THE boardroom of mining minnow Genesis Resources has been all but emptied after shareholders kicked out every director put up for election at its annual shareholder meeting on Monday.
Acting as serpent in the directors' garden is a group of experienced mining types who hold 14 per cent of the company through an exotic array of companies in the British Virgin Islands tax haven.
They're headed by temporary Ivanhoe CEO Ines Scotland, the woman who as head of Citadel turned speculation on a gold mine in Saudi Arabia into a $1.25 billion company. Scotland is backed in the play by the rest of her Citadel team: mining engineer Peter Lester, company secretary Sue-Ann Higgins, geologist Brett Butlin and construction engineer Russell Luxford.
It is understood Scotland's team is interested in the gold prospect in Macedonia owned by Genesis.
More than half of Genesis shares were voted to tip out Deric Wee, John Karajas, Patrick Volpe, John Zee, with the remuneration report and proposals to increase the non-executive directors' pay pool and authorise a share issue of up to 10 per cent also failing.
A motion ratifying the issue of $1.42 million in shares issued to a Malay investor narrowly got up, amid confusion over whether it should have been a special resolution requiring 75 per cent approval.
The day's action exiled so many directors from the boardroom Garden of Eden that it was left with just two, chairman Eddie Pang and managing director Peter Kong, when the legal minimum is three.
Directors fixed that problem after the meeting by appointing Alex Lim to the board.
Brick-by-brick
SLOVENLY boards have been put on notice: wily investment banker Mark Carnegie (pictured) is on the warpath, setting up an activist fund that aims to improve shareholder returns. Stakes in Qantas, Soul Pattinson and Brickworks are among the first in the fund, with Carnegie telling CBD his investors want him to build an activist portfolio. "Without confirming or denying which other ones other than Soul Patts and Brickworks, what they want to see is several of these, not just one, and see whether or not a portfolio of them is going to generate surplus return."
He said the increasing size of super funds meant they could no longer add value by stock picking and would have to become more active overseers of the management of the stocks they hold. "That's not just going to be about remuneration strikes and stuff like that, but actually the issue of how do people generate a huge amount of high returns on capital over a long period of time," he said.
"It's all about trying to make sure that managements don't blow huge amounts of capital on ill-timed acquisitions and foreign frolics and other things."
Through his MH Carnegie & Co, Carnegie on Monday reached an agreement with Perpetual under which the funds management group will follow his voting recommendations when it comes to the 12 per cent it holds in both Soul Pattinson and Brickworks.
The deal also gives him an option to buy about 1.3 million Soul Pattinson shares and about 797,000 Brickworks shares, if performance hurdles are met. Soul Pattinson owns about 48 per cent of Brickworks, which in turn owns 43 per cent of Soul Patts.
Perpetual has been trying - and failing - to break up the cross-shareholding for about a decade, and Carnegie is under no illusions that it is an easy task.
"This thing is not an easy get, as you know - it's the last of the Mohicans," he said. "We've got a lawyer called Robert Mangioni, who we met doing some other stuff, and we think we have a plan in terms of unlocking value, and we'll see over the next two years if we do.
CBD couldn't reach Rob Millner, who is chairman of both Soul Pattinson and Brickworks, for comment.
Northern light
LIKE sunset over the Pilbara, the glow from Her Roy Hill Highness Gina Rinehart's lightning book-launch tour of the nation lingers on. Rinehart flew off on Monday, accompanied by Angela Bishop, the showbiz reporter at Network Ten, where she is a major shareholder.
Left behind is a warm, fuzzy feeling and the sudden urge to become a "voice of the North" by joining the Rinehart-endorsed Australians for Northern Development & Economic Vision, which is pushing for a special economic zone.
(ANDEV's online forum has just three posts in it, so it could do with some enthusiastic newbies.)
It also leaves behind a bit of confusion over the price of the book. CBD's spy at the Sydney launch was initially convinced the book was $40, $10 of which got the tome signed by Australia's richest person.
However, both the Sydney Mining Club and Rinehart spokesman Mark Bickerton have told CBD the $40 was a flat fee, signed or not.
Whether or not the price on the night included an autograph, Northern Australia and then some is available cheaper elsewhere.
On Monday, CBD bought two copies at $35 each from the Institute of Public Affairs.
The book is published by Executive Media, owned by Melbourne's Haratsis family. It also publishes Australian Resources and Investment magazine, where the essays in the book first appeared.
Frequently Asked Questions about this Article…
What exactly happened at the Genesis Resources AGM and why did shareholders vote out directors?
At Genesis Resources’ annual meeting shareholders voted to remove every director who was up for election. The votes also saw the company’s remuneration report and proposals to increase the non‑executive directors’ pay pool and to authorise a share issue of up to 10% all fail. The result left the board with only two directors (below the legal minimum of three) until directors later appointed Alex Lim to restore the minimum.
Who is behind the activist push at Genesis Resources and what are their interests?
A group of experienced mining professionals holding about 14% of Genesis through companies in the British Virgin Islands led the challenge. They’re headed by Ines Scotland (noted for her role at Citadel and as temporary Ivanhoe CEO) and backed by mining engineer Peter Lester, company secretary Sue‑Ann Higgins, geologist Brett Butlin and construction engineer Russell Luxford. The group is understood to be interested in Genesis’s gold prospect in Macedonia.
What does the failed shareholder vote to authorise a 10% share issue mean for everyday investors?
Because the resolution to authorise a share issue of up to 10% failed, the board can’t immediately issue that amount of new shares without returning to shareholders for approval. For investors, that limits the company’s short‑term ability to dilute existing holdings via that specific authorisation and means any capital‑raising of that type will likely require a fresh vote or a different approval route.
What was the issue around the $1.42 million in shares issued to a Malaysian investor?
A motion to ratify the issue of $1.42 million in shares to a Malaysian investor was narrowly approved at the meeting. The vote was clouded by confusion over whether the transaction should have required a special resolution (which needs 75% approval) rather than an ordinary resolution.
How did the Genesis board fix the problem of having fewer than the legal minimum directors after the AGM?
After the meeting left the board with just two directors — chairman Eddie Pang and managing director Peter Kong — the board remedied the shortfall by appointing Alex Lim to bring the number of directors back to the legal minimum of three.
Should investors in Genesis be watching the company’s Macedonian gold prospect?
Yes. The article says the activist group led by Ines Scotland is understood to be interested in Genesis’s Macedonia gold prospect. For investors that means any change in shareholder control or strategy could be driven by that asset, so it’s a key item to monitor for announcements or changes in corporate direction.
Who is Mark Carnegie and what does his new activist fund mean for shareholders of Qantas, Soul Pattinson and Brickworks?
Mark Carnegie is an investment banker setting up an activist fund aimed at improving shareholder returns. Early stakes include Qantas, Soul Pattinson and Brickworks. Through MH Carnegie & Co he reached an agreement with Perpetual for Perpetual to follow his voting recommendations for the roughly 12% stakes it holds in both Soul Pattinson and Brickworks, and he also has options to buy shares in those companies if performance hurdles are met. Everyday investors in those stocks should watch for potential proxy fights or strategic proposals aimed at unlocking value.
Why does the cross‑shareholding between Soul Pattinson and Brickworks matter to investors?
Soul Pattinson owns about 48% of Brickworks, and Brickworks owns about 43% of Soul Pattinson. That circular ownership can lock up value and make corporate change difficult. Perpetual has tried for about a decade to break that cross‑shareholding, and Mark Carnegie says unlocking that structure could create surplus returns — but he also warns it’s a hard task. Investors should be aware that any moves to unwind cross‑holdings could materially affect both companies’ valuations.
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