I am a long term holder of CLA, and whilst I’m generally happy sit back and watch others post on HC, I thought it was time I made a few points, before a bunch of disgruntled, amateur shareholders cause any more damage than they already have.
To add a little context, I have worked and invested in the mineral exploration space for many years, and am technically trained. I have also worked with Brendan Borg in the past and have had a lot of success following his investment tips.
Firstly a few reasons on why I got into CLA: I am a strong believer in the battery minerals story, and although commodity prices have fallen in recent times (the CLA share price fall closely mirrors the cobalt price fall) I am sure they will recover in the future. The world is waking up to the fact we need to curb fossil fuel emissions and this is the best way to do it.
I am also here because I like to put my money into companies with management that I know and trust. Brendan is very well regarded in the industry and has a track record for doing what is best for shareholders, rather than concentrating on what is best for himself and management. This is a rarity in this industry and the chances of a new board acting with similar intentions is unlikely.
Let’s take a look at some evidence to back this up. The current CLA board made the very difficult decision to slow work on the Opuwo project until the cobalt price recovers. Although this was difficult for shareholders to stomach at the time, it was absolutely the right move and the board should be applauded for their actions. What generally happens in these situations is that companies don’t want to admit that a project isn’t working in the current market and they continue work hoping for a market turnaround. When the turnaround fails to come in time funds start to run low, raising capital is difficult to impossible and the company ends up in administration, with management continuing to pay themselves until the dying days and shareholders losing the lot!
The current CLA board have wound back spending considerably (and whilst this may have taken a little longer than we would have liked it unfortunately takes a while to wind up or slow significant exploration and studies). The board were quick to cut the board to three non executive members, who according to Brendan Borg’s letter to shareholders, continue to put in a significant amount of time and energy into finding a new project for the company, without collecting any fees beyond their monthly non executive director fees. Again almost unheard of for a company with a significant cash balance. This is definitely a board that are putting shareholders interests before their own.
In terms of finding another project, again the timeline is a little slower than we would have liked, but you need to trust the board to do their job. Brendan is very good at identifying winning projects and has a strong motivation to find the best possible project for our company, because he will want the best for shareholders, including himself. He has 22,000,000 million shares that he has paid for himself! This is not insignificant! I’m sure he also wants to recover his losses! I urge holders to be patient while the board find the right project! It is frustrating, but companies with good cash positions can and do evolve to become successful again.
Of course this process is being made difficult by the 249D action, which has caused the share price to plummet, meaning any deals will now have to go ahead on terms less favourable to CLA than they would have been prior to this action. The board have also stated that they are looking to bring in new board members or management as part of any new deal, again I’m sure this 249D action will be making this difficult. Who wants to join a board knowing they may be ousted soon after? Or that they may be forced to work with a new board with inferior skills and experience with a vague plan, which only replicates what the current board have already done?
Let’s take a look at the shareholders taking the 249D action. They are clearly a small group of unsophisticated investors with little industry experience. Submitting non compliant paperwork, frequent changes to substantial holder lists, missing the deadline for the AGM (so that a second meeting at great expense to shareholders will have to be called), accusing the company of bullying them for naming the people submitting the 249D (when this is standard procedure) tell me that they are only a small, disorganised group with no idea what they are doing or the damage they are causing. It is also greatly concerning that those proposing themselves as incoming directors didn’t ensure these formal actions were carried out correctly and accurately. How are they going to run a company? I also find it interesting that Russel Hardwick, the only credible person put forward in the first 249D attempt, was no longer on the second notice. Perhaps he realised this is a fruitless endeavour with little chance of success?
Now let’s take a look at the nominees on the 249D notice. First of all I know from my contacts in the industry that the substantial shareholder group were cold calling people to try and get nominees together. These are not people that have a vested interest in the success of CLA and it’s shareholders, they are people looking for a job, a company with plenty of money to line their pockets with.
Hui Palleson: we’ll give her some credit for being a shareholder, but that’s where her credibility as a potential board member ends. She has no previous board experience or industry experience. 1.6 % does not entitle you a board seat. Imagine the shambles this industry would be in if we gave every unqualified shareholder a board position.
Carl Swensson: this guy holds no shares and probably had zero interest in CLA until someone cold called him offering him a job. The substantial shareholder group have put up a website stating his experience and credentials, but have forgotten to mention all of the failed companies he was involved with! How convenient! Condor Blanco Mines (in administration with various other interesting accusations against the company and convictions against management that you can google yourself), Proto Resources and Investments (also in administration) and Global Metals Exploration (another failed company).
John Westdorp: again holds no shares and is clearly looking for a job. He is currently the interim CEO for MZI Resources, the company that he was the CFO for for several years before it went into administration. He was on an approx 500K a year package before the company went under. Perhaps he should have stopped paying himself and saved some of the money to dig the company out of a hole so that the shareholders had a hope? I can only imagine how CLA will end up with this guy running the show. He’s also never been a director of an ASX listed company.
So this all leads us to the conclusion that if this action is successful we will be left with a very weak, inexperienced board with far more interest in paying themselves than restoring value to shareholders. The mere suggestion that they might get in has been enough to wipe out nearly half the remaining value of the company. It would be a total disaster if they were appointed.
So then we get back to the current board, who are actually doing a great job under difficult circumstances.
Brendan’s first crack as an MD was with CLA, which was a 25 bagger!!! Whilst this is not currently helpful to those of us who held on, he has proven that he has what it takes to make a company fly and I’m sure there are plenty of happy people out there that made a killing. Hopefully some of you took some chips off the table when the cobalt price started falling. Most importantly I’m sure he can find the right project to do it again. TMR (for which he is currently MD) are in advanced DD on a good looking, advanced gold project that they got for a steal and he’s long been a supporter of his other non exec board position company BGS/MLL, which is bound to take off once market conditions improve as it has a world class lithium resource that someone will snap up sooner or later.
The plan of the potential incomers at this point seems to be to review the work done on Opuwo to date and to assess if more work should be completed at this stage. Given the experience of the current board I find it highly unlikely that their conclusions of the will be any different, making this a fruitless task and a complete waste of shareholder money. Considering the Project Director, Pine van Wyk, is part of the board that made the decision to slow work I’m not sure why this decision would change? They have also failed to mention the fees that they will be charging to undertake this task, I doubt they would be less than that of the current board. Not to mention the cost of calling a second meeting could probably cover the fees of the current board for several months. What a waste of time and money. And what we really need is a new project to focus on until the cobalt price recovers, which will be more difficult to source with a weaker board, weaker share price and weakened cash position.
Hopefully some of you are still here with me, this post has turned out a little longer than planned. Hopefully shareholders sitting on the fence see this and vote for the current management to stay, so that they can get back to what they do best: preserving cash, doing a deal to enable the company to change focus, and restoring value to us, the patient and hopeful shareholders.
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