Link:
http://www.fareastcapital.com.au/imagesDB/newsletter/WeeklyComm21Dec2024.pdfLindian: too good to be bogged down by fighting
Readers will be aware that I have covered Lindian Resources (LIN) for a number of years, with some enthusiasm. Initially it was due to the very high grade bauxite assets in Guinea (which it still has), and more recently due to the high grade Kangankunde rare earths project in Malawi. Like all rare earth companies the Lindian share price has taken a battering. The collapse of share prices will always cause anguish amongst the true believers.
Devoted shareholders are prone to looking at the board and management to hold them responsible for their paper losses even when the bear market carries much of the blame. Frustration can lead to changes at the board level in the hope that shuffling the pack can turn things around even where the macro environment is the greatest source of that frustration. Lindian is a case in point.
The previous chairman, Asimwe Kabunga, resigned when it was apparent that he didn’t get the numbers to achieve re-election at the recent AGM. My comment at the time was that he was unlikely to take this lying down. He has too big a stake (~ 11%) to just walk away. Further, he is the key man in the relationships in the countries where Lindian operates - countries where personal relationships are very important. Predictably, Asimwe has just lobbed a s249D notice on Lindian. That obliges Lindian to call a General Meeting of shareholders to consider resolutions to remove two directors and appoint a new director.
The additional director is none other than me, Warwick Grigor, so I thought that readers might be interested to hear my rationale for allowing myself to be nominated. After all, most people would walk the other way rather than get into a board stoush. The first point is that we should not be looking at this as board stoush. It is about frustrations of shareholders flowing over, such that a tipping point has been achieved What the Company needs is for everyone on the board to be pulling in the same direction. That direction should be what is best for shareholders - all shareholders equally - without entertaining factions that might be pushing for preferential treatment for anyone. Everything needs to be on the table to ensure this outcome. There is no room for hidden agendas or efforts to whisk control away from the general body of shareholders.
Should I be elected to the board of Lindian you can be sure that this will be my overriding imperative. Regular readers will know that I am critical of companies that are run by directors that prioritise their welfare ahead of the welfare of shareholders. Kangankunde is such a valuable, strategic rare earths asset that we should not be surprised if parties are scheming to gain control of it, by hook or crook, at the cheapest price possible. That would be human nature.
A strong, independent board is needed to stand up and make sure this doesn’t happen. However, if through a process of maximisation of the value of the project, such that a third party is prepared to pay top dollar for control and all shareholders benefit equally, then so be it. We all know tha selling out for maximum capital gain is a faster route to riches than being a long term operator. That all may sound idealistic but there is nothing wrong with that.
There is the possibility that the existing board and Asimwe will be able to come to some sort of compromise rather than engage in the mud slinging which invariably happens with a s249D process, but the parties need to remove the focus on personalities that bring biases into the equation. We all have to be objective and work as a team. Otherwise you might find that the jackals win out an shareholders lose.
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