another article Sceptics dig in over copper whopperMARGIN...

another article Sceptics dig in over copper whopper
MARGIN CALL
Michael West
July 08, 2006
THUMBING through the pages of the business press, a reader could be forgiven for thinking the corporate world was not swarming with thespians, cufflinked swindlers and main-chancers.

A reader could easily succumb to the belief that the corporate world was a dreadfully serious place, inhabited by important people who must be freed from the shackles of regulation because they can be trusted to make the world a better place. That's what the press releases say.

The epidemic of executive options hedging rorts puts paid to that hoary old respectability line. Half of the S&P 200 are still ducking for cover on that one.

Which brings us back to the reality that business people can be trusted about as much as anybody else when it comes to money ... not a lot. Probably less. In the world of corporate ethics, being right is getting the sign-off from the lawyers and accountants.

Swamped by conniving PRs and cowered by silk-tongued bankers and brokers, your average business journo, including yours truly from time to time, tends to trot out the corporate line.

It was for precisely this reason that your lowly and downtrodden scribe was amused to see rival newspapers bagging Australian Mining Investments this week. The subtext was the 7c to $7 rally in AMI's share price over the past few weeks was based on a scam.

The drilling results were "too good to be true", ran the line.

It did look suspect. And the share and options trading hard up against sensitive ASX announcements did exude a piquant aroma.

As to the balance of probability, the path to every major mining discovery is littered with a hundred corporate shells, and the wayside heaped with the corpses of failed junior explorers - not to mention accountants masquerading as miners who backdoor-listed yet another tract of earth but whose most significant earthworks was the hole in the backyard for the swimming pool at the holiday house - after a pump 'n dump.

This week, the boot was on the other foot: yours truly was a true believer for once and the true believers were the sceptics. Maybe they had it right for a change. Maybe not. Next week may tell.

All this rambling, of course, is a ponderous and indulgent way of getting to the point, which is that Wayne McCrae and his mates from AMI are either on to something big, or this mooted $8 billion-plus inferred copper resource at Rocklands in northern Queensland is one mighty swindle.

Wayne does have a colourful background, vivid even, and that's going to haunt him now. He doesn't care for instos and brokers and they don't fancy him much, either. It all stems back to his time running the junior Diversified Minerals. Wayne had a long and bitter stoush with CRA (now Rio) over the development of the large Century zinc deposit. He held the project development up in the courts, they said, before the claim over Century was struck out.

Then there was Tanganyika Gold where Wayne proved up a resource but upset people by quietly selling out. It was no surprise, then, that the professional market was a tad leary at the sight of Rocklands' inferred resource of 59 million tonnes grading 2.04 per cent copper.

The rub for the instos is if Rocklands is as big as Wayne reckons it is, they'll have to own it. And the brokers will have to broke it. There will be much pressure to get that AMI stock price down, including pleas of foul play directed to ASIC.

Much of the reason this one caught the market on the hop is that Wayne bought the ground from a couple of old prospectors who passed away last year. Though there's fabulous exploration potential in the Mt Isa Inlier, much of the land had been pegged in the 1990s by hopeful juniors. But Bre-X came along in 1997 - the greatest ever speccie ramp - and most of the juniors, versatile as they are, went dotcomming in 1999. You Beaut Gold became YouBeaut.com. Only in the past three years have the explorers returned. In the same time, the native title issues have been largely resolved with the Kalkadoon people. Now it's game on again and Wayne will not be the only prospector to hit it big. It will be big.

Damned shareholders

IF anyone can identify a more shoddy performance from a listed company on listed-company process, please let us know. In fact, a shoddy company competition may be in order: identify Australia's shoddiest.

The Public Holdings AGM was held in Melbourne yesterday, confirming the suspicions of the Australian Shareholders Association, whose chairman, Stephen Matthews, had noted in a press release: "Public Holdings don't (sic) seem to have the hang of AGMs or annual reports yet."

Got to love that. The ASA identified a number of concerns. One, PHA was holding its AGM more than six months after its financial year close on December 31 (better late than never). Two, shareholders had been sent two invalid notices of meeting and an annual report which contained unaudited financial statements (oh well, at least they tried). Three, the only independent director (Mr Biziak) didn't make it to any of the four board meetings since joining the board (maybe he lost the address at the dry cleaners). Four, the election of directors appears to be an afterthought which was included on the agenda as "Other Business".

"They seem to find the requirement for 28 days notice of AGM a bit tricky ..." the ASA said.

"Having auditors sign off on the accounts before they were sent to shareholders was obviously too hard, so they just sent them out anyway."

The chairman attempted to gag the meeting several times, but in the end was suitably penitent after he sought to wrap the meeting up and head off, only to be slapped with a requisition for an EGM by Matthews et al.

Matthews reckons that as far as annual reports and AGMs go, Public Holdings takes the cake. That's saying something.

Property ka-boom

ONE thing which is going to blow up is half the listed property sector with this business of revaluing assets and booking the reval as profit. It's rife under a loophole in new accounting standards, but how long can these trusts keep booking air to the bottom line and paying distributions from notional cash? Not for ever.

There will have to be a casualty or 10. Some of the culprits are Valad, Westpac Office, Macquarie Leisure, ING Industrial (and that pubs thing), a couple of Centro vehicles and the mighty Rubicon.

Not all will blow, but there will be weeping and a gnashing of teeth. www.theaustralian.com.au