Zhongrun talks up Noble move Nick Evans, The West Australian November 5, 2012, 6:25 am
With its bid to win a large stake in Noble Mineral Resources teetering, China's Zhongrun Mining Investment has gone on a charm offensive, taking the rare step of making senior executives and management available to defend their offer and talk up the company.
Noble reaffirmed its commitment to Zhongrun's $84.7 million share placement on Friday and, though talks continued over the weekend, it is understood there is little prospect of a peace deal being reached ahead of a Wednesday meeting where Noble shareholders will choose between an $85 million convertible note issue offered by Resolute Mining and a dilutive issue to the relatively unknown Chinese investment firm.
Zhongrun executive director Ian He told _WestBusiness _ the company was aware of the poor reputation for transparency and corporate governance that many Chinese would-be suitors had built up in the local investment community. He pointed to his extensive experience of working in Canada, which he said included 16 years as a director of Canadian-listed companies.
"So we know the regulatory regime and the requirements of the regulatory authorities - we know the requirements for transparency, for investor relations. So we have the international experience to ensure the integrity of corporate governance is intact - or made even better," he said.
"The people we will be appointing (to the Noble board) are mostly from Canada, with international experience. For example, I will be likely be appointed to the Noble board. I have been sitting on the board of publicly-listed Canadian companies for 16 years."
A revised offer from Resolute Mining forced Noble to postpone its first shareholder meeting, due to be held last Wednesday, on the first tranche of Zhongrun's proposed $84.7 million funding offer sending Noble's executives and corporate advisers back to work the phones. It is understood an unusually large number of proxy votes have been cast ahead of the meeting, with the majority of Noble's share base already making their decision. The result is still too close to call, sources say.
Resolute's argument is that its 12¢ convertible note issue allows all of Noble's shareholders to participate in the recapitalisation of the company. With the bulk of its placement to be conducted at 18¢, or through the conversion of 23¢ options, Zhongrun argues it is offering a better price than its Australian competitor.
Zhongrun chief financial officer Yeung Ng, now based in Hong Kong, has worked in Australia for the last 12 years. Although he said there was some element of xenophobia in the reaction to Zhongrun's bid from some Australian shareholders, he said he also believed it was Zhongrun's role to educate the local investment community.
"I don't blame the public for that, because from our end I don't think we've done enough work to promote ourselves as an international company. We haven't told the public much about ourselves, which is why they might think we're just a typical wealthy Chinese company that don't know how to spend their money and don't know how to run a company," he said.
"But we want to tell people that even though we're a Chinese company, we're capable of doing what Australian companies do. So why don't you give us a chance? That's the frustration we're having," he said.
A major sticking point for Noble shareholders is that Zhongrun would become a 41.5 per cent Noble holder after the placement and could end up with a controlling 51 per cent stake if it converts all of its 23¢ options. But Zhongrun executives argue that what Noble needs is an equity injection, not the debt offering promoted by Resolute.
"Resolute has provided a share swap with selected shareholders," Mr He said. "So that means that even though some of the shareholder group are holders of Noble, they have jumped onto the bandwagon of Resolute already. So if this company failed, because they hold Resolute shares they are not affected. And they may have the power to vote down Zhongrun's deal, but their real interest is not in Noble, it is in Resolute."
Mr Ng said if Zhongrun wanted to play the same game as Resolute it could counter-offer with the same structure, which would be better for Zhongrun.
"But that wouldn't be good for the company (Noble)," Mr Ng said. "And we refuse to do that, because we think that what we're providing is in the best interest for Noble and for the other shareholders. This is the only way to bring the company to being cash positive."
Mr He said there was little chance of a sweetener to help bring vacillating Noble shareholders across the line. A conversion of the notes issued under Resolute's offer would be just as dilutive, he said, and the additional $85 million debt would weigh heavily on the company's balance sheet.
"So in the worst case scenario if the company crashed under the heavy load of the debt, who would lose?" Mr He said. "The majority of shareholders who have not signed the deal with Resolute will lose - they will have nothing if the company fails. But those who have signed the deal with Resolute lose nothing, because they have shares in Resolute.
"We could withdraw from this offer and wait for the company to go under, and then we could pick up the assets from bankruptcy auction. That would be good for us too - but we don't want to do that, that would be unfair to the minority shareholders."
Mr He said that, however the battle turned out, he wanted to establish Zhongrun's reputation as an investor.
"It really doesn't matter whether we are winning or losing. What is important is that there are more people that know us - because we want them to know us for the future."
We have the international experience to ensure the integrity of corporate governance is intact, or made even better. "Ian He
NMG Price at posting:
13.5¢ Sentiment: Hold Disclosure: Held
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