THE Australian Securities Exchange is investigating cash-strapped Kazakhstan Potash Corporation after former Fortescue chairman Gordon Toll accused it of failing to tell the market it hadn’t kept up its end of a $US140 million ($178m) deal to buy a potash field in Kazakhstan.
Failure to comply with the ASX’s continuous disclosure rules, which require companies to inform the market of important news, can attract civil or criminal liability and stiff fines.
The investigation follows questions by the ASX about the financial viability of KPC, which burned through $5.2m in cash in the three months to the end of December, leaving just $1.82m in the bank, and comes as mystery surrounds the identity of the company’s largest shareholder.
Executive director Marco Marcou, who could not be reached by The Australian, reassured the exchange that KPC, formerly known as Fortis Mining, would continue to be supported by its chairman, Chinese businesswoman Madame Freada Cheung.
In a complaint to the ASX, Mr Toll said KPC failed to meet an agreed January 6 deadline to pay $US1.5m in working capital into an Isle of Man bank account held by the owner of the potash field, British Virgin Islands-registered Satimola, where he is executive chairman.
In his February 18 letter to the ASX, Mr Toll said KPC also failed to repay $US5m in debt owed by Satimola, as required by the agreement. KPC’s Kazakh subsidiary, Batys Kali, instead agreed to loan the working capital to Satimola by February 4 but “the market was not informed of this”.
While KPC’s failure to pay allegedly meant the deal was “of no effect”, the company had made no such announcement to the market. ASX compliance senior adviser Kobe Li replied to Mr Toll last Tuesday to “confirm that ASX is investigating this matter to determine if there has been a breach of its listing rules”.
He said that if ASX found a “significant breach of the listing rules” it would refer the matter to ASIC “so that ASIC can then consider whether or not it wishes to take criminal or other regulatory action in relation to the breach”.
Last year, the Federal Court ordered goldminer Newcrest to pay $1.2m in penalties after it selectively briefed some analysts on production targets and capital expenditure.
KPC first agreed to buy all the shares of Satimola, giving it control of the Kazakh potash field, in 2013. But the deal had been renegotiated twice to give KPC more time to come up with the money. Satimola is one of three Kazakh potash fields KPC says it wants to develop, with the other two, Zhilyanskoye and Chelkar, purchased last year from BVI company Goldquest Services in an extraordinarily complex transaction.
Goldquest also received shares for “consulting” on the Satimola deal and is now KPC’s largest shareholder, with 23.1 per cent of the company.
KPC previously disclosed it was controlled by ZK Dzhakupov, AK Dzhakupov and KS Ermekkaliyev, of Kazakhstan, and H Kettwich, of Germany. However, a well-placed source said it might also be associated with Kazakh businessman Almas Mynbaev, the former deputy chair of the Kazakh government agency regulating natural monopolies.
KPC Price at posting:
12.5¢ Sentiment: Sell Disclosure: Held
