RM RESEARCH PTY LTD IS A CORPORATE AUTHORISED REPRESENTATIVE OF...

RM RESEARCH PTY LTD IS A CORPORATE AUTHORISED REPRESENTATIVE OF RM CAPITAL PTY LTD (AFSL 221938)
Chameleon Mining Limited (ASX: CHM)
Chameleon launches broadside on Murchison… Jack Hills at risk 8th April 2008
Recommendation: Speculative Buy
GICS Industry: Materials
Capital Structure:
Share Price A$0.026
Fully paid ordinary Shares 1,097.1m
Opt (ex 0.4c, exp 31/12/10) 422.6m
Opt (ex 15c, exp 31/12/10) 4.0m
Market Capitalisation - dil A$39.5m
Approx Cash (31/12/07) A$1.3m
Share Price Year High-Low A$0.02-0.125
Directors:
Director Ben Elias
Director Siew Hong Koh
Director Anthony Karam
Director/Secretary John Chambers
Top Shareholders:
Entity Shares
(m) %
RBC Dexia Inv Serv Aust Nom 84.7 7.7
McNeil Noms Pty Limited 50.0 4.6
Centrebright Pty Limited 45.7 4.2
Fortis Clearing Noms P/L 27.7 2.5
RLB Investments Limited 22.0 2.0
Share Price History:
Investment Highlights
Commences Federal Court Proceedings
q In late November 2007, Chameleon Mining Limited (“Chameleon”, “CHM”,
“the Company”) commenced forshadowed proceeding against Murchison
Metals Limited (“Murchision”, “MMX”), former Murchison director Phil
Grimaldi, Greg Barnes, Pinnacle Nominees Pty Limited and Murchison’s 50%
owned subsidiary Crosslands Resources Ltd (“Crosslands”) in the Federal
Court of Australia;
q The claim relates to, inter alia, Crosslands, which holds the Jack Hills and
Weld Range iron ore deposits situated in the Midwest of Western Australia,
380km north-east of Geraldton. The balance of the shares in Crosslands
(50%) is owned by Mitsubishi Development Pty Ltd (“Mitsubishi”);
q The claim, inter alia, alleges that Murchison is holding shares in Crosslands
on a constructive trust for Chameleon. The writ also alleges that Crosslands
is holding Jack Hills and Weld Range on constructive trust for Chameleon.
Furthermore, the writ alleges that former Chameleon director Barnes and de
facto director Grimaldi caused Chameleon to issue securities sold to raise
funds that were then used by Murchison to acquire Jack Hills and Weld
Range. Chameleon is therefore looking for an account of profits from its
ownership of Crosslands, an account of profits from Murchison’s sale of 50%
of the project to Mitsubishi and interest in the tenements or alternatively
equitable compensation or damages;
q On 28th February 2008, Chameleon also announced it had an 80% interest in
an additional claim (acquired from director Siew Hong Koh and former
director David Evans) over 5% of Jack Hills and Weld Range held by
Crosslands. The claim relates to an MOU between the parties. The matter
has been before the courts since 2006;
q Resources at Jack Hills were upgraded (9th December 2008) to 158Mt
tonnes grading 60% Fe, up from 97m tonnes @ 60% Fe;
q Murchison Metals is currently exporting iron ore from its Port Facilities at
Geraldton at a rate of 1.5m tonnes per annum (Stage 1) with a view of
increasing production to 25m tonnes per annum by 2010 (Stage 2);
q Murchison’s bid for Midwest Corporation Limited (“Midwest Corporation”,
“MIS”) has lapsed with Murchison left holding around 4.78% of the issued
capital of MIS.
Phenomenal upside potential for Chameleon…
q This report details a range of outcomes in respect to the claim by Chameleon
over Jack Hills, with potential for further resource upside potential at Weld
Range. RM Research considers, based on Enterprise Value/NPV valuations
that 100% of Jack Hills is worth in the range of A$3.1b to A$4.7b. This
translates to A$0.23 based on a 10% interest in Jack Hills up to A$2.31 in the
event that Chameleon was able to obtain 100% of Jack Hills;
q Murchison have lodged their defence reaffirming their position. Interestingly
Murchison have lodged a counter claim against Greg Barnes and Grimaldi in
respect the matters that are the subject of the Chameleon claim. The claim
appears to be a serious thorn in the side for Murchison. As Barrister Steven
Pengelis, acting for Murchison, said at the March 20 2008 Federal Court
hearing “We are very concerned. We want to get this matter to trial as quickly
Source: E-trade.com as possible”.