Chinese corporate shareholders in Mt Gibson Iron have seized board control of the local iron ore producer at a sensational annual meeting in Perth today.
Chinese corporate shareholders in Mt Gibson Iron have seized board control of the local iron ore producer at a sensational annual meeting in Perth today.
Steel group Shougang and Hong Kong-listed APAC Resources, which indirectly speak for around 40 per cent of the company's shares and are its biggest iron ore customers, today seized a majority of positions on the seven member board.
The two Chinese groups, which were declared associated parties by the Takeovers Panel in relation to another matter involving Mt Gibson in 2008, today used their combined votes, and those of Shougang-associate Fushan Energy, to prevent the re-election of independent director Peter Knowles.
They also used their voting power to re-elect APAC director Lee Seng Hui, the son of Hong Kong tycoon Lee Ming Tee, despite opposition from the non-aligned directors.
The move ensured that nominees of the Chinese parties would hold four of the seven seats at the Mt Gibson board, following chairman Neil Hamilton's decision not to seek re-election at today's meeting. His decision reflected his concerns over the Chinese parties' refusal to agree to maintain a majority of independent directors as part of an agreed reduction in the size of the Mt Gibson board.
Mr Hamilton, who has been succeeded as independent chairman by Perth resources lawyer Craig Readhead, said the result raised questions about the company's ongoing corporate governance and ability to negotiate effectively with its major customers.
Addressing shareholders after the vote, Mr Hamilton said the result was "very disappointing ... for all shareholders, but it is what it is."
Speaking to reporters shortly after, he said the independent directors may still avoid an "impossible position" if the Chinese parties volunteered to relinquish one of their board positions.
"It's not impossible - it is open to the shareholder nominee directors to reduce their number by one," he said.
"That is a challenge for them and an opportunity for them."
Mr Hamilton noted that the result left managing director Luke Tonkin in an unenviable position, but that he did not expect him to quit in protest at the outcome.
"That is a very important issue, and I have spoken with most of the major shareholders and that is their concern," he said. "Luke won't abandon the company, but if this situation is not fixed, that is a risk - and it is a severe shareholder value risk."
A grim-faced Mr Tonkin said he would stick with the company - at least for the "immediate term" - while attempts to resolve the stand-off were pursued.
"I think I've got an obligation to all the shareholders to maintain some presence for the immediate term," he said. "The new chairman has a role to do, we need to sit down with the major shareholders to see whether we get a pro-rata reduction in the board, and then this issue will be settled.
"But until such time as that occurs, I will continue to manage the operating business ... but we need to get satisfaction as to what's actually happening at board level."
Asked if that implied he would quit the company if the matter was not resolved, Mr Tonkin replied "I'm not going to comment on that".
Mr Hamilton noted that when Australia's Foreign Investment Review Board allowed Shougang and APAC to take such a large stake in providing a company-saving capital injection in late 2008, it was done on the basis that they would adhere to good governance practices.
The capital injection was needed to survive a cash-flow crisis after several unrelated Chinese customers reneged on existing offtake contracts due to the global financial crisis.
Earlier that year, the Takeovers Panel had intervened to prevent APAC and Shougang from acquiring a big block of shares held by Russian group GazMetall which would have delivered them a 40 per cent stake then. The Panel intervened because it considered the two companies to be associated parties.
And in late 2006, Chinese investors linked to APAC's predecessor companies only just failed in a bid to replace Mt Gibson directors with their own nominees to secure board control.
In a statement late today, APAC denied it was acting in concert with any other shareholder and that suggestions it was acting in tandem with Shougang were "false and misleading".
It also said it was supporting "board renewal" for the benefit of all Mt Gibson shareholders, though the process of renewal may take some months to conclude.
APAC holds a direct 26.25 per cent interest in Mt Gibson.
Mt Gibson shares plunged almost 8 per cent to $2.01 on news of today's vote.
