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« No obvious solution to plug base-load gap should nuclear not proceed – Godsell | Main | Japan Panel Keeps Nuclear Power Among Options For Future Energy Mix »
Tuesday
May292012

First Uranium slams Olma's proposal as 'unrealistic' with 'zero chance' of success


JOHANNESBURG (miningweekly.com) – Toronto-based First Uranium on Monday rebuked a proposal from shareholder Olma Investment Group that the beleaguered gold and uranium producer seek better prices for the assets it has agreed to sell, and that convertible debt holders take a 5% to 10% haircut.

In a strongly worded statement, First Uranium called the scheme “unrealistic”, adding it had “zero chance of being accepted”.

After an exhaustive process assessing all available alternatives and based on our discussions over the past five months, and their respective reconfirmations today, we know that neither AngloGold nor Gold One are willing to reopen negotiations with a view to paying a higher price for these assets,” lead independent director John Hick said.

Mining Weekly Online reported on May 24 that a group of First Uranium shareholders including Olma, Canada’s Sprott Asset Management, Stratton Enterprise Incorporated and Patto Corporate Services intended to make an alternative proposal to the TSX- and JSE-listed company’s board.

The shareholders, which claim to own 18% of First Uranium’s shares, are unhappy with the asset sales the company announced in March, whereby Chinese-owned Gold One will buy the Ezulwini mine, located near Randfontein, for $70-million, and the Mine Waste Solutions (MWS) operation, also west of Johannesburg, for $335-million.

Olma and other shareholders have argued the price tags are too cheap, and are threatening to vote against the deals at First Uranium’s June 13 shareholder meetings.

In a letter to First Uranium dated May 27, the shareholders led by Olma proposed the company seek 15% more cash from AngloGold – $385-million – for MWS, which reprocesses old mine dumps using modern technology to extract gold and uranium.

They also want Gold One to lift its offer by the same magnitude to $80.5-million.

'LEGALLY BINDING'

The Johannesburg- and Sydney listed company said it would not pay more than the $70-million already agreed to.

"Gold One has made it public and clear that it is not willing to propose a higher offer and, in addition, we are confident that First Uranium shareholders will approve the sale of Ezulwini to Gold One, as it is in their best interests," CEO Neal Froneman told Mining Weekly Online in reply to emailed questions.

He added the sales agreement between Gold One and First Uranium was legally binding, and that the seller "is fully informed of our views".

AngloGold declined to comment on the proposal.

Olma head of equities Nick Betsky reiterated that the Russian firm would vote against the sales.

"We will vote 'no' and encourage shareholders to vote 'no'," he said.

In addition, Olma’s group was seeking for First Uranium’s note holders to take a 5%, or $8.4-million, haircut on the nominal value of their loans, and debenture holders to take a 10%, or $14.7-million haircut.

According to the group's calculations, shareholders would then receive a payout of between $0.45 and $0.55 a share.

Our group of shareholders would support the improved proposal. In this case, we would agree to abstain from any further legal actions against the board of directors of the company,” Olma and the other investors said in a copy of the letter that First Uranium posted on the internet.

The peeved shareholders group had earlier in May tasked Toronto law firm Lax O'Sullivan Scott Lisus to start preparing legal action against First Uranium’s board.

First Uranium said in a circular sent out on May 8 that the company had flogged Ezulwini and MWS, its only producing assets, to 20 potential buyers, with only AngloGold Ashanti and Gold One emerging as bona fide bidders.

BONUSES

Betsky, meanwhile, lashed out at First Uranium's admonishment, alleging directors were only looking out for their own financial interests.

"The only reason that management and the board of directors want these deals to go through are the bonuses they will get if the deals pass," he told Mining Weekly Online.

"In a normal world, when management fail they get fired; in the First Uranium world, management gets bonuses for failure."

According to the May circular, executive officers would receive some $1.4-million in cash bonuses once the MWS/AngloGold Ashanti deal closes.

Under the plan "bonuses will not be paid until the occurrence of certain events including a sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the corporation", the May circular said.

Hick did not immediately return a call seeking comment.

Betsky said Olma would continue to look for a "viable alternative" to the sales. Earlier this month, he said the group was in contact with a company potentially interested in buying a 50% stake in First Uranium and taking on the $150-million convertible debt that falls due June 30.

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