Today the Chairman of DAU announced a proposed transaction (the sale of wholly owned subsidiary, Aurigin Foods Pty Ltd) which appears on the surface to be an awful deal for shareholders of DAU. We may as well let them know we are not happy and vote NO to the proposed transaction.
Over the course of the last 12 months DAU management have advised in the quarterlies of progress e.g.
December 2016 - Quarterly Activities Report: In addition to the proposed joint development of the K2 Mine with Vango, Dampier continues to evaluate other gold and mineral projects, as well as other diversified investment opportunities in areas such as agriculture, food and infrastructure.
March 2017 - Quarterly Activities Report: During the quarter, Dampier directors investigated a business concept involving the export of high quality Australian food and agriculture products. Internationally, Australia is seen to have a clean, safe and healthy environment for the production and manufacture of quality food products.
September 2017 - Quarterly Activities Report: During the quarter, your directors continued to evaluate through Aurigin Foods Pty Ltd the commercial viability of aggregating and exporting high quality Australian food and agriculture products for import and distribution in China.
Today's Announcement: Aurigin, through its wholly owned subsidiary Aurigin Foods Franchising Pty Ltd, has entered into franchise agreements with five different parties. The franchisees are currently in the process of establishing Aurigin stores in China. In addition, Aurigin has established relationships with a number of Australian manufacturers and suppliers of food products.
In November last year they created the entity: AURIGIN AUSTRALIA LIMITED
In the last Annual Report to Shareholders the company advised they had extended hundreds of thousands of dollars in loans to progress the Aurigin Foods Pty Ltd venture. Furthermore over the course of 2016/2017 shareholders paid the directors large wages to look after their interests in the gold project and the Aurigin Foods venture:
2017
Malcolm Carson: $291,160 (salary fees & shares)
Hui Guo: $293,478 (salary fees & shares)
2016
Malcolm Carson: $174,340 (salary fees & shares)
Hui Guo: $226,158 (salary fees & shares)
Further to the above, DAU is renting the company Sydney office from Ms Guo (for $52,000, up from $8,666 the year prior)
So this venture has been progressed using the finances of DAU, with shareholders wearing the risk of this not panning out. Not only that but shareholders have also funded salaries for the directors to progress this venture.
The announcement today provides DAU with 10 million shares in AAL of an initial 30 million (i.e. 1/3), but with an eventual dilution to 70 million shares through 20 million performance rights and 20 million options (granted this would come with a $4m cash injection if all were executed). Information found online suggests they (WE) are already well on the way to 10 stores which is the first milestone for dilution and a greater share of this company for the two directors.
The only other owners of AAL would be Malcolm Carson & Hui Guo, who could easily end up with 80% of AAL if they hit the performance milestones or over 85% if they exercise the options. To get to this point it appears they've worn none of the risk and very little costs.
They have advanced this project on our dime and risk, why exactly are they getting the lions share of the company?
Vote NO to the proposed transaction.
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