The letter, a copy of which was obtained by MiningNews.net this morning, was penned by David Guy, chief investment officer of Queensland-based Officium Group.
“We are not ordinarily ‘corporate activists’, however the time has come when we simply cannot continue to accept the poor performance of Resolute and its board and management,” the letter says.
Officium says it and its associates hold a combined interest of 36.35 million Resolute shares, or just over 6% of the company’s issued capital.
In the letter, Guy refers to Resolute’s share performance on February 22, when Resolute shares fell 0.9% after the gold price rose $US20 and “a comparable group of Australian-listed gold producers” rose between 5% and 7%.
“This is a pattern which seems to repeat regularly and in fact, its ASX performance since then has been even worse.”
On that day, Resolute was trading at $1.64, but the company’s shares have since slipped to $1.355 in morning trade today.
Guy, meanwhile, said he believed Resolute would be worth more than $3.00 a share on a private market break-up basis.
“We have over the last several years, with increasing frustration, endeavoured to explain to the chairman and chief executive officer of Resolute that they were not successfully conveying to the market the underlying value of Resolute’s assets (which we believe is considerably higher than the current share price, or indeed any price that the company has traded at in the last seven years); that they needed to do better as a management team and as a board; that they needed to seriously respect all shareholders interests and endeavour to maximise value for those shareholders.
“To say those efforts have been unsuccessful is an understatement somewhat akin in size to saying that Resolute’s recent share price performance has been unsatisfactory.”
Guy said Officium was not embittered, but “incredibly disappointed in, and frustrated by, the performance of Resolute and in particular its board and management”
“Current Resolute management have indicated to me that they consider their performance to have not only been acceptable but in fact to have been good and further, that they do not focus on share price. That much is certainly obvious.
“But neither do we, ordinarily. However, we have a strong belief that over time the price and value of assets, and in particular listed shares, should roughly approximate each other and that if they do not, someone will eventually ensure that they do.
“We have waited, and waited for price ($1.65) and value (>$3.00) to approach each other but they have not. We have waited for someone to complain about this board and management but they have not. We have waited for someone to break up this company which is ‘worth more dead or alive’ but they have not. Accordingly we are forced to consider doing something ourselves.”
The letter is accompanied by a questionnaire seeking shareholder feedback on their satisfaction with the performance of Resolute and its board.
Resolute ranks as one of the largest gold miners listed in Australia, having produced 127,460oz of gold in the half-year to December 2006. The company operates the Golden Pride mine in Tanzania and the Ravenswood mine in Queensland, and is developing the advanced Syama mine in Mali.
Since the start of 2007, Resolute shares have slipped from $1.69 to today’s price of $1.355 despite the gold price firming from $US636/oz to $655/oz over the same time.
At today’s share price, Resolute’s market capitalisation is $313.2 million.
Its major shareholders include the Alliance Life Common Fund (38.7%), Bond Street Custodians (6.7%), Equity Trustees (6.5%), and Acorn Capital (6.5%).
Neither Guy, Resolute chairman Peter Huston nor Resolute CEO Peter Sullivan could be reached for comment this morning.
UPDATE
Speaking to MiningNews.net this afternoon, Guy said the letter was already generating a response from Resolute shareholders, most of whom generally agreed with Officium’s sentiments.
Guy described the step to send the letter as very unusual, but had been six or seven years in the making.
“In this case nothing’s happened for so long, and from speaking with management it seems they’ve got to intention of changing that,” he said.
“Right now, we’re just trying to find out what everyone else out there thinks.”
Guy said the letter was posted to all Resolute shareholders owning 100,000 shares or more, representing around 87% of the company’s issued capital.
To date, Guy said, responses representing around 20% of Resolute shares had been received.
“We’ve been reasonably surprised by how fast the responses have been coming in,” he said.
“People have been responding that they’re frustrated, that they’re ready and willing for change and want someone to do something about it.
“If the responses keep coming in, clearly we could call an EGM or something along those lines. Perhaps a management change or a board change could be required.”
Guy also said Officium would be “very interested in supporting” any private equity offers or the like that could arise for Resolute.
He cited continued talk by Resolute management about a potential listing in North America – where the perception of sovereign risk over Golden Pride and Syama would likely be lesser than that among Australian investors – as an example of Resolute management dragging their feet over the company’s progress.
