A fellow shareholder has shared with me some sentences that you can add to, and use, at your own discretion in order to make a complaint about the recent announcements.
Complaints may also be forwarded to the Treasurer, FIRB, and your local Senators email addresses (particularly Senators Hanson and Lambie, if you live in those States).
Don't delay. Now is the time to work together and your efforts matter. Get on this asap (today and tomorrow) and shoot through an email to get 'explain' notices issued in Week 1 of Jan.
Dear Regulator
Re: URGENT Breach of ASX Listing Rules in relation to proposed issue of shares by Legacy Iron Ore
On 3 December 2019, Legacy Iron Ore Limited (ASX:LCY) announced a share issue that will have the effect of allowing an up to 500% dilution of Australian shareholders’ shares, at a share price that will value the company at approximately 1/2000thof its mineral value.
NMDC, a foreign backed mining agency, proposes to subscribe to the offer, which will have the effect of increasing its shareholding in the company from ~78% to ~95%. NMDC wrestled control of LCY throughout 2018/2019, following the undertaking of a drill program on its WA gold licences. The results of those drilling programs have not been announced to the market as yet, in breach of the company’s continuous disclosure obligations.
At all material times throughout this process LCY, and all entities advising LCY, have acted in breach of theASX Listing Rulesinsofar as they:
·failed to disclose the information required under Listing Rule 7 (especially 7.1A) in relation to notice of, and information accompanying, a special resolution for the issue of the shares at the AGM on 22 August 2019;
·failed to properly obtain shareholder approval for a special resolution for the issue of the shares at the AGM on 22 August 2019 in accordance with theListing Rules;
·asserted to the market and regulator in their 3 December 2019 Appendix 3B that shareholder approval had been obtained for a placement under Listing Rule 7.1A, when it had not obtained that approval in accordance with theListing Rules;
·failed in its obligations in relation to continuous disclosure in relation to it’s Western Australian Gold assets, insofar as it has only reported on out-dated 2018 drill results for those projects for some 18 months now, when a subsequent drilling program has been undertaken at those sites (which has not been reported on);
·failed to comply withListing Rulesrelated to the process for takeover of an ASX Listed Entity; and
·failed to properly model, and notify shareholders, of the issue price of the shares in accordance with theListing Rules.
As a result of the ASX’s inaction on enforcing these prima facie breaches, the company has subsequently sought FIRB approval of the transaction in reliance of false documents and statements it has published to the market and the ASX.
As such, the entire transaction is predicated on false and misleading reporting to the ASX by LCY, NMDC and its advisors, and the transaction appears to be direct action by a foreign government power to mislead Australian investors – in breach of theASX Listing Rules.
Further, the transaction has not been performed in good faith or with a high standard of conduct and compliance with Australia’s laws, and is in-reality a takeover-by-dilution instigated by a foreign power, which seeks to avoid any and all accountability to the market or shareholders. This transaction will become the blueprint for future actions in the Australian resources sector.
It is incumbent on the ASX to immediately act in respect of these breaches. Accordingly, please immediately issue notices in respect of these breaches, commence compliance action, and advise me of all steps taken in relation to this illegal behaviour.
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RE: FIRB approval of 500% dilution of Australian Investors investments by ‘dilution takeover’ of Legacy Iron Ore (ASX:LCY) by Indian Government backed NMDC
I am appalled at therushedandharmfuldecision by your FIRB delegate to approve the 3 December 2019 4-for-1 share issue proposal of Legacy Iron Ore Limited (LCY) to destroy the value of our holdings in LCY by 500% (acknowledged in the announcement), two weeks before Xmas. We are Australians who have families and mortgages, and the FIRB has greenlighted this grab at Australian mineral resources and attack on Australian investors. One of our group is a resident of your Kooyong electorate.
We thought that the FIRB process would protect us from this outrageous sacking by a foreign power to take ownership of over approximately $60 billion AUD of Australian Iron Ore, Rare Earth and Gold resources.[1]In approving the deal, you have waved through a transaction that was based on false information being reported to the ASX, namely, the shareholder approval of the dilution. The proposed share issue at . 2c (which you can still stop) values LCY at a market cap of $2.94 million.
The National Development Corporation Limited (NMDC) is a government of India fully owned public enterprise, who currently owns 78% of LCY and is fully subscribing to the 4-for-1 issue to effectively takeover LCY.
Over a period of three transactions (including this transaction), and years of deliberate mismanagement, NMDC have strategically crushed the share price of LCY so much, that a$100,000.00investment in 2011 in LCY would now be worth just$454.00, or .5%. Also, due to these dilution events, the .19% LCY holding in 2011 would now only represent a .006% of the company, or 1/31stof the original percentage. The backgroundattachedbelow outlines all of NMDC’s actions since 2011, and is based on LCY’s public ASX Announcements.
NMDC have controlled and announced this share issue through LCY, after wrestling control of the company executive in early 2019, and indicating their intent to fully acquire the remaining shares (which will be at the price your FIRB decision approves in the prospectus, .2c). See news articles in attached background outlining their intent to acquire in mid-2019 (a position that they have now attempted to resile from).
There were numerous other ways that NMDC could have funded LCY, and previous raises were based on an assertion that NMDC would forward and procure lines of credit for the company. This is a brazen attempt by India to steal Australian mineral resources, with the backing and approval of the FIRB. The FIRB is, once again, politely holding the door, while India raids Australia’s mineral vaults.
Accordingly, the FIRB approval should be varied, revoked or withdrawn, given that the approval was based on incorrect information related to shareholder approval, and given that the FIRB delegate did not rely on material considerations in forming the decision, namely, the information contained within the attachment (and the associated ASX announcements referred to therein). Further, the proposed transaction cannot be – when taken as a whole – in the national interest, as it:
·allows a 500% dilution of Australian shareholders shares, at a share price that values the company at a minimum of 1/2000thof its mineral value ($60B assets v $3M share issue price);
·is predicated on false reporting to the ASX, which is the direct action of a foreign government power to mislead Australian investors – in breach of theASX Listing Rules;
·has not been undertaken in good faith or with a high standard of conduct and compliance with Australia’s laws; and
·is in-reality a takeover-by-dilution instigated by a foreign power, which seeks to avoid any and all accountability to the market or shareholders, and will become the blueprint for future actions in the Australian resources sector.
Aussie investors are bleeding because of the FIRB inaction and we are losing our countries important resources to the lowest bidder.
This 2019 transaction is not the first time that the FIRB has greenlighted NMDC acting in this unconscionable way. In 2014 a transaction for an issue of shares was approved by FIRB, at an issue price of 7.3c, when the company’sown independent expertconcluded that the pricewas not fair for existing holdersbecause the valuation of the company wasup to 43 cents per share. Further, this most recent share issue comes after years of uncovering misuse of hundred of thousands of dollars of funds by the Executives of LCY, with dozens of services contracts awarded to family members etc of associates and employees.
This market behaviour by a foreign government backed entity, culminating in the 2019 Targeted NMDC Dilution, isexactlythe type of market behaviour that FIRB, the ASX and the Takeover Panel are required to prevent/address.This is the worst case of acquirer control and dilution ever to occur to an ASX listed company, and there are hundreds of Australian families that are affected by this decision going into Christmas (with hundred of thousands lost).
Accordingly, please confirm – as a matter of urgency – that the:
·FIRB approval will be varied, revoked or withdrawn, or subject to further investigation;
·Treasury/FIRB will advise ASIC and the ASX to put LCY into a trading halt, pending the outcome of further investigations into the transaction, and the Board membership/make-up;
·Treasury will advise ASIC and the ASX to investigate the publication of false information to the market by LCY, in contravention with theASX Listing Rules, and issue any and all notices and suspensions required (especially in relation to the false claim that shareholder approval was given for the raise, and that a raise/takeover of this magnitude is even possible);
·Treasury/the Hon. Member/FIRB will refer the matter to the Takeover Panel, as an interested person, for an investigation into the ‘unacceptable circumstances’ of this transaction, it’s coercive effect and removal of market power from Australian shareholders; and/or
·Treasurer will set up a compensation fund for shareholders who lose capital as a result of FIRB approving unconscionable and illegal takeovers of Australia mineral resource assets by Asian countries.
The FIRB’s (4-day turnaround!) approval of this share issue that was based on false information, and is not compliant with basic ASX requirements.
This powerful foreign state is taking Australia for a ride.
I look forward to your speedy reply,
Attachment: BACKGROUND TO 2019 NMDC TARGETED DILUTION TAKEOVER
Attachment: BACKGROUND TO 2019 NMDC TARGETED DILUTION TAKEOVER
1.1.1.On 15 August 2011 Legacy Iron Ore Limited (LCY) had a market capitalisation of ~$50,564,679.88, comprised of 229,839,454 shares on issue at an opening price of 22 cents per share.
1.1.2.For the purposes of illustration for the Panel, an Australian non-corporate investor (colloquially a ‘Mum and Dad investor’) investing $100,000 of their savings into LCY at this point, would have secured them 454,545 shares in LCY, or .19% of the Company (the 2011 $100,000 savings investment). A chart tracking the value of this hypothetical parcel over time until after the 2019 NMDC Targeted Dilution appears in the letter.
1.1.3.In the Annual Report released on 23 September 2011 LCY advised its shareholders that (among other things):
1.1.3.1.“The Company remains well positioned with exciting projects and available lines of funding, to capitalise on improving commodity prices, and grow shareholder value throughout 2012, through continued exploration success and corporate activity;
1.1.3.2.In May 2011, Legacy signed a memorandum of understanding (“MOU”) with National Development Corporation Limited (“NMDC”), a government of India fully owned public enterprise. The MOU subject to all [necessary approvals] allows NMDC the right to acquire a shareholding of up to 50% in Legacy by subscribing for shares, at a price to be agreed between the parties;
1.1.3.3.NMDC is a Government of India owned public enterprise and is actively involved in the exploration of a wide range of minerals including iron ore, copper, phosphate, diamonds, tin and other metals, with sales in excess of A$1.2 billion;
1.1.3.4.Upon the completion of due diligence by both parties and the formal completion of documentation, NMDC will become Legacy’s largest shareholder;
1.1.3.5.The Board of Legacy see the advantage of having NMDC as a shareholder in the ability to source and secure additional resource projects for development with the full financial backing of NMDC.”
1.1.4.On 18 October 2011, LCY announced the execution of a Share Subscription Agreement (the 2011 SSA) with the National Mineral Development Corporation Limited (NMDC), in which it informed the shareholders that (among other things):
1.1.4.1.‘Theproposed investment in Legacy will not be a passive one for NMDC, with NMDC Chairman, Rana Som, continuing to confirm their commitment to develop and increase the value of their investment in Legacy through further acquisitions. This commitment was highlighted earlier this month in India’s Business Standard:
Talking about Legacy, NMDC’s first-ever foreign acquisition, Rana Som said this would be used as a foothold in Australia not only to develop the mines under Legacy but also for acquiring other mines in the country. “Ultimately, Legacy will be our Australian arm,” he added. Explaining that NMDC’s aim was to grow both vertically and horizontally, he said the company was setting up steel plants for vertical growth and acquiring mines for horizontal growth”’;
1.1.4.2.Legacy and NMDC discussions on the future acquisition and funding of resource projects in Australia, using Legacy as the vehicle, have been based around:
1.1.4.2.1.The enlarged Legacy/NMDC company acquiring a minimum of 50% and up to 100% of a project, using Legacy as the vehicle to hold that interest.
1.1.4.2.2.NMDC to having sole responsibility for arranging project finance for the full development of the project, via debt financing.
1.1.4.2.3.The enlarged Legacy/NMDC company agreeing to repay the vendors of the projects certain development costs incurred to date. The proposed acquisition model will see Legacy used to acquire a significant interest in resource projects, via the reimbursement of development costs incurred by project vendors to date, typically in the range of $20 - $40m to begin, and NMDC charged with arranging 100% project financing through debt funding.
1.1.4.2.4.As speculated in various media articles, NMDC has also been in advanced discussions with a large Australian iron ore company, regarding the purchase and development of a large scale JORC classified iron ore deposit. … NMDC have indicated their preference to have the acquisition made through Legacy, upon shareholders agreeing to the Placement made by NMDC into Legacy.
1.1.4.2.5.NMDC is essentially eyeing acquisitions to expand its capacity and to ensure raw material security for its upcoming steel mills in Chhattisgarh and Karnataka. This desire to control the vertical supply chain was recently reflected in NMDC Chairman Rana Som’s discussion with the Press Trust of India, where Mr Som stated that
"A navratna company can spend one-third of its net worth on overseas acquisitions which comes to USD 1.2 billion (about Rs 5,400 crore) for us. This fiscal our target is to spend up to USD 500 million and we have already shortlisted four assets abroad,"NMDC Chairman Rana Som told PTI”.
1.1.4.2.6.[Under the heading ‘NMDC financing capacity’] NMDC currently has cash reserves in excess of US$4 billion, and has additional lines of credit from banking syndicates, including Citibank, which have been made available for the purchase and financing of resource projects. Once on board as the largest shareholder of Legacy, NMDC will not only be providing full funding for the ongoing development of Mount Bevan, but arranging for 100% of the required project finance as well.
1.1.4.2.7.NMDC recently highlighting this in an interview report in the Indian Press, on 13 October 2011:
“Hyderabad State-owned NMDC and Australia - based Legacy Iron will jointly invest around $1.3 billion to develop Mt Bevan iron ore project in Western Australia. NMDC Director (Finance) S Thiagarajan said that the project will be developed on 70:30 debt and equity ratio and the investment will start pumping in once formalities for acquiring 50 per cent stake in Legacy by NMDC are completed. NMDC is buying 50 per cent stake in Legacy Iron Ore for nearly 19 million Australian dollars, which will mark the PSU's first-ever overseas acquisition. Mt Bevan is a joint venture between Legacy and Hawthorn Resources. Legacy will earn a 60 per cent interest by spending a minimum of $3.5 million on developing the project to a pre-feasibility status. Mt Bevan is considered to hold excellent potential for the definition of substantial Direct Shipping Ore hematite and magnetite iron resources that are located close to existing road, rail and port facilities…Mt Bevan may need at least $1.3 billion capex investment. Equity part of NMDC and Legacy will be 30 per cent. As soon we complete the acquisition part we will take that up. As it is they are doing some exploration there. Once we pump in the money, the work will be stepped up."
1.1.4.2.8.Whilst debt financing will be used to reduce the dilutionary effects on shareholders for financing 70% of any capex requirements, it is envisaged the 30% equity component of such project finance could include a rights issue for all shareholders to participate in, including NMDC. In addition, loan facilities can be arranged by the newly enlarged Legacy/NMDC entity. Any debt finance arranged through NMDC will also have the added benefit of attractive project finance interest rates and conditions, given NMDC’s financial strength and international status, in its capacity as an Indian government owned enterprise.
1.1.5.The 2011 SSA had a devastating impact on the share price of LCY. On 9 December 2011 Legacy Iron Ore Limited (LCY) had 262,475,307 shares on issue at a closing price of 11 cents per share. For comparison, the2011 $100,000 savings investmentof 454,545 shares would have lost 50% of its value in that short time, and would then have been worth $49,999.95.
1.1.6.On 11 November 2011 LCY released the Notice of Extraordinary General Meeting documentation in relation to the 2011 SSA, which annexed detailed tenement and asset valuations, and the independent expert report of HLB Mann Judd Corporate (See Annexure 2), which concluded that (among other things):
1.1.6.1.The proposed acquisition of shares by NMDC under Resolution 1 was not fair to the Company’s non-associated shareholders;
1.1.6.2.The net asset position of LCY at that time was between $80.77M and $140.24M;
1.1.6.3.The proposed transaction was not fair because the subscription price to be paid by NMDC under Resolution 1 (ie. 7.3 cents per share) was multiples below the fair market value of the share based on LCY’s nett assets (which were in the range (at that time) of 26.9c - 43c per share); and
1.1.6.4.The nett asset backing method was the most appropriate method to value the shares (and the subsequent issue price).
1.1.7.Despite the above, at the Extraordinary General Meeting on 16 December 2011, resolutions were passed for approval of the 2011 SSA, the issuance of shares, and the engagement of NMDC executives/nominees (Mr Rana Som and Mr Naveen Kumar Nandaras)as Directors of LCY. The three resolutions passed in respect of these matters (Resolutions 1-3), were passed with approximately 97.8 million votes (of a reported possible 154,476,813). The vast majority of these votes came from the top three shareholders:
1.1.7.1.LCY Managing Director Sharon Heng (43,819,671);
1.1.7.2.Wealth Forever Ltd, a company run by LCY Managing Director Sharon Heng (23,000,000); and
1.1.7.3.Zorich Limited (13,000,000), a company run by Mr Hao Tan, who was subsequently appointed as a Director of LCY on 29 February 2012 (See 7 March 2012 Announcement).
1.1.8.On 16 December 2011 the 2011 SSA came into effect, which provided for the issuance of 311,362,699 additional shares (namely ~2 times those on offer at 30 June 2011), for a sum of ~$18.9 million (the 2011 Targeted NMDC Dilution).
1.1.9.The result of the 2011 Targeted Dilution, and other share issues to family members of executives, employees and consultants throughout that year, was that the 156,103,280 shares on issue at 30 June 2011 had increased to 581,283,502 on issue by 30 June 2012.
1.1.10.Of that 581,283,502, ~65.18% of the company was then held/controlled by NMDC, Sharon Heng, Wealth Forever Ltd, Zorich Ltd, and Rock Resources Ltd.
1.1.11.On 29 June 2012 the share price closed at 9.4c. The2011 $100,000 savings investmentof 454,545 shares would have then lost 57.3% of its value, and would have been worth $42,747, while ownership in the company would have been diluted from .19% to .078%.
1.1.12.The total remuneration of Managing Director Sharon Heng for the 2012 and 2013 financial years was $1,091,922 and $595,410 respectively. The loss per share for 2012 and 2013 was 2.27 cents per share and 2.06 cents per share respectively.
1.1.13.On 2 July 2014 the share price closed at 2c per share. In comparative terms, this meant that the2011 $100,000 savings investmentof 454,545 shares would have lost ~91% of its value, and would now be worth a mere $9,090.
1.1.14.On 7 July 2014 LCY announced a 3 for 1 renounceable rights offer, at an offer price of 1.4c per share, and confirmed that NMDC (48.8% holder) had confirmed its commitment to take up its full entitlement (the 2014 Targeted NMDC Dilution).
1.1.15.During the 2014/2015 Financial Year, the 590,613,697 shares on issue ballooned to 1,468,264,157 as a result of the 2014 Targeted NMDC Dilution, and NMDC increased its holding by 877,650,460 shares (for a total holding of 78.56%)
1.1.16.On 24 September 2014 the share price closed at 1.2c per share. In comparative terms, this meant that the2011 $100,000 savings investmentof 454,545 shares would have lost ~94.5% of its value, and would now be worth $5,454, while ownership in the company would have been diluted from .19% to 0.03%.
1.1.17.On 31 October 2014 Sharon Heng resigned as Managing Director with immediate effect. The announcement in respect of Ms Heng’s resignation advised shareholders that, “the resignation of Ms Heng follows a review and analysis by the Board of financial transactions for the period June 2011 to present within the Company, which culminated in an agreement by Ms Heng to pay approximately $868,000 to the Company with payments scheduled to occur over the next 5 years.”
1.1.18.On 12 December 2014 Mr Rakesh Gupta was appointed as Chief Executive Officer of LCY.
1.1.19.On 23 January 2015 Mr Devinder Singh Ahluwalia (the NMDC Director of Finance) was appointed as a non-executive director of LCY.
1.1.20.On 26 March 2015 Dr Tanugula Rama Kishan Rao (the NMDC Commercial Director) was appointed as a non-executive director of LCY.
1.1.21.On 31 August 2017 Mr Rakesh Gupta was appointed as Executive Director of LCY.
1.1.22.On 9 July 2018 Mr N Baijendra Kumar (the Chairman/Managing Director of NMDC) was appointed as Non-Executive Chairman of LCY.
1.1.23.On 12 March 2019 Mr Amitava Mukherjee (the Director (Finance) of NMDC) was appointed as a non-Executive Director of LCY.
1.1.24.On 30 May 2019 Mining Weekly quoted NMDC company statements in relation to NMDC’s aim to:
1.1.24.1.acquire the remaining shares in LCY and delist LCY from the ASX;
1.1.24.2.establish a global arm of NMDC and expand the operations of LCY; and
1.1.24.3.invest an additional $10 million AUD into LCYafter it was delistedto develop the LCY’s estimated20 million ounce resourceat Yudamindera (AUD Gold price as at 3/12/2019 is $2,133.86/oz, which would – in simple terms – value the Yudamindera resource at ~$42.67B AUD before operating/production/ contingency costs);
1.1.25. On 31 May 2019 Mining Technology quoted NMDC Finance Manager Amitava Mukherjee (who was also a Non-Executive Director of LCY):
“We are planning to acquire the remaining stake in Legacy…and may delist the company …in the future after the full takeover as there is a lot of compliance-related expenditure.”
1.1.26.On 17 June 2019 Mr Alok Kumar Mehta (the NMDC Commercial Director) was appointed as a non-executive Director of LCY.
1.1.27.On 1 October 2019 the share price closed at .5c per share. In comparative terms, this meant that the2011 $100,000 savings investmentof 454,545 shares would have lost ~97.7% of its value, and would now be worth $2,272.75.
1.1.28.On 3 December 2019 LCY announced a 4 for 1 renounceable rights offer, at an offer price of .2c per share, and confirmed that NMDC (48.8%) had confirmed its commitment to take up its full entitlement (the 2019 Targeted NMDC Dilution).
1.1.29.On 3 December 2019 the share price closed at .3c per share. In comparative terms, this meant that the2011 $100,000 savings investmentof 454,545 shares would have lost ~98.7% of its value, and would now be worth $1,363.63.
1.1.30.NMDC currently holds 1,153,450,796 shares of LCY. On completion of the 2019 Targeted NMDC Dilution (on the terms outlined in the 3 December 2019 Entitlement Issue Prospectus) NMDC will hold 5,767,253,980 shares (of a possible 7,341,320,785), or 94.82% of LCY. LCY acknowledges in the Prospectus could have a dilutive effect of up to 500% on existing shareholders.
1.1.31.The effect of the 2019 Targeted NMDC Dilution (as the final act in the course of conduct outlined above) will be to decimate the share price to .1c or .2c (See Annexure 3 Report). In comparative terms, this will mean that2011 $100,000 savings investmentof 454,545 shares would have lost ~99.1-99.5% of their value, and would now be worth $454.54 - $909.09 (with the initial stake of .19% now being .006%, or 1/31stof the original).
1.1.32.This market behaviour by a foreign government backed entity, culminating in the 2019 Targeted NMDC Dilution that is the subject of these proceedings, isexactlythe type of market behaviour that the FIRB and Takeover Panel were established to address, and is the worst case of acquirer control and dilution ever to occur to an ASX listed company.