The sooner we get rid of this board, the better:GWR faces revolt...

The sooner we get rid of this board, the better:

GWR faces revolt over share gift
JOHN PHACEAS
529 words
15 February 2007
The West Australian
METRO
44
English
(c) 2007, West Australian Newspapers Limited

Fifteen months after scrapping millions of in-the-money directors options, iron ore explorer Golden West Resources is facing an investor backlash over the gift of millions of dollars in equity to its board and leading shareholder.

GWR has been a runaway success since switching its focus from gold to iron ore in 2005 on the back of booming iron ore demand and the potential for its Wiluna West project to become a major iron ore supplier by the end of the decade. Since October 2005, its shares have rocketed from 30 to as high as $3 in December.

Against that backdrop, shareholders will meet next month to vote on granting five million free shares to its controlling shareholder, Lingchip Pty Ltd. Lingchip is controlled by prospector John Doutch and already holds 30 per cent of the company, and the extra shares - worth almost $10 million at current prices - will increase its stake to over 35 per cent.

GWR directors are supporting the share issue despite a finding by independent expert RSM Bird Cameron the proposal is neither fair nor reasonable for "non-associated" shareholders.

The payment relates to a pre-float agreement dating back to 2004 for a staged payment of 10 million shares for tenements acquired from Lingchip. The first tranche of five million shares was issued a few months after the company listed, with the second tranche to be granted once it had confirmed an indicated gold resource of 200,000 ounces.

However, GWR is now seeking to make the issue conditional on achieving an indicated iron ore resource of at least 10 million tonnes.

GWR managing director Gary Hutchinson said the change was only fair, given that the company was now exclusively targeting iron ore.

The original agreement had also been struck after Lingchip agreed to scale back the upfront consideration for its tenements when GWR was struggling to raise funds.

"We are honouring somethi~ng we agreed to when the market was hard," Mr Hutchinson said. "A handshake to me is as good as a legal document - that's the way I've always operated - and he (Mr Doutch) did the right thing by us when he agreed to prune it back."

Mr Hutchinson said the shares would still only vest once the company delineated at least 10 million tonnes of iron ore resources - a milestone it hopes to achieve by mid-year.

But GWR investors will also be asked to approve the issue of millions of free options to the company's directors and Mr Doutch.

Mr Hutchinson, fellow director Michael Wilson and Mr Doutch will each receive 1.5 million options with a strike price of $2, and 1.5 million options with a strike price of $3.

Co-directors Alan Rudd and John Daniels will each receive one million options of each class.

Until yesterday, when GWR shares slumped 17 per cent to $1.93, the stock had not traded below $2 since early November.

Mr Hutchinson said he doubted anyone would be too upset by the latest options plan given the success of GWR shares in the past 18 months.