Tuesday, April 25, 2006

Still Got Them Cowboys In West Australia
Old Boys' Scratchback Mountain

I thought these kind of things happened back in 70s or 80s even, but the Western Australian premier has stirred up stuff not seen since Joh B Pietersen days in Queensland. Rio Tinto (giant and well connected) accidentally allowed the lease on Shovelanna iron ore deposit to lapse last year due to a late courier delivery. The tenement lapse was picked up by the young and hungry Cazaly Resources. Cazaly even got funding from the reputable Investec and an offtake agreement from BHP Billiton. Cazaly planned to develop the mine within 3 years and will be giving the state government approximately A$17 million in royalties a year. Naturally, Cazaly's shares shot through the roof from a paltry A$0.29 to a high of A$2.12 over the last 7 months.

Now, Rio Tinto had the bloody thing for 20 years and have not drilled a flrrucking hole there and probably won't for another 10 years because the company's nearest infrastructure is some 100 km away. After Cazaly got the site, Rio Tinto filed a rare protest to the WA government arguing it was in the public interest for Rio to keep the deposit. In February, WA premier Alan Carpenter said he had discussed the issue at length with Rio's CEO Leigh Clifford during a courtesy call to Rio's London office (starts getting interesting ... London of all places, what a courteous gesture by a premier). Last Friday, WA's Resource Minister John Bowler announced that the WA government has decided to hand back the Shovelanna deposit to Rio Tinto. Bowler could not be located by the press for the last 48 hours.

These kind of things should not be happening in a developed nation's investment arena. Deadlines are set to be met. Courier delays are incidental to business, many things happen that are out of our control, to wait till the last day to submit is plain silly. Cazaly Resources' shares has plunged A$1.45 to A$0.65, after hitting a low of A$0.41. Too many investors have been burnt badly by this debacle. Its one thing to lose money when thing go awry, but this is not fair as investors had put faith in the state government upholding the letter of the law, and in fairness Cazaly Resources did only what is right and available to them. The sad thing is that the integrity of the legal system and the letter of the law had gone to the dogs. The premier and resource minister have a lot to answer for, if only they can be located, ... it is just too obvious and silly a decision to undertake, akin to political suicide. Only in Western Australia? Gee, and I thought Bond and Rivkin were dead ... maybe there is reincarnation after all.

No comments:

That's Not The Way Share Market Works

Encik Shahril of Sapura Energy had to defend his total take-home package of around RM70m a year for the past few years. Specifically sin...