Aufgrund der unten dargestellten Korrespondenz/Sachverhalte halte ich das Management von Indo Mines für inkompetent und unfähig, ein börsennotiertes, explorierendes Rohstoffunternehmen zu führen. Indo Mines besitzt eine miserable Informationspolitik, das Management ist nicht kritikfähig, Zeitpläne werden massivst überschritten ohne dafür genaue Gründe zu nennen, die Dilution für Langzeitanleger ist enorm, die Schaffung von „shareholder value“ ist nicht erkennbar, die Unternehmensführung nicht nachvollziehbar! Dauernd wird darüber berichtet, dass man aggressiv und zügig etwas erledigen/entwickeln möchte, was aber immer im Gegenteil endet.
Diese E-Mail wurde am 7. Oktober 2012 an das Management von Indo Mines gesendet:
LETTER TO MANAGEMENT
7th October 2012
Dear Indo Mines Management,
dear Indo Mines Share- and/or Stakeholder,
dear interested People,
normally it is common practice that a company in a special situation writes a “Letter to Shareholders” to inform them, to state the facts and their opinions clearly and to convince them that they can count on a strong management team that acts right and confident.
But when the opposite happens, people should think and reflect about it.
Now we have October 2012, the beginning of the last quarter in the year 2012. A special date for Indo Mines because in that quarter Indo Mines will commence production of the iron ore concentrate project in Jogjakarta! What a gorgeous milestone succeeded!
Don’t they..? Won’t they..? Shouldn’t they..? When we take a look at the company presentation of May 2011 they planned it this way.
We are a group of Indo Mines shareholders who got together and teamed up in order to get more detailed information than the company publishes so far, more transparency of progresses for a better understanding and especially to emphasize our displeasure about the company’s development.
We are not angry about the continuing decrease in share price at itself, particularly in regard to the fact that the further decrease approximately 50 days ago was initiated by two german “analysts” who prefer to sell an iron ore exploring stock like Indo Mines with unchanged basics at the lowest price in the last 5 years in a very weak market that intends to turn around and strengthen now again. These analysts for example do not insist to discuss the current situation with the management directly and do not act as critically as professionals in that business should do.
The weak iron ore market beats down every iron ore stock and makes capital raisings more difficult und invasive than “normally”. But higher capital financings are still possible and can be done even under hindered market conditions. That demonstrated two iron ore stocks this year:
- Labrador Iron Mines completed its public offering of C$60,950,000 in common shares and C$10,675,000 in flow-through shares of the Company at a price of C$5.30 per common share and C$6.10 per flow-through share. The offering was completed by a syndicate of underwriters led by Canaccord Genuity Corp. and included Jennings Capital Inc., Octagon Capital Corp., RBC Capital Markets, Haywood Securities Inc., Scotia Capital Inc., Paradigm Capital Inc. and Raymond James Ltd. (see Source)
- London Mining entered into an agreement with Blackrock World Mining Trust whereby Blackrock World Mining will pay an upfront sum of US$110 million for a 2% revenue related royalty calculated on any iron ore sales from the Company’s Marampa licence ML02/09 in Sierra Leone (“Marampa”) over the life of mine. (see Source)
Comparing australian and canadian stocks we all know that it is “popular” for public listed companies in Australia to have a huge amount of outstanding shares. Concerning this matter it is in general much easier for a canadian company like Labrador Iron Mines to raise capital through equity financings because their share price is much higher. The non-dilutive financing of London Mining for example is the best way to arrange it supremely shareholder-friendly.
With our following review of the company’s development we want to illustrate that the Management (changes of CEO and Chairman with their “outstanding” experiences do not solve this) recurrently reneges on their promises without giving explaining statements:
- News per 03.05.2007
- Scoping Study released and „shows an NPV ranging from US418 million to US$ 658 million assuming sales at US$300 to US$350 per tonne for pig iron respectively from the production of 1 million tonnes per annum of pig iron.”
- Company Presentation per 04.06.2007
- Major Milestones:
- „BFS for concentrate by Sept 07, desing & construction commencing in Oct 07 for commissioning Mid 08.”
- Quarterly Report published 26.07.2007
- „The company is now progressing Bankable Feasibility Studies to bring the project into production in 2008.”
- Annual Report 2007 published 30.10.2007
- „[…] Indo Mines has commenced a Bankable Feasibility Study […] due for completion late in 2007.”
- Quarterly report published 30.01.2008
- Construction of a Pilot Plant has commenced in Jogjakarta to generate a 50 tonne concentrate sample for large scale confirmation test work by Outotec in Germany. The results of this should be available for inclusion in the Bankable Feasibility Study for the 1 million tone per annum Pig Iron Plan that is due for completion in the second half of 2008.
- Quarterly report published 28.04.2008
- Construction of a Pilot Plant has been completed in Jogjakarta and it has commenced commissioning trials. The Pilot Plant will be used to generate a 50 tonne concentrate sample for large scale confirmation test work by Outotec in Germany. The results of this should be available for inclusion in the Feasibility Study for the 1 million tone per annum Pig Iron Plant that is due for completion in the first half of 2009.
- News per 20.06.2008
- Concentrate Sample for final smelting test work has been dispatched to Germany for full scale smelting tests. Construction of the Concentrator Pilot Plant for the flagship Jogjakarta Iron Sands Project was completed in April 2008. The Pilot Plan was fully commissioned in May 2008, and a 50 tonne concentrate sample at 55% Fe has been made and dispatched, together with a 120 tonne sample of coal, to the testing plant at Outotec in Germany.
- Annual Report 2008 published 30.10.2008
- GR Engineering Services continued to progress the Bankable Feasibility Study for the Concentrator Plant; this is due for completion in late 2009.
- News per 05.11.2008
- Managing Director Phil Welten said: “Receipt of this level of approval [Contract of Works] is a key to securing foreign investment support and allows us to proceed with full confidence to the next phase of development, and the completion of our feasibility study by the second half of 2009.”
- News per 23.03.2009
- Indo Mines is continuing with a Bankable Feasibility Study for a 1 million tone per annum Pig Iron Plant that is due for completion in early 2010.
- Company Presentation September 2010
- The BFS will be completed at the Beginning of Q3/2011
- Construction will start at the Beginning of Q4/2011
- First Concentrate will be produced at the Beginning of Q4/2012
- First Pig Iron will be produced at the Beginning of Q4/2013
- News per 20.09.2010
- CEO Martin Hacon said: “The capital raising [17.5m shares @ A$0.20] positions the Company to further progress the Jogjakarta Iron Project under the direction of the new management team. The placement will strengthen the cash position of the business and enable the Company to fast track the advancement of the Project Feasibility Study, including the environmental approvals which are well progressed.”
- Quarterly Report published 29.10.2010
- Highlight: “Feasibility study commenced on the production of saleable iron sands product from the Jogjakarta Iron Project with the strategic aim of securing early cash flow, ahead of pig iron production.”
- News per 15.12.2010
- “[…]the Company will commence production of commercial trial volumes of iron concentrate within a designated area of the Jogjakarta Iron Sands Project site. It is anticipated that operations will begin in the first half of 2011 targeting production of up to 250,000 tonnes of iron concentrate for sale to potential off-takers generating early cash […]. Indo Mines is undertaking a feasibility study to assess the potential of the Jogjakarta Iron Sands Project to support a 2 million tonne per year iron concentrate operation with first production from the expanded development scheduled for the December quarter 2012.” CEO Martin Hacon said: “[…] The production of commercial volumes of iron concentrate well ahead of our target is an indication of the excellent support we have had from our local Joint Venture partner and the local community. It also demonstrates the commitment of the new board, management team, and employees in realizing the Company’s potential.”
- News per 16.12.2010
- Appointment of Feasibility Project Manager
- “Peter [Hinner] and his experienced team of engineers will undertake the feasibility phase of the Jogjakarta Iron Sands Project with a target completion of June 2011.”
- “[…] it is a further demonstration of the new Board and Management’s commitment to achieving our accelerated development targets.”
- News per 11.01.2011
- Environmental and Socialisation Approval granted by Government
- “Production of commercial trial volumes of iron concentrate will begin this year ahead of the targeted commencement of full-scale operations in June 2012.”
- News per 20.01.2011
- “A Bankable Feasibility Study (“BFS”) for iron concentrate production from the IronProject will be completed in mid-2011. A separate BFS for the production of pig iron is expected to be completed in mid-2012.” CEO Martin Hacon said: “The full-scale production of iron concentrate from the Iron Project in 2012 will generate significant margins and free cash flow, however we continue to believe that substantial additional value can be created through a complimentary pig iron product. We […] continue to push aggressively towards completion of both Bankable Feasibility Studies.”
- Company Presentation 30.05.2011:
- First Pig Iron will be produced at the Beginning of Q2/2014
- News per 06.07.2012
- CEO Martin Hacon said: “The capital raising [18.6m @ A$0.55] has strengthened the Company’s cash position to enable the business to move into early production from the Jogjakarta Iron Project and assess new growth opportunities adding value to shareholders. This is an exciting time for the Company as we look to transition the business from an exploration company in to a significant producer of steelmaking raw materials”
- Quarterly Report published 29.07.2012
- “The Company is currently completing the process and engineering design required to finalise the Feasibility Study, which is anticipated for completion in mid August 2011. The Company has also progressed the development of a commercial trial plant […]. This plant will target production of 20,000 tonnes per month of iron concentrate.”
- News per 29.08.2011
- A Milestone achieved: Feasibility Study completed and published that shows robust economic basics.
- News per 08.09.2011
- First Pig Iron Cast at Outotec Trial Smelting Facility
- CEO Martin Hacon said: “This is a very exciting time for Indo Mines as we move rapidly to becoming an innovative producing company.”
With keeping this review in mind we then take a look on the dilutive company history of Indo Mines. The several delays forced the company to re-finance itself over and over again. And the unsuccessful Mangkok Coal Project that has run through BFS doubled the shares and divided the shareholder value in halves.
The dilutive history:
- 18.02.2010: $3m placement, 12m shares @ $0.25
- CEO Welten: “The capital raising will allow the Company to aggressively progress the BBPK Coal Project to production to take advantage of the current high thermal coal price.”
- 26.02.2010: Issue of 5m shares
- for the acquisition of the Iron Ore Project
- 25.05.2010 + 11.06.2010: Issue of 20m + 14.4m shares
- for Fireside Vendors for the acquisition of the coal project
- 11.06.2010: Conversion of 20m class B performance shares into ordinary shares
- for Fireside Vendors for achieving the milestone that the coal project gets into production
- 22.09.2010: 17.5m placement @ $0.20
- „To fund the accelerated progress of the feasibility study in relation to the Jogjakarta Iron Project and to provide general working capital.”
- 23.12.2010: $5.4m placement, Entry of Rockcheck with 20m shares @ $0.27
- „Funds raised from the placement will be used to provide working capital and allow the Company to expedite the commencement of production of commercial volumes of iron concentrate from the Jogjakarta Iron Project […]. Operations will begin in the first half of 2011 targeting production of up to 250,000 tonnes.”
- „Indo Mines is currently assessing the potential to produce 2 million tonnes of iron concentrate per year from its Jogjakarta Iron Project and is targeting commencement of full scale operations in June 2012.”
- 14.02.2011: Issue of 10m shares
- “To expedite the commencement of production of commercial volumes of iron concentrate from the Jogjakarta Iron Project in Indonesia and to provide general working capital.”
- 07.06.2011: $10.2m placement, 18.6m shares @ $0.55
- “Funds raised will be used to expedite the development of the commercial trial iron sands concentrate plant at the western end of the Contract of Works area in Jogjakarta, Indonesia. Additional funds will be dedicated to working capital and the assessment of new project opportunities including the Halmahera Iron Project announced on 24 May 2011.”
- 20.12.2011: $13.2m placement, Entry of Rajawali with 57.3mio. shares @ $0.23
- „The significant cash injection from the Rajawali Group provides cornerstone funding to the Company to assist in completing construction and commissioning of the demonstration plant at Karawuni, additional testwork required for development of the iron sands project and completion of project finance due diligence.”
So now we are at a point where we got 288m outstanding shares. If you sum up all the issued shares mentioned above, what shareholder value has been created on the other hand or let us be more precise: what shareholder value has been destroyed in longterm? When we take a look at the news of 24th September 2012, where Indo Mines plans to raise $50m with 250m shares @ $0.20 through an equity financing with the assistance of Rajawali, we would nearly double our share amount once more.
Underlying a calculated and targeted future market capitalization of $250m at production (if we reach that milestone in this decade), with the current share amount we would have a share price at $0.86 in comparison to the share amount as of June 2010 with about 163m and a share price at $1.53 (plus 77,62% to the current) and in comparison with the share amount we would have in line with the $50m placement of Rajawali with about 540m and a share price at $0.46 (minus 53,66% to the current). Here everybody can easily see what shareholder value has been and will be destroyed. For longterm shareholders/investors that got in at $0.40, they would achieve an investment profit of +115% at the current share amount [+283% at the share amount of June 2010; +15% at the future share amount with the Rajawali placement]; for those who got in at $0.20 they would achieve a profit of +331% at the current share amount [+666% at the share amount of June 2010; +131% at the future share amount with the Rajawali placement]. Here everybody can easily see the invasive impact of the dilution to shareholders.
Per News of 06.02.2012 Indo Mines published:
Headline: Indo Mines appoints Credit Suisse to assist with Funding Alternatives
“It is a credit to both the fundamentals of the Project and the strength of the team at Indo Mines that a global leading investment bank with the number one track record in Indonesia will be working with us to define the funding alternative that best meets the interests of our shareholders.”
Is the dilutive equity financing the funding alternative for what Credit Suisse has been assigned? Does the management really think that this will be the financing that best meets interests of their shareholder?
First of all Indo Mines was just talking about a Pig Iron Project (capex A$~582m as per Scoping Study of 2007), now the Iron Concentrate Project should be financed (capex A$~158m), but despite of Rockcheck’s and Rajawali’s mentioned “strong support and financial power” and despite of the outstanding robust economic data of the Feasibility Study, it took very very long that we heard something about the financing. Why isn’t the Rajawali Group able to finance the project of Indo Mines like BlackRock did with London Mining in a very shareholder-friendly way? THAT would be a funding alternative!
The review leads us to the MAIN QUESTION: Why does the Management consistently give such time targets that won’t be fulfilled in the mentioned periods? They might have raised false hopes each time with self-made discontent of the shareholders afterwards and the company/management lacks credibility. We don’t accept a simple answer from Indo Mines like “We feel sorry about the delay …” that trivializes the previous development and its impact on shareholders value and future perspectives.
- a non-dilutive financing for the Jogjakarta Iron Sands Concentrate Project as a compensation of the massive dilution regarding the acquisition and development of the unsuccessful Mangkok Coal Project on the one hand and the inexplicably long-range delay in Feasibility, Financing and Production of the Jogjakarta Iron Sand Project on the other hand that causes additional capital raising’s to re-fund activities and general business again and again which wouldn’t been necessary if the mentioned timetable would have been fulfilled in time. We don’t want to be diluted anymore!
- the release of the full report of the Feasibility Study for the Jogjakarta Iron Project of which the highlights has been published at 29th August 2011
- a general change in investor relations giving shareholders more detailed information and transparency
Maybe the Management takes this Letter that serious and important and will upload this document to the Asx page of the company as a general information for all other shareholders. We also hope that the Management understands our situation, action and intention, and continues the opened discussion in a constructive way. We look forward to seeing Indo Mines creating sustainable shareholder value in the future and to hearing from the Management appropriate statements soon.
a Group of Indo Mines Shareholders
Zu der obigen E-Mail habe ich diese noch hinzugefügt:
Dear Mr. Hacon,
regarding our letter below: when can we expect an answer? we would like to have one before 15th November 2012.
and we would like to add a very important question to the letter below:
if the $50m private placement of Rajawali becomes reality, do you have sold Indo Mines to Rajawali? after that transaction they would have a voting power of 57,12%, got the chairman and 3 of 6 persons of the Management Board will be from Rajawali. They could block any decision. So what power do you have at Indo Mines after the pp? what power does Indo Mines have without being dependent to Rajawali? what if Rajawali takes noew the 57,12% of the company and dilutes the share account, and then takes the rest of the company before the iron sand project will commence production (and maybe privatize the company)?
How should shareholders carefree benefit from this enormous dependency (in addition when we take a look at the future participation rights for Rajawali at point 4.4 of the Notice of General Meeting dated 15th October 2012)?
a Group of Indo Mines Shareholders (who of course would vote against the $50m pp of Rajawali but we realize that we don’t got much voting power)
Auf die obigen zwei E-Mails bekam ich dann am 29. Oktober 2012 folgende Antwort von Mr. Hacon:
I have thought long and hard about your comments and would like to thank you and your colleagues for your interest in Indo Mines.
There is no question as you point out that a number of external factors for example; weak iron ore price, confidence in the financial markets, changes to Indonesian mining laws combined with our equipment issues at site have adversely impacted the Indo Mines share price performance.
However, looking ahead the $50m placement to Rajawali, one of the largest and most respected businesses in Indonesia, demonstrates long-term strong local support and commitment to achieving the Indo Mines vision of establishing an Indonesian Steel industry based upon the vast Indonesian iron sand resources. The issue price of 20cents represents a substantial premium over the 30 day VWAP of 100% and a premium of 70% over the 90 day VWAP. The Independent Directors believe this transaction to be in the companies and shareholders best interests in the absence of a superior offer and its now up to shareholders to decide.
For your information Rajawali conducted a similar investment pattern to gain a majority shareholding in Archipeligo Resources, an Indonesian gold project listed on the AIM London Exchange. This business has since flourished under Rajawali’s direction.
The Board is confident that the Rajawali Group’s increased participation will assist the Company:
- with ongoing regional support for the iron concentrate and pig iron projects;
- in securing appropriate project financing; and
- in acquiring additional iron sands assets in the future to help grow the overall business.
The business will also benefit substantially from integration with the excellent business systems and processes of the Rajawali Group.
Am 30. Oktober 2012 antwortete ich Mr. Hacon auf seine E-Mail:
- insist on a declaration (as mentioned in the Letter to Management below) which detailed facts led to the sale of the unsuccesful Mangkok coal project that has run through BFS and doubled the share amount of Indo Mines. the management of Indo Mines owes us a clear explanation!
- want the full report of the Feasibility Study published on the ASX
- insist on a declaration what has led to the inappropriate delay in Feasibility Study (as mentioned in the Letter to Management below) and according to this: Quotation from the Letter: „Why does the Management consistently give such time targets that won’t be fulfilled in the mentioned periods? They might have raised false hopes each time with self-made discontent of the shareholders afterwards and the company/management lacks credibility.“
a Group of Indo Mines Shareholders
Auf zahlreiche weitere Rückfragen zu einer Antwort auf meine letzte E-Mail erhielt ich keine Antwort mehr.