Bad news - wasn't able to attend meeting....Good news a friend of mine was able to...he just sent me this email message -
----------------------------- got to ask a large number of questions at the general meeting to satisfy my appetite. Got a few raised eye brows but the Directors were keen to answer my questions.
Results from the meeting (my notes!!)
SUMMARY
SHARE PLACEMENT Was unanimously approved and will enable MHM flexibility to respond quickly to business opportunities faster than a rights issue would (days vs weeks)
SMELTER Directors are supremely confident for establishment of a smelter (whether it is by Wacker or another player) given the "very attractive" operating costs in Tasmania for a smelter
ALUMINIUM Directors confirmed the aluminium project is still close to finalisation and we should expect a capital raising of some form as part of the acquisition of the aluminium business later this year.
EXPLORATION LICENSE Approved for Marrawah project area (Silica)
A more thorough run down of the days events below.
Went to the general meeting at noon today and overall I got a positive impression of the business. It had a friendly receptionist who offered me a glass of water and there was visitor car parking, what more could a minority shareholder who is just rocking up to check things out want??? I was a bit groggy from my 6am flight from Melbourne, so they thought I was a bit loopy because I kept dropping my paperwork
SHARE PLACEMENT The share placement was unanimously approved by a show of hands as a first point of business.
The Directors were very upfront about it and gave me an opportunity to ask questions.
They explained the reason behind a placement vs rights issue.
The directors assured me that just because they are requesting shareholder approval for a placement, that doesn't neccessarily mean they will actually make the placement.
They stressed it was for "flexibility" more than anything... the company wants to be able to respond quickly if an opportunity presents itself and a rights issue would take 6 weeks wheras a placement can be done in a matter of days.
They elaborated and stated the reason for this is because the placement is to "sophisticated" investors only.
Under the corporations act, a sophisticated investor is someone who is a big player and who understands the risks involved.
By issuing a placement, MHM does not have the same disclosure obligations as a rights issue because a sophisticated investor is taken to understand the risks under the corporations act.
This makes the process a lot faster and less risky.
They also were quick to point out that they themselves are major shareholders and clearly also want to minimise any dilution of shareholder value if possible hence I think they will carefully consider the potential dilution effect of the placement and won't make the placement unless they believe there is a net benefit for themselves (as existing shareholders).
They also assured me this isn't a "mates rates" deal. I felt silly asking this question, but I just wanted to make sure that I asked the question because it was a major concern of mine.
ACQUISITIONS
I expressed concern about the acquisition of the additional two silica sites in Tassie.
Given the huge size of the initial silica site in SORELL, which should in itself be enough to supply a smelter, I questioned the need to acquire additional sites.
I put to them that perhaps they were acquiring the two additional sites because of deficiencies of the SORELL site, such as transport access or other issues that made this site less attractive than the others.
They put my fears at ease. They assured me that the reason for acquisition of the additional sites was to remove any potential competition.
As they became aware of the demand and interest of customers for silica off-take such as WACKER, they identified a threat that another mining industry player would attempt to capitalise on the demand by acquiring the other two silica fields and compete with MHM for silica off-take.
Now MHM have a 100% interest in all three silica sites. Smart move I say.
EXPLORATION LICENSE
They also confirmed that an application for an exploration license has been approved for the MARRAWAH project area, which put another one of my fears to rest.
WACKER
I then asked "what happens if Wacker pulls out?".
The directors seemed supremely confident that another player would pick up where Wacker left off (not to say that Wacker will drop out).
Apparently Wacker has made considerable ground work in establishing a business case for a silicon smelter in Tassie.
The directors singled out the "very attractive" operating costs of a silicon smelter in Tasmania as a key reason for their confidence in silica off-take.
The directors stated that the KEY REASON for the secrecy of the WACKER deal (until the media got a hold of it) was that WACKER was concerned about competition setting up a smelter in Tasmania.
ALUMINIUM
I asked about the alumunium business. Given the $5M pa expected net income from the business, I asked whether we should expected a major capital raising.
The directors said that one would expect some form of capital raising and that a rights issue was not out of the question. Again, it seems to be a matter of "timing" that would determine the exact nature of capital raising.
MHM Price at posting:
23.6¢ Sentiment: LT Buy Disclosure: Held
(20min delay)