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Short-term contract keeps Molopo boss's eyes on the ball

Ian Gorman, the winner of a boardroom battle at Molopo Energy that saw him succeed Stephen Mitchell as chief executive in February, appears to be on a short leash under his new masters.

Ian Gorman, the winner of a boardroom battle at Molopo Energy that saw him succeed Stephen Mitchell as chief executive in February, appears to be on a short leash under his new masters.

Gorman's newly-signed contract reveals his base pay will be $577,500, plus about $50,000 in superannuation. But he is only on a 12-month deal - and the start of that is backdated to mid-February, when shareholders spilled the board at a meeting in Melbourne.

The incoming chairman of Molopo, Greg Lewin, said at the time that Gorman's deal would be for 12 months, but it has apparently taken nearly seven months to finalise the deal, possibly to ensure that the new chief executive was focused on his operational and structural review rather than his wallet.

Under the terms of the deal, the Molopo board has to negotiate an extension by mid-November, or Gorman's employment will cease in February when the original 12-month deal runs out. That, though, seems unlikely given Lewin's endorsement of him in yesterday's ASX statements.

"During Ian's first six months as CEO he has conducted a strategic review that has developed a clear and deliverable strategy to drive Molopo's growth over the next several years, including an increased focus on the company's core business assets in North America and a monetisation plan for other non-core assets, such as the company's coal bed methane (CBM) assets in Queensland," Lewin said (fortunately, in a printed announcement which did not require him to draw breath).

"The board has every confidence that the strategy that Ian and his leadership team have already developed has set the stage for a number of value-adding operational initiatives in the medium term."

Gorman's salary is a significant advance on last year's, when his base pay was $320,000, but also looks like he has leap-frogged the $346,465 earned by Mitchell. Not so, says Lewin, who told Insider Gorman's wages are very similar to the deal that Mitchell was on before he quit in mid-February after the putsch.

Molopo investors have to wait only a week to see if Lewin's claims are correct, because the company will produce its full-year accounts on September 14. That includes the remuneration report, which is expected to show how much Mitchell and other departees collected on the way out the door.

Those more knowledgeable than Insider, which probably does not narrow the list of suspects significantly, suggested that former BHP executive Gorman's expertise in "unconventional oil and gas", in this case coalbed methane, might allow him to demand a much higher price given the "hot" market for

oil alternatives.

That same heat is driving Molopo's hopes of its adviser, Lazard, bringing home a good price for its coal seam gas assets in Queensland, where it reportedly has at least one keen buyer. Unlike many an explorer, Molopo is in the comfortable position of having about $90 million in cash (before tax payments) in the bank, so does not have to sell the assets at an unrealistic price.

PAPERING OVER

No wonder Rupert Murdoch's national daily tries not to let a week go by without a poke at the financial position of its rival, and Insider's paymaster, Fairfax Media.

A memo yesterday outlining plans for a fresh cost-cutting and staff hiring freeze, designed to deliver a 15 per cent to 20 per cent reduction in overheads over three years, sprang from a gathering of local management confronted with both circulation and advertising sales that were apparently well under budget.

Speculation over whether News deliberately allowed the memo from finance man Stephen Rue to leak is irrelevant. The underlying message was : "It is clear from the last few months of trading, trends over the last three years, and ongoing economic uncertainty."

Fascinating that News Ltd's recognition of the pressure in a rapidly changing market came only a couple of days after its flagship broadsheet, The Australian trumpeted on its front page a column about Fairfax Media.

The piece, written by Mark Day, concerned a two-month-old research paper on Fairfax by analyst Roger Colman of CCZ Equities, in which he considered the future of the company's metropolitan newspapers including the Herald against the backdrop of this rather uncertain market. In reality, News's papers are facing the same evolutionary issues in a digital world.

If you keep running down the competition in public, maybe you can haul in some of their advertisers - particularly when your broadsheet flagship lacks much in the way of paid advertisers.

Among the numbers in Colman's report not published by Day was a table discussing what the analyst called an "own goal" by publishers, because they are charging substantially less for online advertising than in print. On Colman's figures, an online advertiser pays about half the rate of a print client at Fairfax, while The Australian slashes its online charges to one-seventh of a full colour page. Fairfax also delivers four times the page impressions.

On Colman's numbers, the News publication generates fewer unique browsers (118,000) than buy copies of its papers (130,000). At Fairfax, the number online is about twice the print copies sold.


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