London Calling: is now the time to call out African Minerals?Published by MAC on 2014-08-13
Source: Nostromo Research, City AM, Reuters
Even before African Minerals was admitted to the London Stock Exchange in August 2007, its founder, Frank Timis was cooking the books.
A Greek oil bonanza he claimed to have discovered turned out to be "chimerical". Timis was fined £600,000 when his false reporting was revealed by AIM (the Alternative Invesment Market).
In January 2008, he was fined £75,000, after being found guilty of doctoring diamonds, in order to pass them off as "rare pinks".
Last week, the rough and ready Romanian was once again up to his tricks - after cancelling a supply agreement with GIO Cyrpus, without the agreement of his own board. It turned out that Timis himself owned shares in the Cypriot company, as did one of his non-executive directors, Dermot Coughlan.
Coughlan stepped down over the matter, but Timis didn't, although African Minerals had to pay a whoping US$50 million penalty for cancellng the supply agreement.
Allegations against Frank Timis surfaced in February 2012, as one of the critical case studies of London-listed mining companies in London Mining Network's report setting out "the case for stricter oversight".
Since then, his operations in Sierra Leone have attracted ongoing criticsm, both from inside and outside the country.
Many of these were summarised in a major investigation of the company's human rights' abuses, published by Human Rights Watch in February this year: Sierra Leone: Mining Boom Brings Rights Abuses
We may well ask: just how many bad apples have to show up in a crop, before the grower is ordered to pulp the lot, and quit the field?
African Minerals share price plummets after inquiry into chairman Frank Timis is revealed
8 August 2014
Sierra Leone-focused iron ore miner African Minerals yesterday saw its share price plunge for the second day running, after a probe into the financial dealings of its chairman came to light.
On Wednesday it revealed that an independent investigation had been undertaken into its colourful chairman and founder Frank Timis over a deal with GIO Cyprus.
The Aim-listed company had paid $50m (£29.7m) to GIO Cyprus as a penalty for exiting a supply agreement that was approved by Timis but not put before the board. It emerged that Timis owned a stake in GIO Cyprus, as did non-executive director Dermot Coughlan, who ended up standing down over the matter.
African Minerals said yesterday that the investigation, which was concluded in July, found no evidence that Timis - or Coughlan - benefitted financially from the deal but it did not prove or disprove the allegations.
Its shares nosedived over 18 per cent on Wednesday and closed 7.3 per cent lower yesterday at 47.04p.
African Minerals was obligated to reveal the information as it is looking
to restructure its debt. The company, like much of the sector, is battling weak iron ore prices that have put pressure on its bottom line over the past few months.
Deutsche Bank warned that the emergence of the internal probe could make it difficult for the company to raise funds.
African Minerals board considers changing chairman's role
13 August 2014
LONDON - The board of iron ore producer African Minerals is considering changing the role of its executive chairman Frank Timis, who was recently at the centre of an investigation into a $50 million payment he authorised, a company director said on Wednesday.
African Minerals director Roger Liddell, replying to questions from a shareholder at the company's annual general meeting, said the board was considering replacing Timis as chairman in the medium term.
"Frank's hands-on role is very important but this is not an ideal structure longer term," said Liddell, a senior independent non-executive director chairing the meeting in Timis' absence.
It is unlikely however that Timis will quit the board voluntarily soon because if he does, a deal with Chinese partner Shandong Iron and Steel Group (SISG) means SISG can exercise an option to sell back its 25 percent stake in the Tonkolili project in Sierra Leone to African Minerals.
Timis, who founded the Sierra Leone-focused iron ore miner in the early 2000s, has come under fire in the last few weeks following allegations he and another company director - Dermot Coughlan, had personally benefited from a payment to Global Iron Ore Ltd (GIO), a business registered in Cyprus.
Coughlan, whose son Craig partially owned GIO, resigned from the board on July 15. GIO was set up in 2011 and its first and main activity was to sell African Minerals iron ore in 2011 and 2012, a source close to the company said.
An internal probe found no "direct evidence" that the $50 million settlement agreed by Timis without the board's approval had benefited them, African Minerals said last week.
The miner said the payment was made in exchange for cancellation of a marketing deal it had with GIO, after African Minerals signed a new offtake contract with SISG.
Shareholders at the meeting questioned the decision to entrust the company's sales to a small firm with no experience in the mining sector.
"We had to settle because we quite simply oversold and underproduced. GIO was doing an effective job and we had no reason not be satisfied at that time," Liddell said.
The internal investigation failed to trace where the $50 million paid by African Minerals went as the money went to two bank accounts in Switzerland that left no trail, Liddell said.
Shares in AIM-listed African Minerals have lost almost 90 percent of their value so far this year, partly hit by a fall in iron ore prices, concerns about credit tightness and worries about the deadly Ebola virus that is afflicting West Africa. (Reporting by Silvia Antonioli; editing by David Evans)
African Minerals names new CEO, gets $248m cash injection
18 August 2014
LONDON - Sierra Leone-focused iron ore miner African Minerals has named a new chief executive and obtained access to $248 million in cash through an agreement with Chinese partner Shandong Iron and Steel Group (Shandong).
Access to the funding will give African Minerals some breathing space as it grapples with lower iron ore prices and the Ebola crisis in West Africa, which have put pressure on its finances.
Its shares have lost about 90 percent of their value this year.
Under the agreement with Chinese steelmaker Shandong, the company will gain immediate access to $284 million for its sole project, Tonkolili in Sierra Leone - money that had been earmarked for the second phase of the project's expansion.
African Minerals has a 75 percent stake in Tonkolili, and Shandong holds the remaining 25 percent.
"Both shareholders have agreed to access the funds in the Hong Kong joint project account... not only for construction capital, but also for general working capital purposes, with immediate effect," African Minerals said on Friday.
In agreeing to allow access to the funds, however, Shandong requested some changes in management. In response, African Minerals announced the appointment of Alan Watling as its new chief executive after the resignation Bernard Pryor.
The Chinese steel mill also requested that the project's financial and operational management be separated from that of African Minerals, effectively increasing its influence over the project.
"The last few weeks have thrown up a perfect storm of low iron ore prices and heightened concern over the serious Ebola virus disease ... the second quarter has seen our received price fall, putting pressure on our working capital requirement," Roger Liddell, an African Minerals director, said in a statement.
"With immediate funding secured ... we expect that the operations will continue to grow to their potential."
Shandong, which has an offtake agreement with Tonkolili, has also made a claim that African Minerals had offered better pricing terms to other Chinese steelmakers, which goes against a clause in its offtake agreement.
African Minerals said it was working with Shandong to agree on the amount, the timing and method of a payment to repair this issue, if required.
The mining company, whose debt amounted to $391 million as of end-March, also said it was looking to refinance an expensive $250 million loan.
"The company continues to evaluate opportunities regarding an optimum capital structure over the medium to longer term," it said in the statement. "The new management will also be reviewing and putting in place an appropriate longer-term structure and funding for African Minerals." (Editing by Jane Baird)