Preliminary Results & Restoration of Trading

RNS Number : 3957G

Pathfinder Minerals Plc

28 June 2012

 

Embargoed: 1500hrs 28 July 2012

Pathfinder Minerals Plc

("Pathfinder Minerals" or "the Company")

Unaudited Preliminary Results for the Year Ended 31 December 2011

&

Restoration of trading

Pathfinder Minerals announces unaudited preliminary results for the year ended 31 December 2011.  In addition, Pathfinder Minerals announces that trading in the Company's shares will be restored at 7.30am on 29 June 2012.

Chairman's Statement

Background

In February 2011, Pathfinder Minerals completed the acquisition of IM Minerals Limited ("IMM") for £34.7 million and, with it, two adjacent licences over heavy mineral bearing sands on the Indian Ocean Coast of Mozambique, known as Moebase and Naburi (the "Licences"). Pathfinder Minerals was founded around these world-class deposits of ilmenite, rutile and zircon and is entirely focused on a strategy to build and operate a mine to produce these minerals.

By mid 2011, Pathfinder Minerals had advanced significantly the development of the Licences by commissioning and completing a scoping study report carried out by the engineering consultants URS/Scott Wilson. The scoping study helped to develop the optimum mining method, process flow sheet and ancillary infrastructure requirements as well as progressing to the next level of engineering and cost accuracy.

In July 2011, Pathfinder Minerals undertook an £11m fundraising backed by institutional investors.  These proceeds enabled the Company to accelerate the development programme and, in September 2011, Pathfinder Minerals appointed Jacobs Matasis (Pty) to carry out the Definitive Feasibility Study with the benefit of a grant from the South African Department of Trade and Industry towards work on our Licences. A LIDAR survey was completed by the Southern Mapping Company of South Africa in October, and drilling on the Moebase licence, originally acquired from BHP Billiton, was scheduled to begin in November 2011.

Suspension of trading

Trading in Pathfinder Minerals' shares was suspended at the Company's request on 11 November 2011, following the resignation of General Veloso from the Board and his assertion that Pathfinder Minerals no longer held its mining licences in Mozambique. At the time, it was appropriate that trading in the Company's shares should be suspended to enable the position to be clarified. The Board believes that, in light of the clearer position which is conveyed in this statement, both in terms of the status of the Company's assets and the routes by which control of those assets may or may not be restored, it is now appropriate to lift the suspension of trading in the Company's shares. Trading in the Company's shares will therefore be restored at 7.30am on 29 June 2012.

The Company's actions since suspension

Since trading in the Company's shares was suspended, the Board's sole focus has been on clarifying the status of the Company's assets and seeking to restore control of them in order that project development can be resumed.

The restoration of control entails:

·       securing the ownership and control of the Company's Mozambique subsidiary, Companhia Mineira de Naburi S.A.R.L. ("CMDN"); and

·       recovering the Licences previously held by CMDN.

There are, broadly, three processes by which the Company is seeking to regain ownership and control of its assets, namely:

1.    multiple legal proceedings which are underway in the English and Mozambican courts;

2.    a political process, which has already involved dialogue at the highest level between the UK and Mozambique governments; and

3.    a line of communication, recently established through representatives of Pathfinder in Mozambique, with General Veloso.

Ownership and control of CMDN

IMM, the Company's wholly owned UK subsidiary, holds or held 399,998 of the 400,000 shares of CMDN.  However, General Veloso and his associates have asserted, first that the agreements by which the shares in CMDN were acquired by IMM (the "Acquisition Agreements") were null and void and, subsequently, that IMM has never been the owner of any shares in CMDN. 

These assertions have been made notwithstanding:

·       the existence of the Acquisition Agreements, which are governed by English law, by which the shares were acquired and which were signed by or on behalf of General Veloso (and/or J.V. Consultores, Limitada ("JVC"), a company controlled by General Veloso) and Mr Cavaco;

·       the issue by CMDN of a share certificate in the name of IMM (the "Share Certificate") evidencing its ownership of 399,998 of the 400,000 issued shares signed by General Veloso and Mr Cavaco;

·       representations made by General Veloso and Mr Cavaco to the Mozambique Ministry of Mineral Resources that IMM was a shareholder in CMDN;

·       the attendance by General Veloso and Mr Cavaco at EGMs of CMDN in 2009 and 2010 approving the transfer of 75% and then of all but two of the shares in CMDN to IMM;

·       Mr Cavaco's detailed involvement in the verification of IMM's ownership of 399,998 shares in CMDN for the purpose of the circular to shareholders at the time of the Company's admission to listing on AIM in February 2010; and

·       the fact that General Veloso and Mr Cavaco's current shareholding in the Company, totalling 19.12% of the Company's issued shares, was acquired by exchanging shares in CMDN for shares in IMM which were then exchanged for shares in the Company.

General Veloso and Mr Cavaco have denied the validity of the Share Certificate they signed, which replaced previously held bearer share certificates, and have purported to cancel the original bearer share certificates and to issue to themselves (and JVC) new share certificates representing the entire issued share capital of CMDN.

Action in England

In the circumstances described above, Pathfinder Minerals obtained an injunction on 19 December 2011 from the English High Court ordering General Veloso, JVC and Mr Cavaco (the "Defendants") not to take any steps to interfere with the rights of ownership of IMM in the shares of CMDN pursuant to the Acquisition Agreements.  At a hearing on 19 March 2012, the Defendants gave an undertaking to the English Court that, until trial or further order, they would not take any further steps to interfere with IMM's asserted rights of ownership of shares in CMDN, including by taking any further steps to have those shares cancelled or annulled or otherwise; and would not take any steps in Mozambique or elsewhere to alter the constitution or share capital of CMDN, or to have CMDN dissolved, wound up, sold or otherwise. 

Also on 19 December 2011, Pathfinder Minerals commenced substantive legal proceedings in the English courts seeking, amongst other things, declarations from the English court as to the validity and effect of the Acquisition Agreements (the "Contract Claims"). The Defendants accepted the jurisdiction of the English High Court to determine the Contract Claims and a hearing date of 29 October 2012 was set.

The Company announces that it has now been informed by the Defendants' English lawyers that they are no longer instructed to act on the Defendants' behalf and that the Defendants intend to take no further part in the English proceedings. 

Contrary to their express agreement to submit to the jurisdiction of the English court for the purpose of the determination of the Contract Claims, the Defendants have, however, sought to prevent the continuation of the English proceedings by obtaining an interdict from the Mozambique courts prohibiting IMM from taking any action in the English courts under two of the disputed Acquisition Agreements (relating to the acquisition by IMM of 75% of the shares in CMDN) - effectively an anti-suit injunction. That interdict was granted without a hearing and without notice to IMM.  A hearing subsequently took place in the Maputo court on 3 May 2012 at which IMM was represented and contested the interdict. Judgment is still awaited, but at the hearing the judge confirmed that she had not been made aware of the existence of the English proceedings when she had first granted the interdict and that the interdict did not apply to those English proceedings already underway.

In light of steps taken by the Defendants in the Mozambique courts described above, Pathfinder Minerals has also obtained an interim injunction from the English High Court on 15 May 2012, ordering the Defendants to withdraw and not to pursue any proceedings in Mozambique which seek to restrain the current litigation in the English courts aimed at determining the parties' contractual rights under the Acquisition Agreements. That injunction was continued until trial or further order at a further hearing on 30 May 2012 which the Defendants did not attend and at which they were ordered to pay the Company's costs of the application on an indemnity basis. So far as the Company is aware, the Defendants have not complied with the injunction.

Action in Mozambique

The Board of CMDN had a majority of local directors, being General Veloso, his daughter and Mr Cavaco.  Following General Veloso's resignation, and the discovery of the apparent removal of the Licences from CMDN to Pathfinder Moçambique (as to which see below), IMM convened and on 17 January 2012 held an extraordinary general meeting of CMDN ("EGM").  The purpose of the EGM was to amend the constitution of CMDN and to remove the local directors from the Board of CMDN.  Notwithstanding a representative of General Veloso and Mr Cavaco voting on their behalf at the EGM in respect of the two CMDN shares owned by them, all the resolutions put forward by IMM (the "January Resolutions"), including to remove the local directors and appoint an additional director on behalf of IMM, were successfully passed.

Immediately prior to the EGM, however, Pathfinder Minerals was advised that General Veloso, Mr Cavaco and JVC had purported to hold a contradictory EGM of CMDN in December 2011, in order to pass resolutions (the "December Resolutions") to remove Pathfinder Minerals' appointees from the Board of CMDN and to authorise the cancellation of the original bearer share certificates and reissue of bearer share certificates to themselves (as described above). The Defendants failed to recognise IMM as a shareholder of CMDN and called the meeting without giving notice to IMM. These steps had been taken notwithstanding IMM's holding of the Share Certificate and the various acts and conduct on the part of General Veloso, Mr Cavaco and JVC evidencing that ownership (as further described above).

On the basis of advice from a leading Mozambican law firm that the December Resolutions were not lawfully passed, IMM has commenced legal proceedings in Mozambique to contest the validity of the December Resolutions, including seeking an interdict preventing CMDN from implementing the December Resolutions. So far as the Company is aware, at the time of this announcement no decision has been given by the Mozambique court in those legal proceedings. Pathfinder Minerals also sought to register the January Resolutions with the Legal Entities Registrar in Maputo. The Company has now been advised that those resolutions have been so registered and been published in the Mozambique Government Gazette.

As the registration of the January Resolutions supersedes the rival December Resolutions, the principal obstacle now in the way of the Company regaining control of CMDN and being able to pursue recovery of the Licences is an interdict, apparently granted upon the application of General Veloso and his associates (referred to in the RNS announcement of 20 March 2012), provisionally suspending the January Resolutions. Substantive legal proceedings have also been commenced on behalf of General Veloso and his associates seeking the permanent annulment of the January Resolutions from the Mozambique court.  IMM is not a party to either the interdict or the substantive proceedings, since these have been brought against CMDN itself in accordance with applicable Mozambique law.  Nevertheless, IMM has recently filed an application in the Maputo Court seeking the appointment of an independent third party to defend the proceedings on behalf of CMDN, given the clear conflict of interest inherent in General Veloso bringing a claim for temporary suspension and ultimately permanent annulment of the resolutions against CMDN which is under his de facto control.  Again, so far as the Company is aware, IMM's application has not yet been ruled upon.

The Licences

In November 2011, Pathfinder Minerals learned of the existence of Pathfinder Moçambique S.A., a Mozambique-incorporated company established on 23 September 2011, with which neither Pathfinder Minerals nor its subsidiaries are affiliated. It was established that the shareholders of Pathfinder Moçambique S.A. are General Veloso, JVC and Mr Cavaco.

The Mozambique Ministry of Mineral Resources has confirmed to the Company that, at present, mining concession licences 4623C and 760C, which were issued to Pathfinder Minerals' subsidiary CMDN, are no longer registered to CMDN. The Company has also established that Pathfinder Moçambique S.A. has been granted an exploration and research licence (with number 4623C) over an area amalgamating Pathfinder Minerals' Moebase and Naburi mining concession areas. The Company has yet to receive any explanation from the Ministry on how this could have taken place. The Company's standing to insist on this would become clearer once control of CMDN is returned to IMM. In the meantime, political pressure is being brought to bear (see below).

The Company and its lawyers have made numerous urgent requests of the Defendants and their London lawyers, since General Veloso's resignation, seeking an explanation of the basis upon which the Licences had allegedly been transferred from CMDN. Despite those requests, it was only on 17 February 2012 that the Defendants for the first time disclosed to the Company an agreement which purports to have been made between the Defendants and CMDN and dated 27 February 2006 (the "2006 Agreement"). Curiously, it appears to be a term of the 2006 Agreement that its existence had to be kept secret by the Defendants from the Board of CMDN (on penalty of a payment of US$1 million) unless and until one of the Defendants ceased to be a director of CMDN. The 2006 Agreement provides, broadly, that CMDN is obliged to transfer the Naburi licence to JVC in the event that: (a) US$2 million is not paid by CMDN to JVC; or (b) the Project is not progressed to export, both within 5 years of the agreement. The 2006 Agreement also provides that, in that event, the sum of US$100 million will be paid by CMDN to JVC. Also on 15 February 2012, the Defendants additionally disclosed the existence of a resolution of CMDN purportedly passed in a general meeting on 11 May 2009 (the "May 2009 Resolution") confirming that the 2006 Agreement (albeit without the US$100 million penalty referred to above) shall also apply to the Moebase licence which was acquired from BHP Billiton at that time (using funds provided by IMM).

The 2006 Agreement and the May 2009 Resolution have never previously been disclosed to the Company nor to its Directors, despite representations having been received from the Defendants that there were no undisclosed material contracts.  The Company has disputed the authenticity of the 2006 Agreement and the May 2009 Resolution in the Contract Claims referred to above.  The Company has been advised by its Mozambique lawyers that, even if authentic, under Mozambique law the 2006 Agreement is not binding on CMDN and the May 2009 Resolution is annullable (although both are matters of Mozambique law which would need a court determination). Legal proceedings have been commenced in the Mozambique courts to seek annulment of the May 2009 Resolution and IMM is awaiting notification of a hearing date for determination of the preliminary question of whether or not it was a shareholder of CMDN as at 11 May 2009 when the resolution was purportedly passed. 

Political status and developments

Until the legal processes in Mozambique have re-confirmed IMM's ownership of CMDN, the Company is advised that it does not have the standing to take legal action for the recovery of its Licences.  Accordingly, concurrent with these legal proceedings, Pathfinder Minerals has been seeking the assistance of both the UK and Mozambique Governments to obtain a resolution of the issues outside the judicial processes. 

Due to sensitivities surrounding the political process, the Company has, to date, not been able to publish any details in this regard. The Company is now able to confirm that the Prime Minister, David Cameron MP, and the Foreign Secretary, William Hague MP, specifically raised the issue of Pathfinder Minerals at a meeting at 10 Downing Street on 9 May 2012 with the President of Mozambique, Armando Guebuza, during his visit to London. The Company has been further assured that the Minister of State at the Foreign and Commonwealth Office with responsibility for relations with Mozambique, Henry Bellingham MP, will continue to take a close personal interest in the issue.

At the same time, in Mozambique Pathfinder Minerals' local representative has held meetings with a senior Mozambique government minister who shares the serious concerns regarding the implications that the transfer of Pathfinder Minerals' assets may have under the Bilateral Investment Treaty between Mozambique and the UK and on the relationship between Mozambique and the UK more generally.

Communication with General Veloso

Since trading in the Company's shares was suspended in November 2011, the Company has not until very recently been able to engage General Veloso in any dialogue on these issues, nor indeed to establish his personal involvement in the actions set out above. A line of communication was recently established between Pathfinder Minerals' Mozambique representative and General Veloso himself with a view to achieving a resolution without reliance on the courts. Meetings have now taken place between the Mozambique representative of Pathfinder Minerals, and both the Defendants' local legal representative and, subsequently, with General Veloso himself. At present it is not possible to ascertain whether or not a positive outcome will be achieved from this communication.

Financial results and current financial position

The unaudited preliminary results of the Pathfinder Minerals Group (the "Group") for the year ended 31 December 2011 are set out below.  The Income Statement shows a loss of £37.6 million.  Of this, £34.8 million results from the Board's decision, in the light of events in Mozambique, to adopt a prudent accounting approach and make full provision against the Group's investment in its Mozambique subsidiaries.  The largest part of the remaining expenditure consists of initial work on the Definitive Feasibility Study (referred to in the opening paragraphs of this announcement).

The Group's Statement of Financial Position shows net assets of £8.5 million, a level which reflects the net £10.3 million raised in July 2011.  The assets are held largely in the form of cash deposits (totalling £8.5 million at the year-end).

Since 31 December 2011, the Board has concentrated its energies on attempting to recover the Group's assets expropriated by General Veloso and Mr Cavaco.  As a result of these efforts, at the date of this announcement cash deposits have fallen to £6.1 million.

The Board will be sending the Company's shareholders copies of the 2011 Annual Report and Financial Statements on 29 June 2012.  These will be accompanied by a notice of the 2012 Annual General Meeting, to be held at 11am on 24 August 2012 at the offices of Daniel Stewart & Company Limited, Becket House, 36 Old Jewry, London EC2R 8DD.  These documents will also be available on the Company's website at www.pathfinderminerals.com.

Outlook

During the last six months, the Board of Pathfinder has been undertaking an exercise of positioning the Company for political and legal redress. This strategy is bearing fruit and there is evidence of a strong political will to resolve the position of Pathfinder Minerals. To that end, our focus remains solely on recovering shareholders' assets and resuming the development of the Moebase and Naburi mineral sands concessions in Zambezia Province. The Board believes that, while a solution is taking much longer than it would have liked, the concessions granted to CMDN, if restored, would have a very material value to the Company.

In the event that the Company becomes solely reliant on the courts for a resolution, the Board believes, and is advised, that Pathfinder Minerals has a strong legal case. The Company continues to pursue these remedies in the interest of securing shareholder value.

The Board recognises that the period of suspension has deprived shareholders of their ability to trade in the shares of Pathfinder Minerals. However, we are grateful for the overwhelming and continuing support of our shareholders.

John McKeon

Chairman

28 June 2012

Enquiries:

Pathfinder Minerals Plc

Nick Trew, Chief Executive

Tel. [phone]

Daniel Stewart & Company Plc

David Hart or James Thomas

Tel: [phone]

M: Communications

Ben Simons or Maria Souvorov

Tel: [phone] /2327

Statement of Consolidated Comprehensive Income
Year ended 31 December		2011 £'000s		2010 £'000s
Continuing operations
Revenue		-		-
Administrative expenses		(2,533)		(1,057)
		---------		---------
Operating loss		(2,533)		(1,057)
Finance costs		-		(7)
Finance income		19		-
Provision for diminution in value of assets		(34,830)		-
		----------		--------
Loss before income tax		(37,344)		(1,064)
Income tax		-		-
		---------		--------
Loss for the year		(37,344)		(1,064)
Other comprehensive income		-		-
		---------		--------
Total comprehensive income for the year		(37,644)		(1,064)
		======		=====
Loss per share, expressed in pence per share
Basic		(4.5)		(2.8)
Diluted		(4.5)		(2.8)

Statement of Consolidated Financial Position
31 December		2011 £'000s		2010 £'000s
Non-current assets
Investments		-		200
Current assets
Trade and other receivables		34		-
Cash and cash equivalents		8,471		21
		--------		----
		8,505		21
		--------		----
Total assets		8,505		221
		=====		===
Shareholders' equity
Called up share capital		18,289		8,412
Share premium		11,022		2,170
Other reserves		-		17
Retained earnings		(21,343)		(11,377)
		----------		---------
		7,968		(737)
		----------		---------
Current liabilities
Trade and other payables		567		958
		------		-----
		--------		-----
Total equity and liabilities		8,505		221
		=====		===

Statement of Consolidated Cash Flows
Year ended 31 December		2011 £'000s		2010 £'000s
Cash flows from operating activities
Cash absorbed by operations		(3,012)		(245)
Interest paid		-		(7)
		----------		-----------
Net cash from operating activities		(3,012)		(252)
		----------		-----------
Cash flows from investing activities
Interest received		19		-
		-----------		------------
Net cash from investing activities		19		-
		-----------		-----------
Cash flows from financing activities
Share issues for cash		11,442		117
		-------------		-----------
Net cash from financing activities		11,422		117
		-------------		----------
Increase (decrease) in cash and cash equivalents		8,449		(135)
Cash and cash equivalents at the beginning of the year		22		157
		---------		----------
Cash and cash equivalents at the end of the year		8,471		22
		======		======

 

END

 

 

FR SEAFDAFESEEM