Page 1 of
2 Battle
resumes for miner BC Iron By
John Helmer
MOSCOW - BC Iron is a small
but promising iron-ore miner from Western
Australia, which is China's mineral supply
province and rival of Russian suppliers to China.
The company is now testing the share price at
which it was the target of an abortive takeover
attempt a year ago.
The bidder at that
time, Regent Pacific, a Hong Kong-listed promoter
of junior mining stocks, is part-owned and
part-chaired by Stephen Dattels, an impresario of
stock market wagers. On the latest available
financial reports, Regent Pacific is losing money
at the mining game.
Regent Pacific is also
the operator of a fixed-odds financial betting
scheme which, according to the company website, is
"the market leader in its [wagering] industry".
Gambling can be profitable; it
seems Regent Markets
Holdings Ltd, the betting affiliated unit of the
group, is turning over far more money than the
mining holding, and at last report generated a
six-month profit of US$1.07 million, compared with
US$1.8 million loss for the mining business.
Betting on sure things is good business if
you are a professional gambler; it isn't viewed
the same way in the mining markets.
Investigators get busy In the
year that has now elapsed since the BC Iron
takeover bid, Dattels and his transaction record
have come under investigation by the Australian
market regulator, the Australian Securities and
Investments Commission (ASIC). In parallel, he and
a junior uranium prospector called Uramin he sold
very profitably in 2007 have been under
investigation in France. Much too profitably think
the French. The Canadian police have also been
invited to investigate.
The tell-tale
details of an abortive junior diamond miner in
Russia, from which Dattels made his profit before
the company collapsed into worthlessness, may also
be worth reexamining to see whether there is a
common modus operandi here.
Dattels
has been reported by a Canadian associate to have
a London residence. He is also reported to have a
Palm Beach, Florida, house, a picture of which has
proved to be easier to find than a picture of
Dattels himself. Canadian press sources report
that no press picture is available of him in that
country; he himself won't say why.
Western
Australia is one of the world's largest iron-ore
provinces. But it is under increasing cost, tax
and political pressure, compared with Russia's
iron-ore mines in the Kursk Magnetic Anomaly; the
West African iron-ore fields, and Brazil. Russian
steelmakers who don't have enough iron-ore to feed
their smelters like Magnitogorsk Metallurgical
Combine (MMK), have invested in Western Australian
mines (Fortescue, Flinders Mines) as a hedge
against the rising price of iron-ore; and because
the outlays are less, and the payback swifter,
than investing in new iron-ore mines in Russia.
Ukrainian metals magnate Gennady
Bogolyubov has also invested in Western Australia
to extract and trade several of the steelmaking
alloy minerals - manganese, chromite, and iron-ore
- to supply China, and also Ukraine-based
steelmills. Bogolyubov's investments in
Consolidated Minerals (100%), BC Iron (24%), and
the Mindy Mindy iron-ore development (50%) - make
him currently one of the largest foreign investors
in Australia; the largest of the non-Chinese
investors.
The story of Regent Pacific's
A$3.30-per-share bid for BC Iron was first
reported in February 2011. Bogolyubov's opposition
to the deal doomed it. He believed the takeover
price was too low.
Before he knew what was
happening, though, between the time the deal was
done between representatives of Regent Pacific and
BC Iron, and then officially announced, and then
again in the days before the deal collapsed in
March-April 2011, there was unusual stock market
activity and share price movements on which
someone made handy money. The impact of the
unraveling of the deal on BC Iron's share price
can be followed here: BC
Iron 3-year share price trajectory.
The Takeovers Panel, a government body run
by the Treasury in Canberra, investigated the
takeover bidding, and sanctioned Regent Pacific by
requiring it to resubmit its offer and terms. By
the time that process had been completed, and BC
Iron withdrew its earlier acceptance, Regent
Pacific was obliged to cough up US$5.5 million in
transaction termination penalties; that was the
single largest revenue item in Regent Pacific's
consolidated income balance-sheet for the first
half of 2011. [1] It wiped out all other sources
of mining or investment income for the period.
The second of the Australian regulators to
open a dossier on the Regent Pacific-BC Iron
takeover attempt and the share price evidence is
ASIC. Its investigation appears to have commenced
between February and April of 2011. At the time,
it refused to comment on the case.
Now,
after almost a year, the ASIC has issued a partial
summary of what it had investigated on March 8,
2012. It claims it has uncovered disclosure
violations by BC Iron which had impacted the share
price during the takeover negotiations. According
to the ASIC release, BC Iron paid a A$66,000
(US$70,000) penalty which accompanied the
infringement notice. ASIC also claims this was "a
timely and efficient remedy for dealing with some
breaches of the continuous disclosure laws and
effective in maintaining confidence in the
integrity of our market. [2]
According to
a release from BC Iron (BCI) the week before, on
March 1, it was as white as the driven snow, and
that at least one newspaper which had intimated
otherwise was "manifestly incorrect". BCI had, the
company declared, engaged an anonymous lawyer "to
opine on the merits of ASIC's notice", who had
advised that the ASIC infringement ruling was
"fatally flawed". BCI said it was paying the
penalty under protest, and because it was cheaper
to do that than to pay fees for lawyers to
"opine".
At the same time as BCI was going
down, the share price was going up.
According to Australian Stock Exchange
(ASX) mandatory disclosures, the Chinese off-taker
for BCI's iron-ore shipments, Henghou Industries
(Hong Kong) Ltd, has been converting earlier BCI
share options into voting shares this year; by
early this month Henghou has built up a bloc of
almost 10%. Henghou had been identified by BCI as
arranging the purchase of 20 million tonnes of
iron-ore for Chinese steelmills between 2010 and
2018. Henghou, on behalf of the mills, fronted up
US$50 million in three instalments to help BCI
open its mine and start shipments to China.
BCI revealed in November 2010 that as part
of the loan and offtake deal, it was issuing 8
million share options to Henghou. In a
presentation to the market that month, BCI also
revealed it had committed 65% of its mine output
in 2011 and 80% in 2012 to Henghou at an "agreed
[undisclosed] discount". Starting in 2013,
Henghou's discount covers 50% of the shipments,
while the remainder goes out at spot market
prices.
In January 2011, a few weeks after
the share options were confirmed, Henghou may have
been as surprised as Bogolyubov to find that the
executives and board it had signed with at BCI had
been busy doing a deal with Regent Pacific to sell
out. The Ukrainian went public; what the Chinese
told BCI isn't known. The upshot is that after the
Australian regulator has found fault with BCI's
conduct, Henghou has decided to reinforce its
interests and strengthen its shareholding position
in BCI.
But it isn't the only one buying
BCI shares. Over three weeks from February 15,
Regent Pacific paid almost A$3.1 million to add
another 1.2 million shares to its stake in BCI.
Its shareholding now totals 21.9%.
Last
week, Bogolyubov's Consolidated Minerals (Consmin)
reported to the ASX that it has been buying BCI
shares too. It has spent more than A$3.2 million
to lift its stake in BCI by 1.2 million shares to
almost 29%. Combining the Henghou, Regent Pacific
and Consmin stakes, 61% of BCI is now under the
control of just three shareholders. The stakes in
the company held by board chairman Tony Kiernan,
managing director Mike Young and other directors
or related parties was reported on March 21 in a
company presentation as 2.6%. That means that
someone on the board has been selling, since the
annual report of BC for the last financial year
claims the directors held 3.4% as of last June.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
