ASIC will be familiar with the Flinders Mine (FMS:ASX) history....

ASIC will be familiar with the Flinders Mine (FMS:ASX) history.  It was the intervention of the Takeover Panel and ASIC in 2019 that prevented the FMS Board from privatising the company for the benefit of the major shareholder, Todd Corporation.  

Minority shareholders, yet again, feel there is a further takeover attempt ‘by stealth’ when we, minority shareholders, are offered a disingenuous Proposal as ‘a means to (iron ore) production’ by our major shareholder, Todd Corporation and his Balla Balla Infrastructure Project Group (BBIG Project).  

The BBIG Project is dependent upon having control of the 100% FMS owned Pilbara Iron Ore Project (PIOP) as it underpins all infrastructure costs of the BBIG  Project.  There have been three (3) previous attempts by the Todd Corporation/BBIG Project (of which Todd Corporation owns 90% of BBIG) to gain control of the Flinders PIOP.  


The FMS Board evidently chose to presume that minority shareholders would agree to this Proposal, in spite of the history and lack of trust, and borrowed from Todd Corporation $5M then $2M to fund the documentation and planned interstate information sessions re Proposal thus tripling the debt from an existing $3M to $10M and Flinders does not have the money to repay Todd Corporation in-kind =  a creep increase in share holdings.

The Flinders Board borrowed money from the major shareholder who is unable to vote, due to a conflict of interest, and the FMS Board has used the money borrowed from the majority shareholder to persuade minority shareholders that the current Proposal urging minority shareholders to sign over the lucrative FMS 100% owned PIOP to a private company dominated by the majority shareholder.  This private company, PIOP MineCo, would have 3 Todd Directors and 1 Flinders Director. How does this behaviour preserve and respect legislation pertaining to conflict of interest?

Minority shareholders DO want to go to production but under the terms of the current Proposal listed below, it is made impossible for us to do so:

There is no certainty of any funds flowing to Flinders Mines (FMS).  Any return to FMS for locking into this deal and handing over its only real asset, is the ‘hope’ that BBIG will take the PIOP to production and that FMS will receive some benefit in the future.

There is no detail or examination of the BBIG Project in the Independent Experts Report (IER).  Were we shareholders to agree to this Proposal, FMS is locked into a Proposal which is totally reliant upon the expertise of BBIG and its unknown partners without information on the viability of the BBIG Project.  BBIG has never constructed a project like this.

Any return that FMS can expect, after handing over control and security of its only real valuable asset will be subjected to all the risks which BBIG will be exposed to. So, it is a myth to say that FMS will be ‘free carried’. If the BBIG Project fails, FMS gets nothing.  FMS and the IER did not price these risks into the valuation or provide any details as to the ‘fair and reasonable’ opinion.  

Upon BBIG declaring a FID and with FMS now locked into a long term deal, the new private company, PIOPMineCo, holds the PIOP mine and this provides the security for the entire BBIG funding - it is security for mine funding and the port and rail funding.  FMS has no economic interest in the BBIG Project but if the BBIG Project were to fail, for whatever reason, then funders foreclose on the PIOP Mine and FMS is left with nothing.

According to the IER, should the Proposal go ahead, the BBIG/ PIOP MineCo (FMS is now a minority shareholder, 40%) will have the ability to renegotiate terms of any royalty or cost agreements without FMS minority shareholders’ approval.

The entire Proposal put to minority shareholders is predicated on the integrity of the controller - BBIG - history has demonstrated otherwise to minority shareholders and there is little trust or confidence in BBIG/Todd Corporation.

Other Australian and Canadian royalty agreements have the iron ore lease holders retaining the leases and are not expected to contribute to rail or infrastructure costs and still receive a better royalty than the unacceptable 2.5% currently proposed.; as well, we are expected to pay fees for transporting the iron ore of $10 to $19/tonne - whilst giving up our major asset.

At the 2019 AGM shareholders repeatedly called for an upfront payment to cover cost to FID and an improved dividend to shareholders.  Despite claims the FMS Board has listened to shareholders this request was not met or even commented on in the Proposal in its final form.

There is a risk that the final capital cost to develop the PIOP is higher than currently estimated and, as a result, the PIOP MineCo incurs higher debt to develop the PIOP which will need to be serviced prior to any distribution to Flinders. This could reduce the financial returns for Flinders from its interest in the PIOP MineCo and "in a worst case scenario, result in dilution".

There is no modelling in regard to the proposed 2 Options of the Proposal which would need to be considered at the FID - which is the crux of future value for minority shareholders.

Minority shareholders do not get to choose which Option of (1) or (2) - that decision rests with the FMS Board and minority shareholders only get to ratify a decision to go to a Royalty model if the FMS Board chooses this path.

The IER does not provide a value of our iron ore with a pathway to market.


All these issues above are in the minds of minority shareholders.  We need to have this information and therefore have it referred back to Grant Samuel for further response so that minority shareholders can make an informed decision.  The information sessions planned nationally are for the Directors of FMS to verbally explain the Proposal to us!  This 209 Pp Proposal is too complex and convoluted even for legal minds let alone mum and dad investors.  

Despite our best wishes of wanting the PIOP mined, we are united in voting AGAINST the Proposal as FMS minority shareholders take all the risks without seeing a tangible incentive whilst the BBIG is protected in every shape and form and takes the lion-share of the profits.  We feel the risks outlined are far too great for the muted rewards purported.

Ironically, the online Proxy voting Form was released January 31, 2020 and yet the planned information sessions to be held nationally in each State, incurring more debt as two or more Directors fly to Brisbane, Sydney, Melbourne and Adelaide with overnight accommodation and expenses, do not commence their expensive jaunt until 19 days after voting has opened.  ‘Closing the gate after the horse has bolted’.  

The entire current situation, as explained, is seen as nothing more than a money-spending exercise which makes our company, Flinders Mine, more indebted to the major shareholder.  I hope ASIC will consider these concerns and see fit to become involved.



My thoughts and opinion only.