In a circular released to shareholders on Wednesday Mwana Africa is urging shareholders to reject and vote against the proposed resolutions.
MWANA Africa has called for an extra-ordinary general meeting after a requisition from minority shareholders to remove four non-executive directors including Ngoni Kudenga and Herbert Mashanyare.
The other two are Stuart Morris (the interim executive chairman) and Johan Botha who have however given notice to retire.
The small shareholder group led by Ian Dearing representing 5.1% of Mwana Africa have proposed instead the election of four directors, who include a former chairman – Mark Wellesley-Wood – and Anne-Marie Chidzero who has no experience in the mining sector but should be the Zimbabwean face on the board. The other two are Scott Morrison, a metallurgical expert and Oliver Barbeau, a CA. The EGM will be held on June 9.
Kudenga and Mashanyare were appointed as non-executive directors in December 2014. “Given that Mwana operates in Zimbabwe, a country with an increasing focus on indigenous participation, the directors firmly believe it is critical to have a board with the right mix of credentials with on the ground experience and with significant local networks of contacts that are of benefit to the company.
In a circular released to shareholders yesterday, Mwana Africa urged shareholders to reject and vote against the proposed resolutions.
This comes amid concerns by the London-listed junior miner that the move would cripple the board and deprive the firm of valuable industry local and indigenous experience, corporate memory and key experience to steer the company forward.
The company stated that over the years it has faced a series of major including adverse economic conditions in Zimbabwe and falling commodity prices. BNC, with the support of its shareholders has overcome these challenges, restarting operations following care and maintenance at its Freda Rebecca and Trojan in Zimbabwe and making significant progress around corporate restructuring announced in 2013.
Last year, the strong foundations for growth were reflected in the group’s ability to complete the raising of $20 million through the issue of a five year bond that was awarded prescribed and liquid asset status, a huge feat for a Zimbabwe mining company.
Dearing has since February been trying to garner sufficient support from shareholders for the requisition after a previous attempt to call for an EGM was rejected as he did not have the support of shareholders holding 5% as required. He is joined by former finance director Donald MacAlister among others. Under MacAlister’s tenure, BNC was impaired in Mwana books only to be reversed the following year when he had left
The requisition requires Mwana to put ten resolutions at the EGM which include the removal and subsequent replacements of four non-executive directors independent of the company’s major shareholder China International Mining Group Corporation (CIMGC). The other resolution will require the directors not to enter into acquisitions and disposals of major assets without prior disclosures of the details to shareholders and that the board and CIMGC resolve their differences.
Dearing also wants Yat Hoi Ning and CIMGC to iron out differences. This comes after a dispute over board seats allocated to Mashanyare and Kudenga created acrimony in the partnership. Ning is challenging the validity of the re-election of Morris and the appointments of the two Zimbabweans. However the petition was temporarily suspended until June 15 to allow the parties to try and reach settlement.
The concerns of the (shareholder) group are around the level of its share price currently, the composition of the board and corporate governance deficiencies. A statement from Dearing which is included in the circular says the catalyst for the move is the High Court petition against the company.
On corporate governance he says the company is wasting its resources on litigation with a board member and shareholder and that Morris (the chairman) and CE Kalaa Mpinga share appointments to a South African board a move which compromises their independence.
Dearing also says the company’s value has eroded to about 10-15% of the 200 million sterling pounds initially invested. “When a company underperforms so badly shareholders should have the right to call board members to account. Management and directors continue to promote the company’s prospects at investor presentations but they have not added to their shareholdings to align their interests with those of shareholders.
“Three ex-board members of the company have extended their support for the requisition, which indicates that the concerns of ordinary shareholders are shared by those who have detailed knowledge of the company.”
Dearing wants shareholders to vote on a resolution compelling directors not to enter into any unconditional agreement to acquire or dispose of any major asset without previously disclosing the details to members of the company before an agreement becomes conditional.
The company said this was neither helpful nor necessary to the operation of the company, saying Mwana was already subject to subject to the transaction tests set out at rules 12 to 16 of the AIM Rules, which include disclosure and shareholder approval requirements for certain substantial, and related party, transactions.
“No adequate explanation is given as to why the Mwana board should be constrained in a way that its AIM-listed peers are not, save that Mr Dearing considers it “prudent”,” the company said. The board said unlike the AIM rule class tests, which are precise and tied to specific numeric thresholds, the wording of the resolution was extremely vague.
They said what would constitute a “major” asset or a “reasonable” time frame was open ended.
Mwana Africa said the four directors Dearing was seeking to remove from the board were willing participants in the company’s cost reduction programme.
According to the company, non-executive directors chose opted between 1 July and 31 March to take a voluntary 50% cut in their fees to support the company’s cost savings initiatives.
Senior management also accepted a salary reduction of 20% as part of the cost cutting exercise. - FinX
