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Finders Resources dismisses claims it misled shareholders over Wetar copper project

Finders Resources (LON:FND, ASX:FND) has rejected allegations, made by two minority shareholders who arranged project financing for the Wetar demonstration plant, that it misled the investors in relation to the development.

According to Finders, the allegations are “without foundation” and potential claims against the company “have little chance of success”.

The company told investors that the minority shareholders, Tennant Metals Pty Ltd (Tennant) and MIT Nominees Pty Ltd (Meridian), may be instigating legal proceedings.

Tennant and Meridian claim that “certain historic reports, announcements and presentations made by the company in relation to the timing and costs of the (Wetar copper project in Indonesia) project and its commercial development were misleading or deceptive”, the group said. 

“In essence, the basis of these claims is that, given the final cost and timing of delivery of the now successful project and its expected commercial development, the company could not at the time have had a reasonable basis for its various announcements,” Finders stated. 

Finders said it has sought an external legal review of material underpinning its past announcements and after receiving legal advice, it believes the claims are without foundation and, if legal proceedings commence, the minority investors have little chance of success.

Furthermore, the company emphasised that “Tennant and Meridian conducted their own due diligence as sophisticated equity investors”, and the shareholders “received detailed and on-going information flow in respect of the project during the course of the loan financing arrangements”. 

In early 2008, Finders placed a combined 5.1 million shares, at US$1.10 per share, to Tennant and Meridian as part of a financing deal to fund construction of the Wetar Demonstration Plant. The financing also included a secured loan agreement of US$5m from Tennant and Meridian.

Finders said the loan was repaid in September 2009, and Tennant and Meridian remain the registered holders of “substantially all” the placing shares issued in 2008.

According to Finders, Tennant and Meridian are seeking to “recoup their alleged loss on their initial capital investment” through the claims.

“Should any legal proceedings commence, the company believes that the legal costs and any potential liability can be managed ... in the ordinary course of business,” Finders stated.

On the ground at Wetar, the project’s expansion program to increase copper cathode production to 23,000 tonnes per annum continues on track.

Last month, in its Q2 results statement, Finder said that the demonstration plant’s current performance has been steady, with 416 tonnes of ‘Grade A’ cathode being produced in the quarter, equating to 4.6 tonnes of copper per day. The company sold 439 tonnes during the period with an average price of US$7,100 per tonne.

Through Stage 1, Finders said it has now completed its detailed engineering; all quotes have been completed and contractor responses to major works are being reviewed; project finance term sheets are being shortlisted; and capital estimates are expected by the end of July.

In reference to the Stage 2 expansion the company said that it is making steady progress with permitting.  A revised capital estimate is targeted for December 2010, while engineering design work and earthworks optimisation is currently underway.