CUDECO INVESTOR PUSHES TO HALT $88M RIGHTS ISSUE
Written on the 26 October 2015 by Nick Nichols
A CUDECO (ASX:CDU) shareholder has called on the Takeovers Panel to prevent major Chinese shareholders gaining a bigger foothold on the Gold Coast-based copper miner.
However, the move could undermine the financial viability of the company which has been struggling to bring its Rocklands copper mine in north-west Queensland to full production.
Neville Lowe, who has been a vocal opponent of the shorting of CuDeco stock in recent years, has written to the Takeovers Panel expressing concern over a proposed $88.3 million rights issue.
Lowe says the issue will present 'unacceptable circumstances' that will benefit major shareholders Sinosteel Equipment and Engineering, New Apex Asia Investment and China Oceanwide International Investment Co the trio that sought the removal of company founder Wayne McCrae as chairman in July.
He also has accused right issue co-underwriter Infinitus of not lodging a substantial holding notice in relation to CuDeco.
The substantial holder notice is required when a shareholder has control of more than 5 per cent of a company. Some sources suggest that Infinitus is linked to parties associated with a $20 million share and option issue in 2013, although this has yet to be proven.
Lowe has sought interim orders from the Takeovers Panel that the major Chinese shareholders not acquire any shares in CuDeco.
He also calls for the rights issue to be scrapped, or at the very least that the rights issue should only proceed if it mitigates any control effect on the company by these shareholders.
Smaller shareholders are concerned that without the rights issue, CuDeco would not have the funds it needs to bring its Rocklands copper mine to full production and that the company could fall into administration.
Sinosteel, New Apex and China Oceanwide have provided short-term funding to the company until the rights issue is finalised.
Sinosteel, a China state-owned entity, has accepted responsibility for the entire electrical installation for the $300 million mineral processing plant at Rocklands and has committed to the job in exchange for more shares in CuDeco.
Sinosteel currently has a 6.23 per cent stake in CuDeco and, between them, the three Chinese shareholders currently control 34.85 per cent of the company.
The three joined forces to provide further funding for CuDeco last year, culminating in the right issue announced in September.
Sinosteel, New Apex and China Oceanwide announced they were prepared to take up their full entitlements to the rights issue, and their new holding in the company will depend on the take-up by smaller shareholders.
The prospectus for the rights issue, which offers one new share for every two held at an issue price of 60c per share, has yet to be lodged by the company.
CuDeco has already said it would refer the matter to the Takeovers Panel in regard to the potential effect the new share issue will have on control of the company.
Earlier this month, CuDeco alluded to the Takeovers Panel application by Lowe and that this could delay the timing of the rights issue.
Author: Nick Nichols