WA-based exploration entity Australian Mines Limited and its former Managing Director Benjamin Bell are facing proceedings in the Federal Court in relation to statements made by Australian Mines and Mr Bell in 2018 in relation to its Sconi Project in Queensland.
In February 2018, Australian Mines announced it had entered into a term sheet for an offtake agreement for the expected cobalt and nickel product from the Sconi Project. This was followed by the announcement of an investor presentation which referred to the offtake agreement and stated “Off-take contract signed on $5 billion of Cobalt and Nickel Product” and “Market value of product in initial term is $5 billion if fully executed at current LME-linked pricing”.
Following inquiries by ASX, Australian Mines publicly retracted these statements. The retraction stated that the $5 billion statement was “extrapolated forecast financial information”, the inclusion of which was not consistent with the JORC Code.
ASIC also alleges that when Mr Bell presented at mining investment conferences in Hong Kong and London between April and May 2018, he:
- falsely claimed that Australian Mines had secured funding for its construction of a plant for the Sconi Project, expected to cost $500 million or more, when in fact no one had offered or agreed such funding; and
- misleadingly stated the value of the offtake agreement was $5 billion when the terms of the agreement included a potential buyer’s discount of 15%.
A video of Mr Bell’s London presentation had been uploaded to YouTube. In late June 2018, Australian Mines publicly retracted claims Mr Bell made at that conference.
ASIC alleges that Australian Mines failed in its obligation to disclose material information to the market. ASIC also contends that Mr Bell failed to discharge his duties as a director with the requisite care and diligence that a reasonable person in his position would have exercised.
ASIC is seeking declarations that Australian Mines and Mr Bell contravened provisions of the Corporations Act, orders for Australian Mines and Mr Bell to pay pecuniary penalties, and that Mr Bell be disqualified from managing a corporation for such period as the Court considers appropriate.
Australian Mines has publicly stated it intends to defend the proceedings.
The proceedings serve as a reminder that clarifications or retractions issued to ASX do not ‘cure’ allegedly defective disclosures and listed entities, including those involved, can face consequences years after such disclosures are made.
For more information, please contact our Capital Markets team.
