Nkwe on 18th March 2016 tried to say that there is nothing in Bermuda Laws that prohibits loans to director related companies. Then they got shoved Section 96 to their faces, then Nkwe tried to say "Section 96 does NOT apply".
These Nkwe guys seem to be of the impression "oh lets give some distorted half answers" and hope these minorities go away.
For people who are not in the minority resistance group below is the email from Mr Pham to the Company ripping their argument into shreds:
**************************************************************************************************** Hi Scott,
I believe you are being bombarded with many queries on the $AUD5.48million Nkwe/Genorah Loan. I also believe that the Nkwe Board is palming off all shareholders questions to yourself is also unjustified since its actually their job to be answering the questions especially Mr Abraham Li (who is paid a lot more money from Nkwe than you Scott).
I was forwarded a few responses that you made to different shareholders on the $AU5.48million loan: Email 1: I suggest you check Section 96 and Genorah’s Loan.
Our lawyers’ advise is: First of all, the loan was made to Genorah, not any individual directors.
None of Maredi, Sharif or Staff owned more than 20% of Genorah’s interest.
Therefore, Sec 96 will not apply here. Scott Email 2: I do not know how do you accessed confidential information of these persona’s interest in Genorah. We got our information directly from Genorah. You mentioned Sec 96 will apply to the loan, but our lawyer in Bermuda confirmed Sec 96 will not apply to the loan as long as none of them individually holding more than 20% of interest in Genorah. So, their collectively holding 46% is irrelevant here. All your questions in Section 2 were answered in our recent announcement. Scott
===================================== I understand that through your lawyers you are trying to scrutinise and distort the wording of Section 96-4(b). For the sake of discussion below is the entire Section 96. Genorah are the Holding Company.
Maredi, Sharif, Staff are all owners of this Holding Company named Genorah. Their ownership is reflected in their shareholding in Genorah. I have attached the file "Genorah Shareholders" for you to see. The sub-entity that is defined by Maredi, Sharif and Staff hold 46% of Genorah.
When a $AU5.48million loan was made from Nkwe Platinum to Genorah, this would benefit all the shareholders of Genorah.
Given Maredi, Sharif and Staff as an entity have a combined total 46% of Genorah. This would through out your argument that "collectively 46%" is irrelevant.
Additionally Maredi, Sharif and Staff are three directors of five directors of Genorah. This means they have operation control of Genorah. At the time the loan is made these are also three of Nkwe directors as well.
The reason your attempted reasoning will fall down is through the following example: If I and 5 friends open up a bermuda company (ABC) with each having 16.66%. Then we vend in various projects into ABC. Finally we then do vend-in deals to an ASX listed company called XYZ where directors of ABC are also directors of XYZ, and ABC is a major shareholder of XYZ. As XYZ raises money on the ASX market, I and my friends can simply just rip out money from XYZ to ABC through "loans" and this will be perfectly legal. If your analysis is correct it means you have found a perfect way to rip money out of a company to related parties. Bermuda Laws follows many of the SEC rules in the United States so I don't think they will allow this.
I believe its your interpretation of the literal isolation of Section 96-4(b) that needs to be reviewed.
Then you can look at Section 96 (5) where it says: Under Nkwe's own AUDITED declaration on the Annual Report 2014, page 50, Section 15(c)(ii)
A loan/receivable that is "unsecured, non-interest bearing and no fixed repayment terms" is in NO way "normal commercial terms" as clearly pointed out in Section 96 (5). The $AU5.48million came out of Nkwe bank account yet its "Zijin holds security over Genorah's shares in Nkwe". There is absolutely no benefit to Nkwe at all. There is NO reason the loan should have been made in the first place.
The other issue you should also look at is that in the same AUDITED annual report of 2014 you registered this $AU5.48million under Section 15 as "Related Party Disclosures". This would obviously come from the fact that at the time three Genorah directors are also directors of Nkwe. Its understandable that Nkwe board is trying their best to defend their position. However I should also note that if the board is deliberately answering shareholders through "half baked" responses then you have to consider also breaching Section 97: Through your recent ASX announcement its said that Nkwe is now working with ASIC over missing money issues. I am sure that you are going to blame everything on Mr Peter Neil Landau for all the trouble, now assuming that you are correct the Nkwe directors formed the Settlement and Release Deed to stop a potential scandal back on the 3rd September 2014. Under that signed agreement you had 3 months to resolve the "$AUD2.5million missing money" through the delivery of International Petroleum (IPL). The Deed expired in December 2014. Its now a full 15 months later. You may debate the settlement was confidential however after its expiry it had to be announced. I know Nkwe used the "confidential" excuse the first time the ASX asked about the Settlement Disclosure. Recently its the "is not considered information that “a reasonable person would expect to have a material effect on the price or value” of the Company’s securities" excuse. IPL has 10% of Hoepakrantz Farm, which under Nkwe AUDITED 2015 annual report contains 20.51Moz 4E Metal Content. The flagship Geratau project has 21.79Moz 4E Metal Content. Its resolution is VERY material. There is proof that IPL could have been resolved for $AUD280k and $AUD300k would further add questions.
I understand there has been many individual investors that has reached out to Nkwe management to work out a peaceful resolution. I certainly hope that this can be achieved. I truly hope that a Derivative Action can be avoided.
NKP Price at posting:
6.1¢ Sentiment: None Disclosure: Held
