director trading, page-5

Seams gain was a lucky strikeFULL DISCLOSURE / MARK HAWTHORNE
June 18, 2009
REGULATORS and market supervisors will probably want to take a peek at the Appendix 3Y notice from listed mining explorer Proto Resources & Investments issued to the Australian Securities Exchange at 7.05pm on Tuesday.

That evening the chairman and long-time promoter of Proto Resources, Sydney-based Andrew Mortimer, released the 3Y "directors' interest" statement to the exchange — a document that must be lodged whenever directors trade shares in their own company.

It's not uncommon for such forms to be released a tad late — in the evening, well after brokers and investors have headed home for the day — if they contain information that might raise a few eyebrows.

And raise a few eyebrows the Proto release certainly did.

After being placed in a market halt pending the announcement of news, Proto's share price soared almost 450 per cent on Monday after it was revealed the company had made a discovery in the Northern Territory that could lead to the development of some major mines. According to the geologists' report, drill results suggested something called a "gabbro mafic intrusion" that could potentially contain copper, nickel, platinum, cobalt, palladium and gold.

A similar "gabbro mafic intrusion" exists in Russia and contributes 2 per cent of its gross domestic product.

At the news conference Mortimer was ebullient. The find was "enormously significant", he said, and the company could build a "a very large low to medium-grade mine". The mine could "employ at least 400 people" and — if a Russian-type find was confirmed, "then it could employ over 10, 20, 30,000 people".

For the record, BHP Billiton and Rio Tinto employ about 20,000 people combined in the Pilbara region of WA — the backbone of the Australian economy.

Mortimer's employment claim was seized on by wire service Australian Associated Press on Monday and then repeated by many of the nation's major media outlets. Given a touch of credence after being reported by such respected news sources as the ABC, Proto's share price rocketed 15.5¢, or 442.86 per cent, to 19¢ on Monday.

For those who bought in before the announcement, it was a windfall. It just so happens that Mortimer was one of those people. On June 3 this year, before the trading halt, Mortimer bought 200,000 shares on-market at 3.4¢ each.

Then, at 7.05pm on Tuesday, came his Appendix 3Y.

On Monday, at the very peak of trading hysteria in Proto, Mortimer made his first sales of Proto shares. The sales included a parcel of 200,000 shares sold for 19¢ each, and a further 600,000 shares sold for 16.5¢ each.

Before that news conference and the release of the drill results, selling 800,000 Proto shares would have reaped the chairman $28,000. Instead, Mortimer pocketed $137,000 for them. Not a bad day's work.

Proto's share price has since slipped back to 12.5¢.

When asked about his trades in Proto stock, Mortimer strongly denied that he had done anything wrong.

"I only sold shares to take up a rights issue," he said. "I am a long-time holder of the stock and will be putting the money back into the company. I've bought shares for more than 70¢ in the past."

When Full Disclosure pointed out that he needed to sell far fewer shares to take up that $90,000 rights issue as a result of the share spike, Mortimer said he had "done nothing wrong".

Asked if he had any regrets about the jobs claims he made at Monday's news conference, Mortimer replied "no". He also said the media had "ignored several caveats" he had put on the 30,000 jobs claim about it being "direct and indirect employment, and not just by Proto".

Yes, of course, it's all the media's fault.

It might take a little digging to find out what really happened with the share sale — Proto has lodged three different versions of the Appendix 3Y.