Today's article in The...

Today's article in The Australian

http://www.theaustralian.com.au/business/asf-holds-23-per-cent-of-rey/story-e6frg8zx-1226518432929

Chinese raider ASF seeks board control of Rey Resources

Chinese-backed ASF Group has set out to grab board control of Rey Resources after having only recently moved on to the share register of the West Australian coal developer through a $13.8 million placement in September.

The move by ASX-listed ASF has raised fears that effective control of Rey could pass without a control premium being paid for the $34m company, one with big ambitions to export steaming coal from the Kimberley region to India and elsewhere in Asia to meet the forecast surge in electricity consumption.

The potential for the new "two strikes" rule on shareholder votes on remuneration reports to have the unintended consequence of helping ASF secure board control has also raised wider implications of ASF's manoeuvering.

ASF holds 23 per cent of Rey, which is advancing plans to export coal from its 350 million tonne Duchess Paradise coal project on a pastoral station 175km southeast of Derby in the Kimberley.

ASF emerged as a new backer of the plans by taking up its 23 per cent stake in a two-trance placement at 12c a share.

Rey is now trading at 6.7c a share and has an annual meeting scheduled for next Thursday in Perth. Ahead of that meeting, Rey received a request from ASF for the eight-person Rey board to be reduced in size. Rey said that ASF requested the resignation of all but one of the existing non-executive directors and proposed the appointment of a non-executive director, as well as requesting the resignation of Rey's strategy executive director.

ASF currently has two nominees on the board of eight.

Rey chairman and former managing director of Rio Tinto Australia, Charlie Lenegan, has told shareholders that non-ASF directors have already agreed that the board be reduced to six by the resignation of two independent non-executive directors and were "particularly concerned" with the ASF proposal to remove the strategy director and a further non-executive director "because of the potential consequences of these changes to the business and the board".

"If implemented, these changes would reduce the board to four directors, two of who are ASF nominees. As noted above, ASF has also indicated that it plans to seek the appointment of another independent non-executive director," Mr Lenegan said.

"These suggested changes should be carefully considered by shareholders in the context of the upcoming annual general meeting," he said.

Mr Lenegan noted that after the vote of more than 25 per cent against Rey's remuneration report last year, there was a possibility of a spill motion at next week's annual meeting, should the vote against again be more than 25 per cent.