Golden West Resources Ltd has hit out at major shareholder Portman Ltd over its proposal to change the make-up of the board, saying if it goes ahead, the latter will have effectively taken control of the company without paying a premium.
Golden West Resources Ltd has hit out at major shareholder Portman Ltd over its proposal to change the make-up of the board, saying if it goes ahead, the latter will have effectively taken control of the company without paying a premium.
In a letter to shareholders today, executive chairman Con Markopoulos said if Portman succeeded in replacing the two executive directors with its own nominees, including Portman managing director Richard Mehan, it will have "aggressively taken control of the company by the back door."
GWR's response follows a request by Portman last month to replace Mr Markopoulos and executive director Michael Wilson with Paul Piercy as independent non-executive chairman and Mr Mehan as non-executive director.
Portman, which is 85 per cent owned by US company Cleveland Cliffs, holds a 19.9 per cent interest in GWR and has consistently denied speculation that it will takeover the company.
Mr Markopoulos said today that it had the support of major shareholder and former bidder, Fairstar Resources Ltd, for the current make-up of the GWR board.
Additionally, GWR has kept open the option of exporting iron from its Wiluna West project through the Esperance port but have stated today that shipping through Oakajee port was the preferred and cheaper option.
Golden West director John Lester told WA Business News the company was in the process of extending the option over land to build a 300,000-tonne iron ore storage shed at the Esperance port.
GWR had initially signed the option agreement with the Esperance Port Authority in mid-2006.
A scoping study into the benefits of transporting ore either through the Esperance or Oakajee ports is currently underway.
Mr Markopoulos said in the letter today that the cost of shipping through Esperance was "considerably greater" than Oakajee and would require a rail line to be built.
In addition, shipping from Esperance would take five days longer than from Oakajee, Mr Markopoulos said.
An excerpt of the letter is pasted below:
Portman Limited
As you are probably aware Portman Limited has recently increased their shareholding in the Company to 19.9%
and there has been considerable media speculation in relation to the possibility of a takeover from Portman.
Portman has denied on a number of occasions that they have any intention to make a takeover bid for the
Company at this stage.
Portman (which is majority owned by American company Cleveland Cliffs with a percentage holding of
approximately 85%) operates the Koolyanobbing iron ore mine in Western Australia and exports iron ore through
the port of Esperance. Mr Richard Mehan, the managing director of Portman, has been reported as suggesting
that iron ore from GWR's Wiluna West project should be exported through Esperance with a spur railway line
being built between Leonora and Wiluna West.
This would not only be very expensive but the whole process would seriously disadvantage the other 80% shareholders of your Company. The costs of exporting through this route are considerably greater than the board's favoured route to the proposed new port at Oakajee. The distance is half as far again, shipping takes 5 days longer with the exporter paying a freight penalty and the railway will be extremely expensive to build. This means that the Company gets far less profit for each ton of ore sold.
Portman has delivered to the Company a request to convene a general meeting of the Company to consider the
removal of the Company's two executive directors and the appointment of Portman Managing Director, Mr
Richard Mehan and former Rio Tinto executive, Mr Paul Piercy, as directors. A shareholders' meeting will be
called for 29 August 2008 to consider these resolutions.
The remaining members of the Board (being Alan Rudd and John Lester) do not support the proposed removal of either of the executive directors, particularly in the circumstances where identical resolutions were considered at a general meeting held in February 2008 and no shareholder of the Company was prepared to propose either resolution.
The Company has been advised by Fairstar Resources Limited, its largest shareholder, that it supports the entire current Board. If Portman succeeds in replacing the two executive directors with its own nominees and then goes on to appoint a new Managing Director of Portman's choice then it will have aggressively taken control of the Company by the back door without paying a control premium.
