litigation

Miners up there with Cazaly
Kevin Andrusiak
April 25, 2006
JUNIOR explorer Cazaly Resources claims it has financial support from the West Australian mining industry for a legal challenge to Friday's decision by the West Australian Government to strip it of the lucrative Shovelanna iron ore deposit.
Investors wiped nearly 70 per cent from Cazaly's market value yesterday - turning over more than 120 per cent of its issued paper - and sent shares in its partner Echelon Resources down by more than half in a savage reaction to the decision, released after the market closed on Friday.

The Government has since refused to comment on its decision, leaving market watchers and mining industry insiders speculating about the reason for handing the lease back to Pilbara heavyweight Rio Tinto.

State Resources Minister John Bowler maintained his silence over the matter before the legal challenge was launched. Government advisers said it was Mr Bowler's decision not to expand on the "public interest" grounds given for his decision.

Rio had argued it lost the deposit, which it has not worked for nearly two decades, only because a courier failed to deliver the reapplication for the tenement lease in August last year.

Cazaly managing director Nathan McMahon yesterday stepped up his attack on the Government, saying Mr Bowler did not have the "guts" to explain the decision to the public. "This is a Government which prides itself on transparency and as we have seen there is no transparency when big business is involved," Mr McMahon said. "The board feels deeply that this is worth fighting for.

"We are adequately funded and have had a huge response, including financially, from the WA mining industry in response to this decision."

Despite Cazaly's market capitalisation falling to $34 million from well over $100 million yesterday, Mr McMahon said the company was "adequately funded" to mount the legal challenge. "The funding will not diminish shareholder value," he said.

Cazaly has called upon the services of top West Australian Queens Counsel Malcom McCusker to spearhead the challenge and has also lodged Freedom of Information applications for all legal advice from the State Solicitors Office to Mr Bowler and the state's Department of Industry and Resources. It has also written to Mr Bowler asking for a "full written explanation" of the reasons for his decision.

Nearly 65 million Cazaly shares swapped hands yesterday, well over the 51 million on issue, as day traders played havoc with the share price. After beginning the day at 45.5c, down from Friday's close of $2.12, the share price found some market support to close at 66.5 cents.

Australian Shareholder Association chairman Stephen Matthews said the Government's failure to explain publicly had undermined its decision. "These kinds of things can come back to bite the Government if they do not act promptly and with transparency," Mr Matthews said.

The decision has also raised concerns in Mr Bowler's home town of Kalgoorlie-Boulder, with mining insiders saying privately it would be hard for him to hold his head up in the mining city.

Amalgamated Prospectors and Leaseholders Association secretary Scott Wilson said supporting a bigger player in the mining industry over a smaller player set a dangerous precedent.

"We were of the impression that if you follow the Mining Act you will be protected by law."