In summary, my opinion of how BLK got to its current situation...

In summary, my opinion of how BLK got to its current situation is as follows:

- Everything was going along smoothly for BLK.
- Gutnick makes a suggestion to curb exploration and either sit idle or attempt to get into production sooner rather than later.
- The BLK directors disregard Gutnick’s suggestion and decide to purse a more prudent and thorough exploration program with the view of getting into Production within 18-24 months (early 2014).
- Gutnick was most likely dissatisfied with their decision, cried a little and took his toys and went home which meant he discontinued funding BLK.
- BLK management serve Great Central with a writ for the funding default and remove Gutnick as chairman.
- In retaliation, Gutnick lodges section 249D notice to remove the BLK directors.
- Gutnick repositions his shareholding with Polo, reducing his stake to under 20% and forming an alliance with Polo.


So let’s look at each of Gutnick’s arguments

“The other Blackham directors are aware that I have appointed an alternate director who attended meetings in my absence…”
- Was Gutnick allowed to appoint another director to attend in his absence?
- This statement is in contradiction with “During the period from 25 November 2013 to 29 May 2014, no meetings of directors of Blackham were convened.”
- This is point is irrelevant anyway, the funding default is sufficient cause to remove Gutnick as chairman.

“Blackham are acting to protect their own positions rather than acting in the best interests of Blackham or its shareholders.”
BLK referred the matter to the TOV to protect shareholders against a takeover and indirectly they are protecting their own positions. If any party wishes to takeover BLK, they are welcome to pay for it. BLK directors do not have blocking stakes so if Gutnick wanted to pay for BLK he could do it with an appropriate bid.

Reason #1 for Gutnick’s action
This will be difficult to prove who is right here but let’s just say BLK is in the wrong here, so what did BLK “wrongfully” do? BLK issued shares at $0.21. Looking at the historical share price, one can argue that the price was fair. Gutnick himself bought shares at $0.21. I suspect Gutnick is pissed off because the convertible note agreement is priced at $0.25. BLK also issued shares to Lanstead Capital at $0.1785 on 26-June. If one looks at the Lanstead agreement, they will see it is an equity swap, and hence the lower price. It is also worth noting that BLK took these funding actions AFTER Great Central defaulted on the note agreement, so one can argue Gutnick is to blame for forcing BLK to seek funding elsewhere. As for the options, Dixon and Thom received 900,000 options and Miles & Michael received 350,000 options, all options were priced at $0.298 (134% of the ASX 5 trading day volume weighted average price per Share prior to the date of the general meeting). I don’t see any problem with the issuance of those options priced at that amount. I suspect Mr Gutnick declined to accept his options because if he wasn’t willing to fund BLK at $0.25 he most likely would not be interested to do so at $0.298.

Reason #2 for Gutnick’s action
If this is true, it implicates the entire board, including Gutnick so it can’t be a reason why Gutnick is taking the action.

Reason #3 for Gutnick’s action
It is worth noting that these meetings are all after or around the time of the convertible note agreement default.

Reason #4 for Gutnick’s action
Yep, makes sense if you refuse to fund the company.

Reasons #5 & 6 for Gutnick’s action
Without any details, these reasons don’t carry any weight.

Reason #7 for Gutnick’s action
“Great Central has strong reasons for not completing the funding arrangements” What are those reasons? Gutnick’s cash conservation suggestions are purely that, just suggestions. Gutnick is a non-executive chairman which means his suggestions can be either acted upon or disregarded, hence he doesn’t have the right to make operational decisions. Gutnick is suggesting that BLK start production quickly and the other BLK directors are taking a normal path of exploration before commencing production. Whilst everyone would love to get into production ASAP it makes sense (to me at least) to conduct further exploration, conduct the PFS, BFS and then go into Production.

Reason #8 for Gutnick’s action
Without any details, this reason doesn’t carry any weight.

Reason #9 for Gutnick’s action
Based on Gutnick’s history, it is difficult to place trust in this statement. If Gutnick gains control, the writ against Great Central will most likely be dropped and who knows if BLK will see the funding (or maybe at a revised price). If the funding was to resume, Gutnick would obtain further control of BLK increasing minority shareholders’ vulnerability to the desires of an individual.

Reason #10 & 11 for Gutnick’s action
Blah blah blah.


So it is interesting to note that for all of Gutnick’s reasons, not one reason refers to any operational mismanagement, shareholder value destruction (Reason #1 is subjective) or incompetence of the directors. None of Gutnick’s reasons relate to the common shareholder, it’s all just frivolous ASX listing rules, Corporations Act, crap that I don't care about. I would dare share that shareholders are more concerned about the daily management, drilling operations and getting BLK into Production. I would also hope that the shareholders are more concerned about not giving control to an individual who has well-documented history of shafting shareholders. If Gutnick came up with something more serious I would be more inclined to give credence to his letter.

Some key missing points from this letter are:
- Gutnick doesn’t address the reason for Great Central’s convertible note agreement default.
- Gutnick doesn’t address why he transferred his shares to Perfectus or entered into his arrangement with Polo Resources.
- Gutnick doesn’t provide an action plan for BLK, thus losing a golden opportunity to explain to shareholders why he should take control of the company. If he wants to get BLK into production quickly, he should have explained how he could achieve this and back it up with sufficient detail.


So if you are a shareholder you have to ask yourself, who you would prefer to control the company?

The current BLK management:
- They have a minor stake in the company.
- They have done the leg-work to get BLK to where it is today.
- No conflict of interest other than wishing to keep their jobs. This is a key point when trying to determine if there is anything illicit in their motives.
- Pursuing what seems to be a normal transition from gold explorer to gold producer.
- Taking actions to avoid a takeover of the company, unless it is done at a premium.
- May have committed some insignificant ASX listing/Corporation Act violations. You have to ask yourself if these alleged violations adversely affect shareholders? The answer here should be no, but this is my opinion.
- Have yet to put a foot wrong in the 6 years I have been invested in BLK. In hindsight, it would have been great if they sold Scaddan when they had the chance but I assume BLK management wanted more than ~$30M for the billion ton coal resource so I can’t really fault them.

Gutnick
- Has a marred legal history.
- Currently being taken to court by BLK for defaulting on the funding agreement.
- Can be perceived to have a conflict of interest given his company is a major shareholder. i.e. just as an example, who will stop Gutnick issuing shares to Great Central at massive discounts? Again, the potential conflict of interest is a key point when trying to determine Gutnick’s motives.
- This will result in a board of directors hand-picked by Gutnick, thus independence is lost.
- Great Central/Gutnick increasing its shareholding, thus increasing its power and decreasing the power of the remaining shareholders. If you not concerned about this, have a look at Essar Energy (LON:ESSR) and how the minority shareholders got shafted earlier this year.


I am up for debate on the topic, especially if anyone can defend Gutnick or support his allegations. If I have made any mistakes please feel free to correct me.