What follows is an almost complete transcript of the Cityview EGM held on 30th January 2009.
The transcript was compiled from the incredibly detailed notes of our volunteer stenographer. Parts were also transcribed with the aid of audio recordings taken by some of the shareholders present who forwarded them to us after the meeting. We were not sure if audio recording would be permitted at the meeting and given that we were holding so many proxy votes we simply could not take the risk that we might be removed from the meeting for carrying a recording device so we are very fortunate that some others did so as to enable us to get a thorough record of the proceedings. Our sincerest thanks go to both those shareholders and to the stenographer who did a fantastic job of capturing the full meaning of the meeting.
If you have not already done so we strongly recommend you read the voting outcomes article before you start wading through the transcript as it will assist greatly in setting the scene and elaborating the mood of shareholders in the room at the time. You can find it here.
We have taken the liberty of removing all the um's and ah's (from all speakers) for the sake of clarity. There is limited commentary in the text in order to better convey what is happening. We will keep opinionated commentary for a separate article however as this is meant to be strictly an impartial record of events.
It is possible there are errors in the transcript. If any speaker has issue with anything that has been transcribed we invite you to contact us and we will endeavor to correct the transcription without delay.
CVI EGM transcript – detailed.
Arriving at the meeting at 10am to register, meet Computershare management to scrutinize forms, and then meet the Chairman at 10.30, Steve and I had a lot to get through.
During the pre meeting brief, the Chairman set some rules, and thanks To Doug Armati, our Australian Shareholders Association rep from WA, we established that the chairman stated he would allow reasonable discussion, which he also verbalized in his introduction. The chairman (Michael Bowen) also made it clear that it was NOT a question and answer session, but a debate – therefore we also had to adjust some things on the fly.
We encourage everyone to join the ASA – their resources and the professional attitude and brilliance shown by Doug after being familiarized with CVI only 48 hours before the meeting was amazing.
We also handed out a sheet to all attendees (thanks to shareholder volunteer).
We were going to read it out, but instead and to save time, made it a handout but gave it officially to the Company Secretary for tabling – along with two of the more complex questions that were posed for Mr. Smyth and sent in earlier.
As you read through, you will notice there were two specific points where the Chairman stepped in and argued very strongly against particular lines of question we were attempting to put to Mark Smyth. The resolutions in question were always used as the reason, yet permitting the question would perhaps have been more expedient than arguing them down.
Handout attached as Annexure 1.
Tabled Questions Annexure 2
Meeting Commences:
The meeting commenced at 11.03am
INTRODUCTION
The Chair, Michael Bowen (Ch), commenced the meeting by introducing himself as a partner of the Perth law firm Hardy Bowen. He explained that he was chairing the meeting in place of Wayne Reid who was unable to attend.
He went on to advise that he had had no involvement in the notice of general meeting and was not aware of the substance of the issues at hand. He was there to act as an independent chair, ensure compliance with the relevant Corporations Law and ensure procedural fairness. He confirmed that Computershare had reviewed the documentation relating to the proceedings and would conduct the poll at the end of the debate.
Attendees and apologies were detailed and the Chair declared that, as there was a quorum present, the meeting could proceed.
Ch: Resolution 2 is withdrawn because David Wilson has asked for it to be withdrawn.
Resolutions 13 & 14 have been withdrawn as the proxies indicated they didn’t have enough support. There is no point in putting that up for debate.
Prior to drafting the notice of the meeting, the Company sought legal advice from Corrs as to resolutions 4 to 7, and they are not compelled to be followed by the board. The Company has therefore made them advisory resolution.
Shareholders do not have the power to manage the company through resolutions. Shareholders’ only power is to remove board members if they are unhappy with the way they are performing within the company.
OK – I move to the business of the day.
Resolution 1:
Ch: I move resolution one. (Numbers read out)
I move resolution 1 open for debate.
Douglas Armati (DA)
“I just have one question I’d like to ask.”
DA: You want me to stand here?” – moving to podium across the room
Ch: Yes
DA: My name is Douglas Armati, I’m Chairman of the Company Monitoring Committee of the local branch of the ASA. I must say that I’ve only become involved in this matter in the last 48 hours or so, so I’m still coming up to speed on all things. I HAVE had a chance to have a conversation with the CEO.
I DO have one question though, in relation to the placements – and that relates to the relationship, through Global, to various parties. It raised the question in my mind as to whether there’s a probability that these parties are in any way affiliated with each other; – The parties to whom the shares have been placed.
If they HAVE been, it would appear that overall there would now be a potential for there to be associated parties holding more than 40% of the company, in which case there would have been a requirement to seek prior approval for the uptake of those shares from the Treasurer and the Foreign Investment Review Board.
Are you aware in ANY way whatsoever that there may be a possibility of this being the case – that there are associated parties involved in this transaction?
Mark Smyth (MS): There are NO associated parties involved.
DA: “Thank you”
CH: If no further debate, I will put this resolution to a ballot that will be counted at the end of the meeting.
Resolution 2
Ch: Reiterated that this resolution has been withdrawn.
I now move on to resolution 3 – removal of a director..and I move resolution three.
Resolution 3
Ch: Reads out proxies
Opened up the debate.
DA: “Once again, a couple of questions…..”
You have considerable financial assets on your balance sheet. As a Director of the company, do you consider that any of these financial assets should be subject to impairment, and if so when might that be disclosed?
Long pause
MS: “Do you want me to reply now?”
DA “Yes”
MS: “No assets are subject to impairment.
DA: “OK – So you are holding them on the balance sheet at cost? You are confident that there is no impairment of that value at this stage?”
MS: “That’s correct”
DA: “OK – That’s very good – and – one of the questions I asked you the other day and I just also wanted to put this in front of the meeting as well. Is there a chance that between June 30th last year and the time that in fact the placement was made or the funds raised from that placement – is there ANY chance that at any time during that period the company was trading insolvent?
MS: “No – because as I mentioned, at the Annual General Meeting in May, the work obligations were being carried by Pensador, and so we were actually only paying for office and administration.
DA: “So then in December in your report that you lodged – the quarterly statement – of your cash position – you made no mention in that of having any creditors of the company, and you explained to me the other day when I asked you that there were in fact zero creditors. IS that the correct position?”
MS: “Yes, that’s correct. Paul Williams as Company Secretary can confirm that”
DA: OK, and so the same applies at the end of the year as well?
MS: “December 31st sorry?”
DA: “Yes, the latest report. There are still no – cos you’ve made no reference to creditors, so you’re zero again?
MS: “Yes”
DA: “Thank you very much”
CH: Any other debate on the matter? OK then Mr Smyth, you have the right of reply. Do you wish to say anything?
MS: Shakes head.
Ch: OK – I’ll defer this matter until the ballot as well.
Resolution 4:
CH: Right –now this is one of 4 resolutions that are advisory in nature.
I move resolution 4 as in the text of the meeting, and I now read out the proxies.
(Numbers)
I open this resolution for debate.
Steve Coughlan: (SC) “Mr. Chairman, I have a number of points to make.
Ch: “Sure – would you come up here”
SC: Yes. ….walks across room….I have a number of points to make that relate to resolutions 4 through 7.
Ch: :And you’re proposing that we perhaps deal with all these now? That would make it more expedient.
SC: Mr. Chairman, a document with questions was tabled yesterday to the company secretary which he indicated were forwarded to you and the Managing Director. Would the Managing Director care to make a comment or response?
Ch: You want to read it? This is what you gave me before the meeting (shareholder statement shown)
SC: No - These are the tabled questions.(Annexure 2)
Ch: Do you want to read them out so that we all know.
SC: They’re quite long and complex
Ch: Well just for the purpose of the people who haven’t got a copy of them do you want to give a quick summary of them so they know the nature of the questions. Just give us a summary of the areas.
SC: Question 1 relates to the legal standing of the licenses held by Fortitude Minerals through its subsidiary Zebra Copper. It quotes one of the ‘agreement for sale’ sections of the purchase contract for Zebra copper purchasing a number of these mineral licenses from various parties. The quote’s quite long so I won’t read it out I’ll just get to the relevant questions.
The licenses refer to all of those held by Zebra Copper, what is the commencement date of those licenses currently held?
MS: Oh right, do you want me to go through each of these one by one? I prefer to go all through all the questions then we’ll do it at the end.
Ch: OK.
SC: What is the current legal standing of the mineral licenses held within Fortitude Minerals and its subsidiaries, specifically, are all titles that have been acquired by Fortitude free of Liens?
Are they in good standing with full force and effect?
Will a search of the Mining and Geology Department records in Angola confirm Fortitude’s, or its subsidiaries’, name on the licenses?
Will it confirm that both the vendor and Fortitude have complied with all the obligations and laws in relation to the tenements?
And does the company, namely Fortitude, operate in Angola in accordance with the requirements of the Angolan National Private Investment body?
Two further questions or rather points on this question:
Are copies of those licenses and/or the transfer documents available for perusal by the company’s auditors at the Cityview Perth office?
If not can they be tabled to the auditors and will the Managing Director give an undertaking to do so in a timely manner?
MS: Is that it?
SC: Yes that’s the first question
Ch: Do you want to deal with the rest of your issues and come back and visit this in normal business.
SC: Well that’s up to Mark if he wants to address that question now
MS: I just don’t want to keep jumping up and down
Ch: Why don’t you finish off if you like?
SC: Ok, I have quite a few matters so… I’ll finish these two questions that are tabled then
MS: Well actually I’m quite happy to or we’ll lose the thread..OK?
SueTurner (ST): Mr Chairman may I join Steve at the podium please?
Ch: Well let’s just deal… we don’t want to turn this into a circus here
ST: No..I just thought..(gets interrupted by Chair)
Ch: We’re one speaker at a time that’s what I’m going to have… the second thing is, Mark’s going to deal with these questions now.
MS: I think the key point is, you have to look at who is the Chairman of Cityview. The Chairman of Cityview is the former minister of mines in Angola and he was minister until about October last year. All the concession areas would be actually granted by him and his name is on all the title deeds. Every year we have a letter of good standing and actually the reason why the minister is not present at the moment is because he is actually in Luanda getting the next lot of letters of good standing. The significance of this is that there is a new Minister who is granting the letters of good standing. The question that always comes up is once the minister changes are all your titles safe and everything like that. I’m pleased to say that Mr Africano has great relationships with the new minister and he will be attending to matters of good standing. The reason why all this is going on right now is that we have announced several times that the plan for Cityview is to take over the rest of Fortitude. To do that you need several things. First of all you need to have good legal title, signed off. And that’s what’s being confirmed at the moment. Secondly you need an audit report, thirdly you need a competent person report… and valuation and then you have to have shareholders approving it. All of these things are actually in motion now. So from my point of view a lot of the issues you have addressed will actually in fact be surfacing very soon. They’re actually doing, they’ve done an audit of Fortitude as at the end of February which is financial year end but they’re doing another one right now for December 31.
SC: Mark you discussed at length what’s being done at the moment to secure good standing of the titles but I don’t think you addressed what the current standing is.
MS: The current standing is that they are all in good legal standing, but Africa is Africa and you have to be very aware that you’re only as strong as the Minister. Angola’s very much controlled by Dos Santos and surrounding Dos Santos are some very powerful groups and so on… and at all times one has to be very careful that you don’t fall foul of one of those groups.
SC: Mark, given that the current Chairman and the ex-Minister is actually a member of the opposition party that was involved in a civil war with the current ruling party for some decades, are you confident that his relationship, his ability to maintain this good standing is intact.
MS: Mr Africano is one of the world’s great survivors. He’s changed party. He’s now a member of the MLPA.
SC: That’s reassuring..(sarcasm detected!)
(MS chuckles)
SC: I’ll move on to the 2nd tabled question. In mid 2007 Mr Smyth signed off on behalf of Zebra Copper 5 separate contracts that transferred the ownership of 7 of the 9 Angolan exploration blocks to Zebra Copper, I can name them all if you want me to?
MS: No
SC: Zebra has on issue 26,700,000 shares which includes 26,200,000 shares at a value of 10 pence each that changed hands for those 7 blocks. On top of that 3 of the contracts involved additional cash payments that totaled roughly $8 million AUD. If you add the value of the shares and the cash you end up with around $12 million AUD. In December 2007 Cityview announced the formation of Fortitude Minerals which would be the new vehicle holding all these exploration licenses. Fortitude had 51,700,000 shares on issue at a value of $1.39 US each which gives Fortitude an approximate value of $100 million AUD. We know that approximate $30 million of this can be accounted for from Cityview’s transfer of Longonjo minerals and Ucua licenses but we cannot account for the balance. What other assets did Fortitude or Zebra Copper hold to account for the approximately $88 million and then $58 million difference in Zebra’s purchase price and Cityview’s purchase price of Fortitude shares.
MS: The answer to that question is that you’re muddling up the nominal value with the actual issue value. The nominal par value at the time was 10p and they’re issued at a dollar from memory a dollar thirty nine. There’s never been any markup at all. This will be verified anyway in the audit.
SC: The figure of 10p comes from the contracts…
MS: It might do, but what I’m saying is that’s the nominal value…. There’s not been a markup.
SC: So that’s not the value that was actually paid?
MS: Not at all no…. This will be exactly the perfect thing you can look at when you see the audited accounts. It’s like the old stories - Mark Smyth was born in the West Indies, West Indians are black therefore Mark Smyth is black. You know you get these situations that’s clearly both a half statement which is correct but really not true.
SC: What I’m failing to understand though Mark is that the executed contracts stated the shares were transferred at 10p each so you, you’re trying to tell me that
MS: (interrupts) they weren’t. That’s exactly what you can check when you see the auditor. The whole thing was done by Nabarros, the lawyers, there’s a very detailed audit trail.
SC: So in fact it was how much that you paid for the shares?
MS: I can’t remember what it was… about a dollar 39 I think.
ST: That was Fortitude
MS: I don’t know. It was all done in pounds though.
SC: Pertaining to Fortitude again. Can you explain to the members how the figure of US$1.39 was actually calculated?
MS: I can’t remember, it flows back to the pound figure, I think from memory it was 75p.
SC: I mean on what basis, the underlying assets
MS: The underlying assets oh it’s 39p is the valuation. Actually the best person to ask these questions is Ian Egan who’s the Chairman of Fortitude.
SC: Unfortunately he’s not here right now.
MS: I had no idea these questions were going to come up. But I mean he is the ideal person to ask them to.
SC: Are you able to secure an undertaking from Mr Egan that he will discuss these…
Ch: Well he’s not here
SC: I realise he’s not here at the moment, we’ve tried to contact Mr Egan on a number of occasions and…
MS: I can ask these questions to him and get a reply back. No problem.
SC: That would be appreciated. How many Fortitude Minerals shares does Cityview currently hold?
MS: 25 million from memory…(pause)……. 46% anyway that’s what I believe.
ST: Sorry what was the figure that was changed to?
Ch: 46% was the answer
SC: Are you aware how many they currently have on issue?
MS: The audited accounts are actually taking place now.
SC: Are you aware how many they currently have on issue?
MS: The audited accounts of Fortitude are actually taking place now. So again all this information will be totally updated very soon.
SC: Ok, do we have an ETA on when that audit will be available?
MS: I would think it must be ready by February.
SC: Ok, it will be available for shareholder perusal?
MS: I come back to what I said before, is that the intention is for Cityview to takeover Fortitude. To do that we have to call an EGM with the shareholders. To do that we have to produce audited accounts, proper valuations and legal standing. All these queries which you are validly raising will be addressed at that time.
SC: I suspect that the answer will be the same to this question. What are the funding obligations to maintain legal standing of the Fortitude licenses and how does the Board propose to meet Cityview’s part of these obligations?
MS: Well again those are in the letters of good standing. Just to put everything into perspective, there’s still a great problem of landmines in Angola. I see Mr Jacoby over here in the corner and he’s certainly very well aware of the difficulties of operating in Angola. For example, one of the areas, Ucua is heavily mined still, so you can have all, the err what do you call them, crumbs? in the world but you can’t actually get onto the tenement, so you just can’t operate and that is appreciable.
ST: Would that risk not affect the value?
Ch: (interrupts)No, you’ll get your chance. Unless you (indicates SC) want to sit down, we’ll have one question at a time.
ST: Ok
SC: Pertaining specifically to resolution 7, I’d like to turn our attention to Pensador for a moment. In May 2008 Cityview purchased $12 million worth of Pensador shares at a discounted rate of $15 per share. An August company extract of Pensador shows some 38 million shares on issue which, at the normal subscription price of $20, implies a capitalization of $760 million. What assets did Pensador hold to justify the share price we paid?
MS: As you know the entire Pensador arrangements have been terminated and Cityview has received the benefit of the loans which Pensador made to Fortitude and also 18.5% of the diamond operations. So in return for our investment actually we have assets considerably greater than what we invested in them.
SC: I understand that the arrangements were terminated and I understand what the terms were that were announced to the ASX. The point that I’m trying to discuss at the moment is the method of Cityview’s entry into the Pensador deal which I think it would be fair to say many shareholders have concerns with and the question was, what assets did Pensador hold to justify the share price that was paid. Is the Board aware of what assets Pensador held at the time the deal was initiated?
MS: Pensador was a special purpose vehicle which was backed by a couple of Swiss banks with some pretty large clients behind it. The concept was actually first class. They were going to be paying for all the programmes including the refinery and then the whole idea was to back it into Cityview. Then Lehman Brothers collapsed and the entire banking system in Switzerland seemed to collapse and we couldn’t proceed. What I’m pleased about is that out of the wreckage of Pensador we’ve actually gained far more than what we ever put in. At the end of the day that’s what matters. Cityview is in the business of trying to create the largest quality portfolio in Africa and we haven’t, Pensador exercise hasn’t actually stopped us from doing it.
SC: There’s a question of due diligence that needs to be addressed Mark
Ch: (interrupts) Just a point of order here. This resolution, resolution 7, you’re asking for the company to provide full audited evidence of the money received… the company’s providing information down the track. I’m just trying to work out where this debate is heading. I understand a debate about… rather than a debate about what action in the transaction the resolution will seek to pass, is in accounting for it later on. so I’m just trying to keep it on the subject matter.
SC: I understand Mr Chairman, I also pointed out however that the Pensador issue relates to resolution 3
Ch: Ok, sorry
SC: and the question of…
Ch: Resolution 3? Removal of director…Oh, that’s been considered. That’s gone to the ballot, that’s been dealt with.
SC: so…
Ch: That’s been debated we’ll now move onto resolution 4 and onwards.
SC: Ok, so you’re not going to allow me to…
Ch: Not if it… We’ve already debated resolution 3 you’ve had an opportunity to do that.
SC: I discussed with the Chairman prior to the meeting the fact that many of these questions (Ch:sure) pertain to numerous resolutions(Ch:Sure) and that it would be better for us to…
Ch: I understand. Clearly, clearly that discussion was meaning… was in relation to… you can hardly debate the resolution after it’s been debated and closed. What we’re doing now is resolutions 4, 5, 6 and 7.
DA: Mr Chairman, I don’t believe you actually said that to us at all. I was a witness to that conversation.
Ch: Well it’s implicitly and CLEARLY obvious. You CAN’T debate something in retrospect.
DA: No - It might be clearly obvious to YOU. You DO realise you’re dealing with motivated shareholders here?
Ch: I know that. The debate on resolution 3 is finished. We’re moving forward.
(DA: Makes obvious expression of frustration / displeasure)
SC: In relation to the spending of 12 million dollars. As Cityview has paid 12 million dollars in cash to Pensador, is there a written contract in the Perth office detailing the terms of the 1.1 billion dollar facility?
MS: Yes, there’s plenty of documentation in the Perth Office.
SC: Is it available to the auditors?
MS: Absolutely it is. Yes.
SC: The auditors are present?
Ch: No
SueT: Yes, Mr. Somes.
Ch: I didn’t know we had the auditor present.
Shareholder 1 – from back of room:
Sh1:Mr. Chairman, would it be possible to ask a question please?
Ch: Sure – if you want to come up to the podium please.
Sh1: I’d personally prefer not to. (Ch: No) I’m sure I’ve got a loud enough voice.
Ch: If you don’t mind standing up in front of the podium please.
Sh1: I actually have three questions. One’s actually with relation to the position of the chairman. I find it very intriguing.
With the best of my knowledge, the chairman’s position is not to act in an executive position and do the executive work of a director, and yet we’ve been advised by Mr. Smyth today that he is over in Angola (the lovely place that it is) doing effectively directors work. I am wondering if Mr. Smyth would like to make comment on that.
Ch: I think, with all due respect, that has nothing to do with the resolutions we are debating. If you want to talk about that after, I’m sure you can, but it’s not on the subject matter. Do you have a point?
Sh1: I think Mr. Chairman you have actually made my point for me. (burning sarcasm) Thank you very much sir.
SC: Mr. Chairman - A point of order I’d just like to ask is did you consider it appropriate to bring up matters that are obviously relevant to the current Cityview matters?
Ch: I am only allowing debate on the open issues, which is now 4,5,6 and 7. The OTHER matters are matters for the AGM or any other meeting where those matters are under debate – but right now we have resolution 4,5,6 and 7. We’re talking about an audit that has actually been done. (Though Mr. Somes didn’t agree that he has done) Some of these questions relate to the integrity of transactions which are subject of audit so outside of that resolution, no.
SC: Well my questions actually DO relate to the integrity of the transactions so if you’ll allow them to go through then you’ll actually see that the relationship is pretty clear. The original question was, what assets did Pensador hold to justify the share price paid. The question of due diligence and an understanding that Cityview had a reasonable expectation that the shares were worth what we paid for them I think pertains pretty clearly to the integrity of the transactions.
MS: Of course. . . . any more?
SC: No that was the question
Ch: Well he doesn’t have to ANSWER the question, this is a debate and it is open to debate. If you don’t want to debate it, if you want to sit down and listen to the debate of the issue then you can.
SC: All right, (frustration in voice) I’ll move on. Again going to the integrity of the transaction I would like to ask what due diligence was performed to satisfy the Board that the subscription price paid for Pensador was at fair value?
MS: Well it’s….. Due diligence was carried out and we are doing our… Mr Somes will be doing the audit of Cityview very shortly and it’s one of the first things he’ll be checking up I’m sure.
SC: You are satisfied then that Pensador held assets that were worth the subscription share price multiplied by the number of shares on issue?
MS: I’m satisfied
SC: Ok…… On Jan 21 Cityview announced it was returning 3.4 million shares to Pensador which we understand had a book value of $68 million in exchange for terminating our obligation to transfer the refinery and offshore oil potential rights. With respect to the offshore oil rights, what was the nature of the rights that Cityview held and what approximate value was assigned to those rights?
MS: The main valuation in that figure by the way is the refinery. The offshore rights were those 4 areas held by Falcon oil……..
SC: Are you able to give an approximate dollar figure of the oil?
MS: The combined refinery and oil ………. I can’t remember the exact figure but all I do know is, I wanted to ensure that Cityview had the rights to the refinery without anybody else being able to prevent us from participating in it so it’s very important we cleared the lines and the refinery is an extremely valuable project.
SC: The rights to the refinery were in fact transferred to Pensador in consideration for some of those shares but in August Cityview announced that the refinery would proceed as a Cityview project rather than as a Pensador project. Can you explain why the project was taken OUT of Pensador at this time?
MS: Because Pensador had, (like like) Lehman brothers wouldn’t be able to fund it so we wanted.. If they couldn’t do it then we would do it ourselves.
SC: This was in August of 2008… was the company…
MS: (interrupts)Lehman Brothers collapsed when everything fell apart
SC: Was the company aware at the time that the Pensador deal was in jeopardy?
MS: Well in August 2008 you may remember, the European banking system collapsed.
SC: That’s so, yes.
MS: So it’s common sense that everything would be falling apart, so we took preventative action.
SC: Ok so… you were or you weren’t aware that the Pensador deal was in jeopardy?
MS: I wasn’t aware that Pensador dealings were really in jeopardy until I think middle of August, early September.
SC: Can I ask why this market sensitive information wasn’t immediately announced?
MS: When I say ‘aware’ I was looking at the papers, looking and I saw Lehman Brother’s collapsed, Citi collapsed, the whole world was collapsing. It’s common sense.
SC: So the announcement that the refinery was proceeding as a Cityview deal rather than a Pensador deal indicates to me that the rights to the refinery had in fact been waived by Pensador is that the correct…
MS: It’s taken us many months to get all this organized. It only finished in January.
There’s a long difference between the time when you actually come up with a concept and the time when you actually can execute the documents.
SC: I understand that but it was announced in August 2008 that…
MS: That was our intention yes.
SC: That it was your intention?
MS: Yes, just as we announced that is was our intention that we want to takeover Fortitude, but there’s a big difference between announcing our intention and being a definite decision.
SC: I refer to the August 18 announcement it actually says that it had been ‘decided’ that Cityview would acquire the oil refinery in its own name. Is that indicating an intention or is that indicating a definite decision?
MS: An intention, because the reality is you can’t do anything without the government authorities getting involved.
SC: So at that time did the rights that Pensador had to this oil refinery have a binding value?
MS: Yes it did, I wouldn’t be able to say exactly what the value was. The refinery is a valuable project. What’s been holding us up really to this point is actually uncertainty about Cityview. Now that this meeting will clear the air, pretty soon the refinery will be able to move forwards.
SC: I believe that Sue Turner probably has a question to put at this point.
Ch: Thank you. Your floor (to Sue)
ST: Staying with the advisory resolutions Mr. Chairman, (Ch: “Sure”) and moving onto Canzar.
Mr. Smyth - Shareholders were advised that the first diamond production would be seen at either Luachisse or Nhefo during late 2008. In the December monthly update, we were told that this has now been delayed until late 2009. When will Canzar actually obtain mining rights, as opposed to exploration rights to Luachisse and Nhefo?
MS: One can always apply for mining rights, but the moment you apply for mining rights, you actually have to spend large amounts of money, so you don’t want to apply for mining rights until you actually have the finance organized.
ST: So the conditions that need to be fulfilled to convert exploration rights to mining rights would be to have enough capital to proceed?
MS: That’s correct.
ST: Could you explain to me why did Mr Anton Tarkanyi, a Canzar and Easy office Director at the time oversee the sell down of around 35 million CVI shares and why did this sell down take place within days of having received the share placement?
Ch: (Quietly to Mr Smyth) - This is an ASIC resolution - is that a matter for ASIC under my understanding? –
Ch: Is that a question about the share registry of the holding company linked to Cityview?
ST: It’s all part of the advisory resolutions.
MS: I don’t mind answering it because the Easy Office got caught up in the sell down by all the hedge funds. They were just margin called – a complete wipe out of the hedge funds in London during that month – August. All the assets were just dumped, and Easy Office was one of the many, many hedge funds caught up in it.
ST: And that would be the same for all of the related transactions where we had placed large numbers of shares?
MS: With the shares … the people that took the shares weren’t expecting to be wiped out by this tsunami wave. What happened with the collapse of Lehman Brothers is a thing that you don’t often see, and all of these hedge funds have been wiped out. They’re as unhappy as other Cityview shareholders.
ST: Again, along with the advisory resolutions looking at the whole process of interlinked companies, when was Cityview Director Wayne Reid appointed to the board of Canzar?
MS: I don’t know……
ST: One year ago? Two years ago?
MS: I’ll ask him. I don’t think he is, I don’t think he was appointed. Ask him.
ST: OK. Well, unfortunately he’s not here, so I can’t – and there’s no record of his being MADE a director.
MS: I don’t think he was a director, but you’ll have to ask him.
ST: Well his resignation notice went to Companies House in London last week.
ST: Moving onto Longonjo.
A Cityview release on March 12, 2008 stated:
“The FIRST of twenty four planned JORC compliant exploration drill holes has been completed at Cassenha Hill / Catabola Huambo Province, Angola."
Drilling obviously stopped soon after that. Why was this important information not announced to shareholders and the ASX?
MS: We’re talking about March 2008. The…umm…there were a lot of problems at Longonjo that Mr. Jacoby over there will well know. One of the main problems has been logistics - Sending out the samples through DHL.
They had problems with the rig.
They satisfied themselves there was enough information to plan a proper drilling campaign this year.
ST: We’ll look forward to that, obviously. Ian Egan told shareholders at the AGM in May last year that “drilling had started again last week”, that was obviously the week before the EGM, and when asked if they had a new rig Egan said “No, they fixed the old one”.
If this is true, why haven’t we seen any drilling results?
MS: The answer is that the drill was inadequate and we need two new rigs this year, and we’re hoping to get them by April.
ST: OK. Thank you. I believe we have more holders with questions.
SC: Just quickly, I have one more question on Longonjo. The fact that the drilling was announced as a work in progress and suddenly stopped is something I suspect should have been announced to the ASX.
Can you comment on why this was never made public?
MS: I can’t actually remember the exact events but in any interest the drilling was a non event. The rig wasn’t satisfactory.
SC: You don’t regard the fact that the drilling programme had stopped as price sensitive?
MS: No, but going back to May 2008 the oil was the main issue we were concentrating on the time and from memory we were pushing hard with Falcon to get their offshore rights. We certainly didn’t want to be highlighting to Falcon about exploration in Longonjo. Again, this question has been asked without notice so I haven’t researched.
Ch: Any more questions?....Yes please……you’re a shareholder holding a green thing?
Shareholder1: Yes
Ch: Your name please
Shareholder 2: My name is NP. (Sh2)I’ve basically got two questions. One is concerning the refinery.
In relation to the refinery, what sort of a percentage will CVI finish up with in the end? When will the refinery deal roughly go through and what will be the cost will be involved to Cityview and how will this be financed?
MS: This is very sensitive information.
PW: Hasn’t been announced yet –
Ch: No, you can’t answer it. No. Can’t allow forward looking questions.
MS: My only comment is, the refinery I discovered was being held up by the Africans until the confusion of the EGM would be solved. Now this is coming to an end, you will see things happening.
For example. You’ll notice on the Stock Exchange this morning that something’s happening, which I still don’t understand. (MS grins then laughs – crowd laugh cynically)
ST: Mr. Tarkanyi’s just resigned from Canzar.
NPSh2: And finally Enditrade. We heard about it some time ago about six months ago actually- that this deal was going to happen. Will that go ahead?
MS: Yes, it will. It’s all part of the bringing into production of the Nhefo Alluvials. The one thing, the lesson we learnt from Longonjo was that you really have to control your own logistics because there aren’t any Angolans and Enditrade will enable us to bring Nhefo into production smoothly, or more smoothly.
NPSh2: Any ideas yet on what sort of capital we will need to take on this deal?... and how it’s funded
MS: Well again, nowadays the projects are clearly worth a lot of money, and the last couple of months we’ve been arranging a diamond bond. $50million to pay for the alluvials, and basically the bond will be backed by diamond business entities that actually want the offset. They actually want the rough.
NPSh2: So you’re already
MS: (interrupts) Very close to it yes, again, everything’s being held up by this meeting. (grin)
NPSh2: All right. Just one final question. You MAY remember me suggesting this at the AGM or EGM before. We paid for an introduction to this deal and came up with 20 million shares at a market price of 10c each. In other words, around 2 million dollars. (MS: ‘Yes’) Now whom did we pay – what was the service we received for that?... and but you are now saying that it WILL go ahead.
MS: Yes, it was to Angolans, related to Luachisse, and as a matter of fact they didn’t get such a good deal, because they got the shares at 20c and the share price collapsed on them so they got far less than they were expecting.
NPSh2: I suggested at the previous meeting with these shares that when deals are made, if you are paying by shares, to put these shares in escrow to keep them interested in the deal. So these people can’t go off and sell them on us. They’d be interested still right now and still have those shares because they can’t sell them.
MS: I told you a year ago I’m with you, but unfortunately Cityview is a little company punching way above its weight. We only started in Angola 2 years ago and now we are the biggest landowner in Angola. We’re in with all the big boys and so on. It’s extremely difficult to negotiate in the field, but if I had more muscle I would force them to do it. (put the shares into escrow.)
ST: Can I join this debate Mr. Chairman?
Ch: Sure…
ST: Mr Smyth I’m just intrigued that you say Cityview is the largest land holder in Angola.
MS: In well for mining, yes, it’s got 18,4hundred and well that’s held under Fortitude. 18,400
ST: Yes, that’s what I wanted to clear up. Cityview’s assets certainly don’t represent being the largest land holder.
MS: Fortitude yes.
ST: The other thing that you said to the room is that nothing can be said about the refinery deal because it’s sensitive information. Can you tell me then why MOST of your shareholders already know that you expect to get 30% of the refinery deal?
MS: Well, that’s always been indicated but at the end of the day what the Government decides is not certain.
ST: The point is Mr. Smyth, a LOT of shareholders have received a LOT of information from you, myself included over the years, where you have built the company up, and it’s been falsely built up. You’ve said everything is fine, we’re going to be enormous, you’re going to be rich – we’ll all get rich together and in the last 15 months we’ve seen close on zero result. This is perhaps why shareholders are saying enough is enough. We want to see some action rather than just these stray words.
MS: Cityview hasn’t deviated at all. It’s continuing to build up its portfolio. We haven’t changed.
ST: Thank you.
Ch: Any more debate on this resolution? (4 to7)
SC: Yesterday, we saw the announcement of a new substantial shareholder – Kent Finance Limited. Is the Cityview Board aware of any relationship between this company and a Mr Andrew Kent?
MS: No, (laughs,) never occurred to me that one. (More laughs.) No, no relationship. (still laughing)
SC: Is the Malcolm Keith Johnson named in the Diario de Republica, issue 62, April 2008 in relation to Canzar Nhefo Diamond license the same Malcolm Keith Johnson that was at one time convicted in the Supreme Court of South Australia on a corporate fraud charge?
MS: I don’t know about the conviction, but he is the same Johnson that was in Australia, yes.
SC: The same person that was involved in the “Burbank Scheme”?
MS: Yes, that’s right. He consults to a number of African groups in Southern Africa. He’s not involved in our refinery at all.
SC: He’s NOT involved in our refinery did you say? Is he involved in anything else?
MS: Well, he’s advising on the diamonds in particular. Not US, he’s advising the Africans.
SC: That’s all I need.
Ch: If there is no further debate on resolution 4, I will be put resolution 4 to the ballot.- and again, we’ll defer it to the end of the meeting.
Resolution 5
The Chair asked if there was any additional debate. As there was none, he deferred this resolution to the ballot. Read proxies
Resolution 6
The Chair asked if there was any additional debate. As there was none, he deferred this resolution to the ballot. Read proxies
Resolution 7
The Chair asked if there was any additional debate. As there was none, he deferred this resolution to the ballot. Read proxies
Resolution 8
Ch:Now what I’m going to do with resolution 8, even though it’s called resolution 8 that I’m going to treat it as separate resolutions 8a and 8b as you can’t vote to appoint individual directors collectively.
Reads out 8A. We don’t have consent of nominated directors, so would expect to obtain it after the meeting.
Reads out proxies.
SC has the last right of reply. I’ll open the floor for debate – any questions?
At this juncture Douglas Armati took the floor again
DA: Just an observation Mr Chairman, if I may.
Ch: Sure
DA: I’ve seen a few directors in my time and one of the things that I guess I like about what I see in these two people that have flown across the country to represent the interests of this shareholder group.
Ch: You mean 8b (ST) as well?
DA: Yes. I have to say I think they’ve been extraordinarily diligent, I think they’ve shown their preparedness to act in the interests of others other than their own.
I think they’ve acted in good faith, in the best interests of this company and I think they are acting for a proper purpose – taking into account the interests of all the stakeholders.
I think they are showing that they owe their duty primarily to the company to which they might be appointed.
It’s clear they are not going to be appointed today, one of the decisions however that I think this company could make, and it’s a conversation I had with you Mr. Smyth the other day, that I think it would be a very fair outcome for one of these people to be nominated to stand to sit on the board of this company and to restore trust between the company and its shareholders. I would think it would be a very useful thing for the company to undertake, to take a nomination from this group for at least one person to sit on the board as a result of the AGM later this year. .
I think these people would do an outstanding job of holding the company to account on behalf of its shareholders.
Ch: Any other debate? Steve do you want to say anything?
SC: No
Ch: OK, I’ll put this matter to a ballot at the end of the meeting as well.
Resolution 8B – which for clarity I’ll read out….reads res….
Reads proxies. Any discussion?......Yes please…(to raised hand)
NPSh2: Yes. As previously mentioned, there’s no chance of these resolutions being carried but I just hope that somehow the message has gone through to all concerned. A bit of work has to be put into restore this trust between shareholders and the board and if after the election that message has gone through and been received, then these two people have actually served a purpose, and I’d like to thank them once again.
Applause from room
Ch: Sue, do you want to reply?
ST: No thank you.
Ch: OK I’ll put this to the ballot at the end of the meeting.
Resolution 9
The Chair noted that Timothy Jones (the subject of the resolution) was not present and asked if there was any additional debate. As there was none, he deferred this resolution to the ballot.
Resolution 10
The Chair noted that Alan Paxton (the subject of the resolution) was not present and asked if there was any additional debate. As there was none, he deferred this resolution to the ballot.
Resolution 11
The Chair asked if there was any additional debate. As there was none, he deferred this resolution to the ballot.
Resolution 12
The Chair asked if there was any additional debate. As there was none, he deferred this resolution to the ballot.
Resolution 13 & 14
NP Sh2: Just a quick question, noting that 13 and 14 have been withdrawn. Will there be any discussion on that?
The Chair reiterated that both Resolutions 13 & 14 had been withdrawn from consideration with no discussion permitted.
Ch: We’ll now go to the poll.
DIRECTION RE PROXIES & BALLOT PROCEDURES
The Chair provided general instruction relating to the ballot and specific instructions to both single shareholders and those who in attendance who represented multiple shareholders and asked if there were any questions relating to the ballot. There were no questions.
The Chair directed that the ballot papers be completed in the meeting room and then collected by roving Computershare staff members. He advised that Computershare would need approximately 20 minutes to collate the results and proposed a short adjournment to undertake the ballot and associated processing.
The meeting adjourned at 12.22pm and, subsequently, the ballot was conducted and the results were compiled.
The meeting reconvened at 12.48pm.
RESULTS
The Chair announced the results of the ballot.
Resolution 1: Carried
Resolution 2: Withdrawn
Resolution 3: Lost
Resolution 4: Lost
Resolution 5: Lost
Resolution 6: Lost
Resolution 7: Lost
Resolution 8A: Lost
Resolution 8B: Lost
Resolution 9: Lost
Resolution 10: Lost
Resolution 11: Lost
Resolution 12: Lost
Resolution 13 & 14: Withdrawn
The Chair advised that the results of the EGM would be communicated to the market, via the ASX, today.
The meeting closed at 12.53pm.
Annexure 1:
Handout to all attendees:
CITYVIEW CORPORATION LIMITED
EXTRAORDINARY GENERAL MEETING
30TH JANUARY 2009 AT 11:00 AM WDST
AT: PERTH WESTERN AUSTRALIA
“SHAREHOLDERS GROUP STATEMENT” -
We table this statement to this EGM on behalf of the “Shareholders Group”.
This EGM was requested on December 1st 2008 because over 11% of the company’s shareholders at that time (“Shareholders Group”) were concerned about the management of the company.
The “Shareholders Group” has four major areas of concern.
- The divestment under CEO Smyth of approximately AUD$42m. The “Shareholders Group” requests an audit of the movement of these funds from CVI to the end recipient; that is, through the private companies Fortitude and Pensador and “beyond” and requires evidence that the investment was not to related parties was prudent and was not reckless.
- Shareholder Group research has discovered the possibility of the involvement in a linked company of one, “Malcolm Keith Johnson” who is known in Australian case Law as the perpetrator of “The Burbank Scheme” – a well documented alleged $25m fraud.
- The process of substantial share placements through companies associated with Anton Von Tarkanyi and the subsequent dumping of those shares on the market
- Concerns arising from the “inexact content” of the company’s ASX releases and from email and telephone communications principally between CEO Mark Smyth and shareholders from time to time since May 2006.
These concerns cannot go unanswered as they raise the fundamental question of appropriate management, that is, management that complies with the Corporations Act:-
- Whether the directors and CEO have discharged their duties, particularly with respect to business judgment, with the degree of care and diligence that a reasonable person in equivalent circumstances would be expected to exercise.
- Whether the directors and CEO have discharged their duties in good faith in the best interests of the corporation and for proper purpose.
- Whether the actions of the directors and CEO have not been to the detriment of the company.
- Whether the directors and CEO have in fact been reckless with the investment of $42m of ASX listed Public Company shareholders funds.
- Whether some of the published and private release information has been misleading.
The questions that will be asked during the meeting, address the above concerns and seek to review the management decisions of the executive in the interest of present and future shareholders and seek to ensure that future decisions are at all times unambiguously compliant with the Corporations Act.
Annexure 2.
Tabled Questions (Due to length and complexity of the questions)
Q1 -
Legal standing of the Licences
Clause 7.13 Assets of The Agreement for sale and purchase of Shares by Zebra Copper plc states
“The company has good and valid title to (or valid leasehold interest in) all of its personal property and assets, free and clear of all liens. The assets constitute all of the assets which are necessary to operate the business of the company as currently conducted.
To the extent that the assets of the company constitute a holding of or interest in Mining Tenements (“Tenements”) the tenements are free from liens, in good standing full force and effect and the company has complied with all obligations and all laws in relation to the tenements and the tenements are not liable to be forfeited or cancelled nor are they in the course of being surrendered in whole or in part.
To the best of the sellers information and belief there are no proceedings, litigation or claims concerning the whole or part of the tenements or which might jeopardise or impact upon this agreement. There are no environmental liabilities or any other liability in respect of the tenements other than as stated in the respective tenement title conditions or as disclosed to the purchaser prior to the date of this agreement.
There are no agreements or understandings currently in force in relation to the tenements with any third party including agreements or understandings with any indigenous persons claiming native title rights in respect of the tenements.”
- What is the commencement date of the licences?
- What is the current legal standing of the Mineral licenses held within Fortitude Minerals?
Specifically, are all titles that have been acquired by Fortitude:
- free of liens?
- in good standing full force and effect?
Will a search of the Mining and Geology department records in Angola:
- Confirm Fortitude’s (or the company owned by Fortitude which is said to be the licence holder) name?
- confirm that both the vendor and Fortitude have complied with all the obligations and all the laws in relation to all of the tenements?
- Does the company (Fortitude) operate in Angola in accordance with the requirements of The Angolan National Private Investment body?
As part of its due diligence CVI directors and CEO should have examined and retained copies of the licences for each tenement and the Angolan Government stamped transfers to evidence that the titles are legitimately held by the bearer or by the bearer in partnership with any local party who has been granted the licence.
· Are those copies of the licences and/or transfers available for perusal by the company’s auditors in CVI Perth Office?
· If not, Why Not and when can they or similar evidence of a diligent process be produced for audit.
Q2 -
In Mid 2007 Mark Smyth signed off on behalf of Zebra Copper, five separate contracts that transferred the ownership of seven of the nine Angolan exploration blocks to Zebra Copper.
Zebra has on issue 26,700,000 shares, which include the 26,200,000 shares at a value of 10p each that changed hands for those seven blocks. On top of that, three of the contracts involved an additional cash payment which totaled roughly $8 million.
If you add the value of the shares to the cash you end up with around $12 million. In December 2007 CVI announced the formation of Fortitude Minerals which would be the new vehicle holding all the exploration licenses previously acquired by Zebra in Mid July 2007 . Fortitude had 51,700,000 shares on issue at a value of USD1.39 each, which valued Fortitude at USD71.8 million or roughly $100 million.
So it appears that Zebra / Fortitude paid around $12 Million for the 9 blocks. Why is Fortitude therefore valued at $100 Million? Approximately AUD$30 million is accounted for from CVI’s transfer of Longonjo Minerals and Ucua licenses to Fortitude. But we cannot account for the balance.
Why are we paying so much for Fortitude?
What other assets did Fortitude or Zebra Copper hold to account for an approximate $88million then $58 million difference in the Zebra’s purchase price of the assets and Cityview’s purchase price of Fortitude shares?
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