TS is a pretty smart feller. IF this court case goes Chameleon's way, this company could change colour very quickly. I especially liked the part about the $800 million value of the Murchison iron ore tenements!
Chameleon Mining used as 'milch cow' to buy WA tenements Rebecca Urban From: The Australian September 30, 2009 10:00AM
CHAMELEON CHAIRMAN: Former rugby league player Benny Elias. Picture: Adam Ward Source: News Interactive MINING identities Greg Barnes and Phillip Grimaldi used Chameleon Mining as a "milch cow" to buy WA tenements, a Sydney court has heard. In a case brought against the pair by Chameleon, the Federal Court heard allegations yesterday that Mr Barnes and Mr Grimaldi fraudulently extracted cash and shares to buy lucrative mining tenements for a rival company, Murchison Metals.
The court heard they breached their fiduciary duties by arranging a series of share placements for the benefit of a cash-strapped Murchison Metals, enabling its purchase of the Iron Jack tenements in WA in 2004. Mr Barnes and Mr Grimaldi are defending the allegations.
Chameleon - chaired by former rugby league player Benny Elias and backed by several colourful characters, including banned stockbroker Jeff Braysich and so-called porn king Con Ange - is claiming rights over Murchison's Jack Hills project, which is now worth an estimated $800 million.
In his opening submission, Noel Hutley SC, who is acting for Chameleon, accused Mr Barnes and Mr Grimaldi of hatching a plan to use Chameleon for the purpose of ensuring that NiCu -- as Murchison used to be known -- could obtain funding.
At the time, Mr Barnes was managing director of Chameleon and Mr Grimaldi was a director of NiCu.
However, the court heard that Mr Grimaldi was also a shadow director of Chameleon and, while he was never appointed to the board, he acted as an officer of the company.
According to Mr Hutley, NiCu had been experiencing financial difficulties and would have been in no position to acquire the Iron Jack tenements if not for profits derived from several Chameleon transactions.
He said Mr Barnes knew that Chameleon was also having problems extracting $3.2m in promised funding from a financier, a matter that had not been disclosed to the company's investors.
"He then joined in influence with Mr Grimaldi to keep the milch cow alive so that it could fund NiCu ... which had no money," Mr Hutley said.
Quoting from a letter Mr Grimaldi wrote to Mr Barnes at the time, Mr Hutley said Mr Grimaldi warned his colleague "if you think you've got problems now, (that's) nothing compared to if you blow the whistle" and "we work hard to get NiCu cashed up".
Chameleon argues that NiCu, or Murchison, received a direct benefit from four transactions, including three share placements, as well as an earlier deal involving its purchase of leases from New Millennium.
Chameleon was the initial purchaser of the leases. However, Murchison, which was then known as Weboz, stepped in to buy the leases and sold them on to Chameleon for a higher price. It banked a paper profit of $1.65m.
"They had found the key to manufacturing profit," Mr Hutley said. "Just use Chameleon ... in effect the body which will issue shares willy-nilly for the benefit ultimately, we say, for Mr Grimaldi and Mr Barnes."
Murchison and the former directors are defending the action. Mr Barnes, who is also being pursued by the Australian Securities & Investments Commission over a related matter, issued a statement yesterday saying the case had no substance.
The case almost didn't proceed as a result of Chameleon's limited finances. Last year the company parted ways with its legal adviser Atanaskovic Hartnell, which later issued it with a statutory demand over unpaid bills. Chameleon, which has a market capitalisation of just $37m, has since secured a new lawyer and a litigation funder, the Singapore-based International Litigation Partners whose sole shareholder is a company registered to the British Virgin Islands.
Chameleon has yet to disclose the terms of the arrangement, including the split of proceeds should the case prove successful.
(20min delay)