Sage, Evraz at loggerheads 2nd September 2008, 7:45 WST
Cape Lambert Iron Ore chairman Tony Sage was last night on a collision course with his biggest shareholder Evraz, the Russian steel giant controlled by billionaire Roman Abramovich, after striking a $US200 million ($234.5 million) deal with entrepreneur Frank Timis to acquire an African iron ore project.
The proposed deal with Mr Timis’ London-listed African Minerals came only hours after Evraz wrote to Mr Sage demanding board representation to reflect its 19.9 per cent stake in Cape Lambert. Evraz also used its letter to tell Cape Lambert it was opposed to a proposed $62.3 million unfranked cash dividend to shareholders and against any corporate deal and scrip issue.
In clear defiance of Evraz’s demand, the African Minerals deal will see Cape Lambert issue a 10 per cent stake to the Timis-chaired company and spend $US25 million on a feasibility study for an initial 30 per cent interest in the Marampa hematite asset in Sierra Leone.
Cape Lambert will also have an option to acquire the remaining 70 per cent of Marampa in a deal that would value the project at $US200 million.
Cape Lambert and African Minerals expect to formalise the binding term sheet by the end of the month.
The deal is likely to spark hostilities between Cape Lambert and Evraz.
Mr Sage said last night he was “shocked” and “bemused” by Evraz’s tactics but would put the demand to Cape Lambert’s next board meeting, later this month.
But he hinted Evraz’s demand for board representation would be knocked back given the Russian steelmaker’s clear intention to influence the Perth company’s future direction and prevent the dividend payment.
An Evraz spokesman, speaking before the African Minerals deal was announced in London last night, said it would contribute expertise and experience to Cape Lambert’s board.
A source close to the Russian steelmaker later added that Evraz was concerned about how Cape Lambert planned to spend the $400 million proceeds from the Perth company’s sale of its flagship magnetite project in the Pilbara to China Metallurgical Group Corporation (MCC).
Cape Lambert has already flagged, and received shareholder approval for, plans to return $37.7 million to shareholders in franked dividends, $62.3 million in unfranked dividends, pay the Hong Kong broker who introduced MCC $38 million and use $171.1 million on future projects.
Evraz could requisition a Cape Lambert shareholders meeting to force board change if its demand fails.
Evraz’s stake in Cape Lambert will be cut to under 18 per cent once the new scrip is issued to African Minerals. The share issue to Mr Timis’ company will not require approval from Cape Lambert investors but will not be eligible for the special payouts.
Cape Lambert has been working on the African Minerals deal for several months, long before Evraz became a shareholder. Until six weeks ago, Evraz was eyeing a takeover of Cape Lambert to snare the magnetite project from MCC. However, Evraz then stunned Cape Lambert by instead striking a deal with MCC.
PERTH Edited by SEAN SMITH PETER KLINGER
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