Page 2 of
2 Battle
resumes for miner BC Iron By
John Helmer
So if the Chinese were playing
catch-up and prevent BCI getting away from them,
why has the loss-making Regent Pacific been
spending its scarce cash on BCI? Is it planning
another strategic move on BCI, and if so, who is
paying for it?
Follow the
money At Regent Pacific, Dattels shares
control of the company with co-chairman James
Mellon; as of November 1, 2011, Dattels is
reported to have been holding 8.16% of the shares;
Mellon 14.74%. Dattels, a Canadian national with a
reported residence in London, has declined the
invitation to respond to questions about his role
in Regent Pacific at the time of the BCI takeover
attempt or since.
Dattels is known to
Russia's former mining regulator Oleg Mitvol
for the role he and a
Russian partner, Sergei Kurzin, played in
promoting Everfor Diamonds, which listed on the
Alternative Investment Market (AIM) of the London
Stock Exchange between 2005 and 2008.
In
2004, Dattels and Kurzin arranged Russian diamond
exploration licenses that were controversial at
their issue, and proved to be fruitless three
years later. Pages 78-80 of the AIM Admission
Document for Everfor relating to the issuance of
these licenses, the government officials
responsible, the chain of Caribbean companies
through which the licenses passed into Everfor,
and the fees paid to Dattels and others have been
of special interest. Later, Mitvol claimed he
suspected a share price pump and dump scheme, but
took no action before he himself was ousted from
the Ministry of Natural Resources.
Everfor's listing produced an initial
market capitalization of 140 million pounds
sterling (US$223 million). By the time it changed
its name and went into liquidation, Dattels was
long gone. He doesn't mention the experience in
his Regent Pacific biography. Kurzin, Dattels'
partner in that venture, has also been reticent
about the Everfor story, though he told a Forbes
interviewer he was "feeling good" about it at the
time.
The Forbes report attempted to
identify sensitive patterns in the way mining
licenses were obtained, companies floated, and
windfall profits generated from "complicated deals
involving offshore trusts and opaque Russian- and
Kazakh-registered entities". [3]
Dattels'
name and business conduct have been the target of
more recent investigation after the French uranium
giant Areva announced that it was writing down the
purported asset value of uranium prospects Dattels
had sold Areva in 2007. Dattels had sold Uramin, a
junior miner listed in Canada, for US$2.5 billion.
Here's the way the deal looked when it was
officially disclosed in June of that year on areva.com.
Last December Areva declared a loss of US$2
billion on the asset value.
English-language reporting of Dattels'
mining investment operations has been modest by
contrast with the French coverage of this year's
investigations of the difference between Uramin's
selling price and what Areva now considers it is
worth. [4] According to an investigative report by
by Andre Noel and Fabrice de Pierrebourg of La
Presse, published in Montreal on February 15,
Dattels began selling Uramin to Areva in October
of 2005, just weeks after Dattels had formed the
company with his partners.
After Dattels
was identified in the investigation by La Presse,
the Senator for Bedford, Quebec, Celine
Hervieux-Payette, charged in senate proceedings
that "there is reason to believe that UraMin might
have engaged in insider trading and other
fraudulent activity." She asked the leader for the
Canadian Government in the Senate to order the
Royal Canadian Mounted Police "financial crime
division [to] start an investigation immediately
into UraMin's dealing with Areva and clean up
Canada's reputation". [5]
Alleging that
Uramin may have been joined in misrepresentation
of its asset and transaction value to Areva, the
senator added that "the Bank of Montreal acted as
a financial advisor to UraMin in its transaction
with Areva. Considering that the implication of a
Canadian bank in this scandal, which is common
knowledge in France, has the potential to harm
Canada's international reputation, can you
guarantee to this chamber that the Office of the
Superintendent of Financial Institutions will look
into the role and actions of the Bank of Montreal
in this affair?"
Regent Pacific is not
commenting on the outcome of the Australian
regulator's investigation of BCI share trading and
disclosure of the takeover scheme. Nor will it
discuss Dattels' role in deciding Regent Pacific's
buy and sell strategy. Dattels refuses to respond
to enquiries.
The company's website is
currently reporting that BCI is one of 12 mining
company holdings in the Regent Pacific portfolio.
Of this dozen, BCI is the only one in current
production, and is almost certainly the most
valuable to Regent Pacific. On BCI's current
market capitalization, the BCI stake is worth just
over A$68 million. That represents more than a
quarter of Regent Pacific's entire net asset
value.
Strategic planning - or just
wager? But if BCI was a hot potato once,
why make a grab for it a second time? One
interpretation in the Hong Kong market is that
Dattels and his associates have found a financial
backer for a fresh takeover attempt, and that
Regent Pacific is building a bloc of shares toward
that end, with the aim of issuing a fresh bid at
about the same price it offered before.
Another interpretation is that there is
nothing strategic about the recent Regent Pacific
buying, and that Dattels is doing no more than
wagering on the bet that BCI has been undervalued
since the collapse of the takeover, and must rise
above the takeover offer.
That price was
A$3.30. Argonaut Securities, an Australian broker
which has been paid to advise BCI and received
fees for promoting the Regent Pacific takeover,
claimed in a December 2011 report that BCI's share
price should be fairly valued at A$3.40 if the
iron-ore price sticks at U$140 per tonne. A report
by Austock Securities, released last month, claims
the share price should hit a target of A$3.36 if
the iron-ore price remains stable or rises. Those
are bets on China's steel production and
consumption plans, however.
The Chinese
iron-ore index shows no reason for short-term
optimism, as shown by this chart.
In a presentation to investors released
this week, BCI isn't optimistic itself. This chart
shows the company forecasting an iron-ore price
(the benchmark is iron-ore of 62% Fe content
delivered at Tianjin port) edging below the $150
per tonne level through 2014; thereafter, the BCI
management is anticipating a further drop for
iron-ore below the $100 per tonne mark. [6]
Source: BC Iron
company forecast.
The fact now
revealed that just three stakeholders, plus BCI's
management, control most of the shares means that
although the share price may be rising, the
liquidity of trading in the stock is drying up. So
a bet by Regent Pacific may be defeated by the
absence of enough bettors in the market to make
the difference.
"In this market, and after
all that has happened to BC Iron over the past 15
months, no one in the market likes surprises,"
according to Oleg Sheiko, speaking for the
Consolidated Minerals group. "Normally, markets
don't like just two or three shareholders
controlling the stock of a mining company.
Meantime, we are obliged to defend our position."
Notes 1. For interim report,
see here.
2. For ASIC report, see here.
3. For Forbes report, see here. 4.
For example of the English language coverage see
here.
5. See Senator Celine Hervieux-Payette on eureka.blog. 6.
here,
page 18.
John Helmer has been
a Moscow-based correspondent since 1989,
specializing in the coverage of Russian
business.
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