic] and the fact that they are allowed to operate in this way.”
McCrae believes no company has made the request of ASIC before because few people know that legislation exists to allow it. He expects others to follow once they are aware. ASIC representatives weren’t available to confirm this.
According to McCrae, one of the reasons for selling down, provided by a shareholder who had participated in a recent $4 a share placement, was that Cudeco extended the date for the start of production from its Rocklands copper project, near Cloncurry. The original date for first production from Rocklands, which is expected to cost $300 million to build, was October or November this year. But McCrae says he pushed it back because he was unhappy with the quotes he had received from contractors. For that, he makes no apologies.
“When quotes by contractors are required and tenders put out by mining companies, it appears to be an opportunity for a LOTTERY WIN [McCrae’s emphasis],” he writes in the letter. “Unfortunately, for these service providers, Cudeco is a micro-managed company and we are not going to pay these exorbitant and ridiculous quotes that they appear to have been getting from other projects.”
The plaintive tone of McCrae’s letter did little to help Cudeco on Friday: the stock closed down 23¢ to $2.03, half its level from its peak in May.
It is now a long way from its 52-week high of about $4.50, at which point it was capitalised at about $900?million. The fact that it stayed so high without any analysts covering it was a mystery in itself.
CDU Price at posting:
$2.00 Sentiment: Sell Disclosure: Not Held
