Burnt investors get at Paynes to explain cash drain and board...

Burnt investors get at Paynes to explain cash drain and board changes
BY: ANDREW BURRELL From: The Australian December 03, 2011 12:00AM


Mining veteran Peter Salter - at the old Paynes Find goldfield 420km northwest of Perth last year - has stepped down from the board of Paynes Find Gold. Picture: Colin Murty Source: The Australian
THEY say business is done a bit differently in the wild west.

But that's cold comfort to investors in listed explorer Paynes Find Gold, which has seen its shares plummet and the company burn through almost all its cash as directors spent more on their own salaries than on drilling for the precious metal.

And the highest paid of all was the managing director, veteran Perth mining identity Peter Salter, who pulled in a base salary of $520,000 for just seven months' work last year -- the equivalent of a $900,000 annual wage. That puts Salter, as the head of a small explorer, in the same pay league as a chief executive running a company with a market value of hundreds of millions of dollars.

Shareholders stopped paying the colourful Salter last month when he stepped down from the board. A few weeks earlier, he was removed as managing director for reasons that were not disclosed to the market.


But The Weekend Australian can reveal that Salter, 64, was dumped after he allegedly failed to inform the board that he was accused of sexually harassing a female employee at the company's remote project in Western Australia.

A series of letters between the WA Equal Opportunity Commission and Paynes Find Gold show a young Canadian backpacker was paid $4000 to settle a complaint of sexual harrassment she lodged against both Salter and the company, but this was done without admission of any liability. The woman claimed she resigned from her job and became depressed after Salter -- who denied any wrongdoing -- grabbed her bottom, kissed her, tried to hug her and asked her to fly back to Perth with him.

Salter's behaviour was also under scrutiny in the weeks before his dismissal amid allegations -- detailed in a complaint to the Civil Aviation Safety Authority -- that he urinated into a sick bag during a company charter flight and later threatened to punch the pilot.

Salter has not returned phone calls, text message and emails this week. The allegations concerning the mining promoter's conduct come in the middle of a bitter boardroom brawl in which dissident shareholders led by Perth businessman Carl Popal are trying to seize control of the company, which owns lucrative gold tenements at Paynes Find, 420km northwest of Perth.

Popal, who has called an extraordinary general meeting of shareholders in Perth for next Friday, is demanding to know how Paynes Find Gold has raised a total of $9m from investors since late last year but had just $300,000 in its accounts at the end of September.

Questions have also been raised over how the company -- with Salter at the helm -- managed to spend $1.9m on employee, corporate and administration costs in 2010-11 but only $960,000 on exploration. The five directors shared more than $1m in salaries and fees among themselves.

While it's hardly unusual for a small explorer to burn through cash, Paynes Find Gold has little to show for its efforts almost 12 months after it floated.

There has been no drilling at the site for several months and the company's shares have been suspended from trading since October as the board attempts to raise more capital through a stalled convertible note issue.

Chairman Paul Berresford, who was considered a close ally of Salter, denies spending has been out of control and says the company's $5.2m net loss in its first seven months of operations is not unusual for a junior explorer.

He blames some of the blowouts on a storm that tore through Paynes Find earlier this year, destroying the workers' camp.

But Berresford does admit that Salter was overpaid and that the board signed off on the generous package before the ASX listing.

"There was a concern that he didn't represent good value," he says of the decision to remove Salter. "The decision was made to stand him down as managing director."According to the Paynes Find Gold prospectus, Salter's private company Superite (2010) was contracted to provide "management services" at the rate of $250 an hour for two years from the date of the ASX listing.

The June 30 annual report shows Salter, through Superite (2010), earned more than $500,000 in consulting fees for seven months' work in 2010-11, which means he charged the company for working the equivalent of about 70 hours each week and, according to sources, it is doubtful whether Salter, who suffers from arthritis and back problems, would have been able to work such hours.

The annual report shows Berresford drew $354,000 from the company in the same period, due to his multiple roles as the company's accountant, landlord, company secretary and chairman.

Fellow director Adam Bennett received $140,00 over the period.

Former director Brian Leedman would not be drawn on the reasons for Salter's dismissal but says he had had "a gutful of Mr Salter's behaviour".

Leedman became interim managing director after Salter's removal but resigned within weeks.

"Because Mr Salter refused to resign from the board and I became managing director, I felt my position was untenable," he says.

Shareholders who closely scrutinised the Paynes Find Gold prospectus last year would have been well aware of Salter's record in business.

One small paragraph on page 81 says the businessman was banned in 2005 from serving as a company director by the Australian Securities and Investments Commission for 3 1/2 years over his role in failed bottled water companies Tiger Spring and Aussie Viva.

Both companies, which were spruiking a plan to export magnesium-rich water to the US, collapsed in 2003 and were unable to pay creditors more than 50c in the dollar, according to the liquidators.

ASIC found Salter had breached provisions of the Corporations Act relating to directors' duties, the requirement to give an administrator full details of the financial circumstances of a company, and failed to ensure Aussie Viva complied with the prohibition against offering securities without a disclosure document.

There is no record of Salter commenting on the allegations at the time and he could not be contacted this week.

Salter is also well known in Perth business circles for his involvement in Anaconda Nickel in the 1990s and for a bitter falling out with its then chief executive, a young mining promoter called Andrew "Twiggy" Forrest.

In one celebrated incident in the 1990s, Salter punched Forrest in the face after a four-hour lunch at a Chinese restaurant.Salter admitted in court to the assault but claimed provocation, and the claim was dismissed.After being served with the ASIC ban in 2005, Salter went into exile by pursuing business interests in Hong Kong.

But last year, with his capacity to serve as a company director in Australia restored, he decided to return to the Perth mining scene in an attempt to cash in on the soaring gold price.

"One morning I just woke up in Hong Kong and said I've got to get back into it," Salter said in October last year.

But he sowed the seeds of his downfall in March when he allegedly sexually harassed the female cleaner at the company's exploration site in Western Australia's Mid-West region.

The woman was paid $4000 to settle the case after a complaint was made to the West Australian Equal Opportunity Commission, according to documents obtained by The Weekend Australian. The woman and Salter, in his capacity as managing director of Paynes Find Gold, signed the settlement on August 11.

It was reached "without any admission of liability for breach of the Equal Opportunity Act".

It is understood that Salter failed to inform the board of the alleged incident or the settlement.

This placed his relationship with some directors under strain and is believed to have led to his removal as managing director.

It remains unclear whether Salter paid the $4000 from his own pocket or with company funds.

The woman alleged in her complaint to the EOC that she was in her room at the Paynes Find site on April 8 after finishing work for the day when Salter came to her door and asked her to help him pack his bags.

"He gave me $100, and I followed him to his room," she claimed.

"As I gathered his belongings and placed them in his luggage, he came behind me and grabbed my backside. I turned around and told him it was inappropriate and he said that I could grab his 'arse'.

"I told him no and that it was rude and inappropriate. He then stated that I had a nice arse.

"I was flustered and just kept saying that it was rude and inappropriate and he just laughed it off like it was nothing."

The woman alleged she left Salter's room but saw him again later.

"I was stuck standing in front of him and he handed me a $50 bill," she alleged.

"I was upset and asked him why he was giving me money for just standing there.

"I had told him not to grab my ass again as he was coming towards me as they (sic) he was going to give me a hug.

"Then he scoffed and tried to hug me and gave me a kiss on the neck. He kept asking me to fly back to Perth with him and I said I didn't want to leave."

In his response to the allegation, Salter denied he had acted inappropriately or that he touched the woman in the way she alleged.

He said he had paid the woman $100 for massaging his arthritic ankles.Fellow director Adam Bennett told the EOC that he had not observed Salter acting inappropriately on the site and the cleaner had not reported the alleged incident to him.

"I would have thought if anything inappropriate did take place, it would have been reported to me immediately," he told the commission.In her complaint, the woman said she had decided to resign a few days later after discovering that Salter was due to return to Paynes Find.

She said the incident had made her depressed.

"Not only was it degrading, but every time I think about it I feel sick and I get angry," she claimed.

"I was supposed to have this job for six months so that I could pay off all my debts and have plenty of money to travel around the rest of Australia with."

Just days after signing the sexual harassment settlement in August, Salter ran into more trouble during a company charter flight between Paynes Find and Perth's Jandakot airport.

According to a complaint sent to CASA, an "intoxicated" Salter urinated into a bag during the flight with fellow directors Adam Bennett and Paul Matich.

The Cessna 402C aircraft had no toilet, but the flight back from Paynes Find lasted for less than one hour.

"Peter indicated he wanted to use the toilet and that he would use the Esky if he had to," said the senior pilot in the complaint that was sent to CASA.

"I proceeded to give him a sick bag. Sometime later he was seen holding the bag and asking what to do with it. As we were just entering (controlled air space) I was unable to help and indicated he would have to hold it.

"With this, Peter became very angry and poured the contents of the bag into the Esky (with beer still in it). At this time he began to threaten me, suggesting he would punch me out when we got to Jandakot. Apparently he thought I was laughing at him."

After landing the aircraft and disembarking, the pilot said he had attempted to speak to Salter to reassure him he had not been laughing at him. "He responded to this gesture with the uncalled-for aggression that he had previously shown me," the pilot alleged in the incident report.

"Peter threatened and indicated to carry out his threat to punch me. With this action, Adam (Bennett) stepped between us and defused the situation. This incident has unsettled and shocked me due to the instant snap personality change in Peter."

No action has been take against Salter in relation to the allegations.

Paynes Find Gold shareholders will meet on Friday to decide whether to elect Popal and geologist Ray Muskett to the board alongside their ally Doug Taylor.

If the pair are elected, they will have the numbers to seize control of the board and possibly remove Beresford and Bennett, who is also a long-time ally of Salter.

Popal says his camp is opposed to Berresford's decision last month to reinstate Bennett as a director, even though shareholders had voted against his appointment at the annual meeting.

"Adam Bennett's appointment went against the democratic support of shareholders," Popal says.

Berresford defends his actions as chairman, saying he had to appoint someone to the board because the company's constitution requires a minimum of three directors and Bennett's rejection left only two.

He says a group of shareholders, including Popal, gathered after the annual meeting and agreed to reinstate Bennett and to appoint Doug Taylor.

Popal denies he backed Bennett's reinstatement, saying he wants an "independent board with no vested interests and one that is purely focused on the project".

Berresford went on the front foot this week, appointing a new director, John Hatherley, in a bid to head off Popal's challenge at the extraordinary meeting.

Mr Cunningham, whose firm CPS Securities managed last year's float of Paynes Find Gold along with Patersons, made no comment on the recent management of the company but says he still believes it has excellent tenements.

The tenements at Paynes Find are littered with hundreds of abandoned mine shafts that were explored for gold from 1911 until the 1980s.

Paynes Find Gold sold its vision during last year's initial public offering by saying it would use modern exploration techniques to transform the historic underground mines into a single open-pit gold operation.

"It's an asset worthy of everyone fighting over," Cunningham says.

Patersons director of corporate finance Michael Atkins says he wants to see an independent board in place rather than one comprising representatives of the warring parties.

"It's a very sound asset that needs to be taken to the next stage," he says.

"If someone who knew what they were doing got involved, that would be good."