Poseidon returns, in name only Kevin Andrusiak 04jun07
COME early afternoon July 2, Sydney-time, the mining world will officially have its Poseidon Mark II.
At least in name, not in theory.
That is, given that Niagara Mining shareholders vote to approve a reorganisation of their company which controls the Mt Windarra project in outback Western Australia - the scene of the infamous Poseidon boom and bust in the late 1960s.
Central to the Niagara tweaking is the move by Andrew “Twiggy” Forrest to become non-executive chairman who will use all his nous and guile to drive Niagara to become a nickel producer of note. Another part which shareholders will have to consider is a name change from Niagara to Poseidon Nickel Limited.
Why Niagara feels comfortable with aligning itself with one of the most infamous periods in Australian mining history is a matter for the company.
For those unfamiliar with the Poseidon adventure, and Daily Assay is not talking about the movie involving a sinking ship, the story goes like this.
Poseidon NL discovered the Mt Windarra nickel deposit in September 1969 at a time of rising nickel prices.
Its share price ran from 80 cents in September to $280 six months later which prompted many other mining promoters to cash in on the heady times and list companies which had no hope really of ever being a nickel miner.
By the time Poseidon got into production the price of nickel fell and the company went bust. Western Mining (WMC Resources) then took over Mt Windarra which it worked until 1991.
Rising nickel prices prompted Niagara to revisit the project and in January 2005 it made its move.
Two years and three months later it announced the Forrest deal in the hope that the man would bring his skills to Niagara and revitalise the deposit much quicker than the father-son team of Doug and Chris Daws could ever have.
And they are prepared to give up their company relatively cheaply too.
For his trouble, Forrest will get, subject to shareholder approval, 115 million options with a conversion price of 40c if he takes the chairman's role.
Niagara has already entered into a nickel marketing agreement with Fortescue on May 16. It was around the time that the ASX issued Niagara with three notices asking it to explain share price movements.
Forrest is already $105.8 million in the black on that stock which will cost him $46 million to exercise.
Niagara will undergo a 2-for-1 consolidation of its shares and when Forrest's 5 million shares gifted to him as part of a placement are added to the 115 million options - which can be exercised at any time in the next five years - it gives him a 40.95 per cent major shareholding the company.
$46 million for a controlling stake in a $386.6 million company is not bad going in anybody's language.
“Mr Forrest's primary skills are as an asset builder and financier, developing dynamic and dedicated teams to meet corporate objectives,” current Niagara chairman Doug Daws said in a letter to shareholders.
“The purpose of the grant of Forrest options is to provide an incentive to Mr Forrest to assist in the achievement of the company's objectives as non-executive chairman of the company and to align his interests with shareholders. In the event the Forrest options are exercised, the incentive remains to contribute to the achievement of the company's objectives, derive shareholder return and increase the price of a share.”
Certainly Niagara shareholders hope that Mr Forrest will not be satisfied with his $100 million-plus stag profits and continue to improve the company's fortunes.
They would also be aware that on conversion of the Forrest options, it will have a dilutionary effect of 72.4 per cent on their equity stake.
The funds raised from the option conversions will be set aside for exploration work at Mt Windarra, but one wonders if Niagara could have got more out of Forrest.
BDO Consultants out of Perth believe the proposal is fair and reasonable to shareholders, despite it giving Forrest a blocking stake on any resolution which requires a 75 per cent majority
NIA Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
