A bit has transpired in the last week or so, however for those that have not had the chance to read this here it is.
11 November 2013
«ADDRESS_INTRO» «PO_Box» «Suburb»
RE: Moreton Resources Limited
Dear «LETTER_INTRO»,
As you will be aware by now, an EGM has been called for the 13th of December 2013, to deal with matters relating to resolution about the incumbent board and their suitability to remain as Directors of Moreton Resources Limited. You will also be aware that upon distribution of the EGM material the Directors chose to ignore their obligations under the Corporations Legislation and have failed to send out the shareholders statement to inform you, of what this is all about. Your first question should be, if there is nothing to be concerned about or nothing to hide, then why did they not send this information out, as they are legally obliged to do? That being said, please find enclosed a copy of that shareholder statement and the Bio’s of the proposed board members that are seeking to sort this disastrous period of leadership out, and more importantly to steer the company into a safe and secure 2014, that will protect shareholder value.
Do not wait until the 13th of December 2013, make your vote count now at the AGM:
Vote NO to the re-election of the current directors in resolutions 4 – 5 -6
Vote NO to the inferior funding deal in resolutions 2 -3
There has been a lot of things going on in the background; the 249D notice that seeks to hold the board to account for their poor performance; a Takeovers Panel application that seeks to outline the clear association and conflict between certain Directors and the funding party, as to it seeks to remove the ridiculous and onerous funding terms, that are detrimental to shareholders.
In regard to ‘is there alternate funding available’ to which the incumbent board makes reference in their current emails and phone calls to shareholders; here are a few of the facts as stated by the Andrew Matheson (Chairman) and Andrew Purcell Director.
- The Chairman states he got a draft terms sheet for this funding on the 27th of August 2013. Now that is an important date as the 10 day rolling average of share price was 0.0034 and the board apparently on the 19th of September signed a deal at 0.001. Now that is a 70% discount to the rolling 10 day average
- That the other offers (That’s right, multiple options for them to consider in August) were disregarded because they could not control them being flooded back onto the market and were unsure about who the ultimate investors would be. However these offers as stated by the Chairman were around 0.003, that is 300% better than the deal signed by the board on the 19th of Sept 2013 and released to the ASX on the 25th of Sept 2013.
- That as part of the funding discussion, “Who runs the company as MD is clearly in that mix along with other conditions”. Going as far as to outline that the “Investor” would not seek a board seat, provided Andrew Purcell was moved into MD, to protect the new investors holdings, which at the time were proposed to be 41%.
- As at the 25th of September, they still had not formally sort to claim a cash bond potentially worth over 1 million dollars which the Chairman talked about in late July early August and as outlined by Andrew Purcell on the 18th of October 2013, despite having a letter quantifying the amount payable, the company still had not formally applied.
So in regard to funding deficiencies of the alternate board, does the alternate board intend to seek funding that will give an unknown investor a 70% discount on trading average, NO; does the alternate board intend to seek a highly dilutive deal with an unknown party without even having tried to seek the return of a substantial cash bond, NO; and, does the alternate board intend to do a deal without considering current investors and the normal funding options the company has sort previously, NO; and does the incumbent board intend to seek funds that may not even be required by the company at this point, NO.
What the current board has failed to inform shareholders is, there are considerable parties whom have expressed interest in funding the company provided there is an alternate board; that the company has failed to produce a forecasted cash flow and cash at bank, as at the 28th of November for the alternate board, as requested and agreed by Andrew Purcell on the 18th of October 2013; and the current board has failed to indicate they have at least one direct offer made on the 23rd of October 2013, that would have put a loan facility in place on far superior terms to “Twinkle Woods” provided certain documents are released by the company, to which the Chairman saw fit to ignore, until the 6th of November 2013. That is two weeks later and coincidently is the day before they send out the EGM notice stating the alternate board has no funding secured.
Enough of the games, and enough of deals that seek to promote personal interest around negotiated positions and outcomes with a “unkown party”.
I seek your support to remove this board, to cease the current funding proposal and to bring value back to Moreton Resources as a priority. Regards
Alexander JASON ELKS
(Please find enclosed the 249P notice issued to the company on the 15th of October 2013, a Corporations Legislative complaint version was supplied to the company on the 30th of October however they sort fit, not to comply with the Corporations Legislation and issue to shareholders)
15th October, 2013 Dear Fellow Shareholders,
I, Alexander Jason Elks (the Requisitioning Shareholder) have requested a general meeting (GM) of Moreton Resources Limited (MRV and the Company) shareholders be called to consider resolutions to remove the current board and appoint a skilled and competent alternative board.
With significant decrease in shareholder value and an onerous and questionable funding deal struck with Twinkle Woods Limited (the Inferior Funding Deal), which was announced on 25 September 2013 and is yet to be approved by the shareholders of MRV, your support is being sought to:
1. reject the Inferior Funding Deal; and 2. remove and replace the current board.
The Compelling Case for a Change of MRV Board After seven months the incumbent MRV board still struggle to generate change, positive sentiment or shareholder value. Detailed below is a summary of critical issues and the board’s poor performance.
• 80% decrease in market value - Since March 2013, the MRV share price has dropped from 0.5 cents to a current offer price of 0.1 of a cent in the proposed Inferior Funding Deal. That is an 80% decrease of market value.
• 66% drop in seven weeks of share value - In August 2013, a capital raising was undertaken with existing and new shareholders at a price of 0.3 cents per share, representing a 21% discount against the 1-Month VWAP of the Company (Capital Raising). The proposed Inferior Funding Deal now effectively values shares of the Company at 0.1 of a cent. This decrease in share value is a fall of 66% in just seven weeks following the first week of the Capital Raising. Accordingly, while the long term shareholders received only a 21% discount under the Capital Raising, the directors have effectively granted the foreign investor a 66% discount under the Inferior Funding Deal.
• MRV valued at just $2.5 million - Under the proposed Inferior Funding Deal, the board has effectively valued the entire Company at $2.5 million by offering up to 1,225,000,000 new shares at 0.1 of a cent. This value does not take into account the cash value of outstanding bonds and outstanding R&D grants owed to MRV, which is understood (from representations of the Chairman) to have a value of between $4-6 million. This means that the incumbent MRV directors have effectively valued the entirety of MRV assets as NIL and the expected cash due, at a 50% discount.
• Superior funding deals were not secured - Alternate superior funding deals should have been duly considered and secured. Such alternatives were being presented to the board only weeks prior to the Inferior Funding Deal, that would not have offered 40.8% of the Company to a new foreign investor. It is understood that this investor has a close association with an incumbent board director. We have grave concerns about whether the standard of due diligence which a prudent board should have given to the Inferior Funding Deal, was given by the MRV board. When the Chairman was queried about the Inferior Funding Deal (following its execution) he expressed that he did not know certain particulars of the deal, including the identity of the actual investor, or its background or how the deal would strategically benefit the Company.
• Additional onerous provisions in the Inferior Funding Deal – Additional onerous provisions have been agreed to by the directors under the Inferior Funding Deal such as; a 25% break fee, a 12.5% coupon rate per annum and the allocation of a 100,000,000 shares. Shareholders who have seen similar foreign investment deals, will be aware of the general 1% break fees position and that the proposed deal is 25 times the market trend of 1% break fees.
• Missed opportunities could have protected MRV share price - Critical company opportunities and timelines that should have been pursued, enacted and met by the Company were not. In particular, activities such as securing alternative funding, scoping studies, coal qualities, securing of returned bonds and R&D grants, along with sale of fixed and mobile Kingaroy assets, all could have been pursued. Opportunities missed by the Company (if pursued) could have protected the share price and brought much needed critical funds into the Company well before now.
• Lack of transparency by the board – In addition to the failure to properly disclose the relevant particulars of the foreign investor, the board is unable to advise of what attempts were made to finalise other funding options. Further, the board (despite requests to do so) has failed to state if they did in fact spend the shareholders’ money on the committed items for funding in August and are unwilling to itemise expenditures. With $1.75 million already raised in the six months prior, itemising expenditures and disclosure should be pertinent at this critical time.
Shareholders (who in total hold approximately 24.5% of the issued capital of the Company) have expressed significant concerns about the Company’s decrease in market value and the above mentioned incompetent board performance, failures and lack of delivery. Several shareholders have each separately expressed a need for the removal of the current board and replacement with a new board who will seek to restore shareholder value in MRV and take the Company forward positively.
Ensure you maintain your current MRV share value by voting NO to the Inferior Funding Deal at the upcoming Annual General Meeting on 14 November 2013 (AGM).
Support Change to the Current MRV Board Against the backdrop of the Inferior Funding Deal, the board’s effective valuation (of shares at 0.1 of a cent which values MRV at $2.5 million) is outrageous and fails to take into account the below list of current MRV assets and expected cash flow:
• McKenzie PCI JORC “compliant” inferred resource of 201MT*
• Wandoan Thermal JORC “compliant” indicated and inferred resource of 360MT*
• Kingaroy Thermal JORC “compliant” indicated and inferred resource of 73MT*
• Significant infrastructure, plant and equipment investments at the Kingaroy site which cost the company well over $10 million in set up costs
• A grant and bond return opportunity which directors have stated could total $4-6 million
• Company intellectual property, historical data and shell
(* refer to company web site for explanatory information)
A more transparent and accountable board that seeks to drive value through MRV’s considerable assets is needed.
Make Positive Change with a New MRV Board The need for MRV change is strong and urgent. A new, competent and skilled board for MRV shareholders has been identified as a positive solution. A new MRV board (comprising Arthur Hood, Robert James Canning-Ure, John Thomas and Alexander Jason Elks) which will seek to create positive change to unlock the significant financial potential of all MRV assets (which is far greater than the current board’s nil value attributed to MRV assets). The proposed new board will seek superior alternative funding opportunities to the Inferior Funding Deal with third parties who have expressed a confidence, and a willingness to negotiate, only with the new board.
This is now critical. Should the incumbent board be allowed to remain and continue to ignore the competent alternatives, funding will be a critical issue and I consider that the board will have placed your investments at significant risk. I have addressed these concerns with the board (on several occasions previously) and it is apparent that the board is in denial as to the need for change.
Our Proposal
Shareholders (who in total hold approximately 24.5% of the issued capital of the Company) have expressed their significant concern regarding the current board dealings. Several shareholders have expressed a need for a new board who believes in the considerable value of MRV, and believes in maximizing its value and transparency for shareholders.
I welcome your review of the attached biographies and achievements of the proposed new MRV board, being Arthur Hood, Robert James Canning-Ure, John Thomas and Alexander Jason Elks, and your endorsement of the change which will enable the Company to move forward and realise positive shareholder value.
At the AGM, called by the MRV board, you can stop the potential sale of MRV to foreign investors and maintain your current shareholder value:
• Vote NO to the MRV Inferior Funding Deal and related resolutions
At the proposed General Meeting called by the MRV board, (at the request of the Requisitioning Shareholder), take action and:
• Vote YES to remove the current MRV board and appoint the above as directors of MRV
In response to the 2013 incompetent MRV board delivery, the below proposed new directors (if appointed) will seek to restore shareholder value in MRV and take the company forward positively.
Mr Arthur Hood – Proposed Chairman Arthur Hood, BSc (Hons), FAusIMM, MICE, CEng, currently holds a Chairmanship of a privately held company which provides professional services in consulting, safety and environmental service and human capital sourcing across multiple industries, including the mining sector.
Prior to this Arthur served as Chief Executive Officer of Lihir Management Company, a Manager of Lihir Gold Ltd from 1st October, 2005 to January 2010. At the time the company was Queensland’s largest ASX listed business and a significant mid tier mining company which reached 10 billion in market capitalisation. He also served as Managing Director of Placer Dome Tanzania.
Arthur’s career spans 30 years, of which five years were in civil engineering and 25 years in mining. He has 12 years’ operating experience in PNG, including five years at the Porgera Gold Mine and has experience in many other regions around the world. Arthur brings a history of strong performance, company growth and significant company transactions to the proposed MRV board.
Mr Robert James Canning-Ure – Proposed Director Robert James Canning-Ure (known as James Canning-Ure), BComm, is a Brisbane based Company Director and has over 30 years’ experience in corporate advisory, specialising in the resources, eCommerce and property development sectors.
Over the last 12 years James has been President of Macarthur Minerals, a Toronto Listed Iron Ore exploration public company; Managing Director of Global Approach, an ASX listed e commerce company; and Managing Director of Orion Metals, a ASX listed rare earths and gold exploration company. James provides strategic counsel to many listed companies and specialises in capital raising road shows.
James has a Commerce Degree from the University of Queensland and is an accountant and banker by profession having worked with PWC and Barclays Bank.
Mr John Thomas – Proposed Director John, a current and long time shareholder of Cougar Energy/Moreton Resources, was a Founding Partner of Airmech Engineering Wll, Bahrain which executed and participated in a range of projects throughout the Middle East. Projects included aluminum smelters, power stations, military defence as well as oil and gas. He was Chairman and Founding Partner of the United Launch Systems International (ULSI) proponent (project value $700M) to develop a Low Earth Orbit (LEO) Satellite space launch complex in Queensland. Most recently, John is Director and Founding Shareholder of Ascot Energy Holdings Limited. A company established to identify and pursue opportunities in the Asia region utilising underground coal gasification (UCG) for the purpose of power generation and Syngas by products.
Mr Alexander Jason Elks – Proposed Director Alexander, a current and long time shareholder of Cougar Energy/Moreton Resources, holds a Masters in Management, and currently stands as the second largest shareholder of the company.
Most recently Alexander worked for Rio Tinto, based out of Canada, looking after Rio Tinto’s People and Organisation support areas throughout Canada, North and South America, Australia and New Zealand. Prior to this Alexander has held senior roles with LGL, Zinifex, OneSteel and also Kodak Australasia. He has worked in the commodities of coal, iron ore, zinc, lead and gold, along with a history in oil and gas exploration and heavy manufacturing.
Alexander has worked and provided expertise in areas such as West Africa, South Africa, North and South America, Canada and the Asia Pacific region.
Vote YES to remove the current MRV board and to appoint the above as directors of MRV
MRV Price at posting:
0.3¢ Sentiment: Buy Disclosure: Held
