This article is in todays Financial ReviewThings are getting...

This article is in todays Financial Review

Things are getting ugly at former underground coal gasification play Moreton Resources, with disgruntled shareholder Jason Elks taking his concerns about the running of the company to the Takeovers Panel.

Elks has built a stake of 5.5 per cent in Moreton, which traded as Cougar Energy until last month, and has already requisitioned a general meeting to remove the company’s three directors, Andrew Matheson, Andrew Purcell and Eva Djauhari.

The meeting is scheduled for November 15. In the meantime, Elks, a former Rio Tinto executive, wants the Takeovers Panel to block a proposed deal between Moreton and British Virgin Islands-domiciled company Twinkle Woods Ltd.

Twinkle Woods is the private investment vehicle of an Asian family that is interested in securing coal supply to support a power station project. Moreton, which is now focused on conventional coal, sees the company as a strategic partner.

But Elks is concerned that Matheson and Purcell have links to Twinkle Woods and are trying to take control of Moreton for nothing.

In September, Moreton procured a $1 million loan from Twinkle Woods, claiming the funding injection was urgently needed if the company was to avoid trading insolvent.

The loan matures at the end of this month and Moreton has proposed repaying part of it through the issue of 100 million shares priced at 0.17¢ each and the balance through the issue of convertible notes priced at 0.17¢ each.

Elks and other shareholders have indicated they intend to vote against the deal at Moreton’s annual meeting on November 28. By their reckoning, the $1 million provided by Twinkle Woods was never required. ?

Elks says Moreton has a $950,000 bond with Queensland utility Ergon Energy it could have recouped, as well as $3 million to $5 million in research and development grants it was eligible for.

He also believes the board withheld the results of a scoping study on one of its Queensland coal projects and coal quality tests from the market to keep the share price from rising and that it ignored alternative funding offers at a more attractive price.

“In a nutshell, these two guys are trying to steal the company for nothing,” he says. “They’re trying to talk down the assets and the wealth, they’ve withheld information to manipulate the price and they’re trying to steal it.”

Matheson has tried to make it clear in investor presentations that the Twinkle Woods deal is not takeover by stealth, and says the funding options Elks speaks of are not immediately available to the company.

Moreton would need to call another general meeting if Twinkle Woods converted all of the notes as that would lift its holding beyond 19.9 per cent. The exception would be if the investor took advantage of ASX creep provisions.

Elks believes he has about 30 per cent of the Moreton register behind him, including the company’s biggest shareholder, Tony Feitelson.

He has nominated former Lihir Gold chief executive Arthur Hood, fellow mining executive Robert Canning-Ure, engineer John Thomas and himself as replacement board members.