FYI | Jul 12 2006
Regulatory authorities are usually the subject of quite some criticism, both in Australia and overseas. This week, however, I think they deserve a firm pat on the back.
Both the Australian Stock Exchange and ASIC jumped on a small copper explorer this week preventing sheer market madness to take hold of its share price and management from giving itself a few extra millions through some deep in the money stock options.
I am not in any way, shape or form suggesting management at Australian Mining Investments (AUM) is writing another chapter in the book of great resources swindles, a tradition that carries names such as Poseidon and Bre-X, but there appear to be enough reasons to remain suspicious, if not concerned. It is obvious both authorities had similar thoughts.
Looking upon the events of the past few weeks, investors and speculators have either become victim of the rather clumsy PR mechanics of a few old school mining veterans (somewhat excusable from a miner’s view) or they have fallen into the trap of a smart investment ploy.
It doesn’t take too much imagination to visualise the second option: an unknown, barely traded company publishes some vague, but highly promising indications about what might be under the ground (details can always be changed at a later stage); all of a sudden the word is out "possibly the biggest discovery in two decades"; someone tips a journalist at one of the daily newspapers (they’re always keen to have a scoop with their name attached to it) and to top it all off there’s an unnamed broker who is about to issue a report on the matter and who thinks all this could be worth, let’s take a not too ridiculously high figure, let’s say $25 a share.
And oh yes, Xstrata is nearby and looking to buy some assets.
Perfect!
I’d almost say, works all the time. Especially at times like these.
What makes the whole thing even more suspicious is that after the unnamed broker had been identified, a copy of the flagged research report could not be provided.
Hmm.
Assuming option one, my first advice to management at CuDeco would be to hire a professional PR agent. As an old school journalist I actually cannot believe I am saying this, but one simply cannot let a few miners handle matters as important like this – just look at the past few weeks.
The second thing is, of course, to raise the sub-standard way of providing information about the resource and the drilling results. Am I looking in the direction of the ASX? Yes, I am.
Ultimately, of course, it will be up to shareholders and investors to decide what happens at the company. I may be wrong, but I fear that the genie is already out of the bottle at CuDeco: common greed is waiting to kick in.
I think management will have its desired stock options soon, probably next month.
I hope we’re talking possible scenario number one.
Till next week,
Your I am sure just like you all this story will have a long tail editor,
Rudi Filapek-Vandyck
(Supported by an equally sceptic Fab Four: Chris, Greg, Terry and Rob)