Shareholders lock horns over diatomite miner

The fate of failed diatomite miner Featherston Resources near Dunedin may be decided this week, as factions look to get a controlling stake through a creditors' vote in the fertiliser manufacturer, which was launched in 2011.

Vying Asian companies want to buy out Featherston, by paying its numerous creditors, while some historical shareholders have warned the administrators they will oppose the proposals.

Crucial to the situation is that creditors, some of whom are shareholders, will vote on whether to accept or reject either of the dual proposals being put forward by appointed administrators Rodgers Reidy Ltd tomorrow in Auckland.

Despite projections of multimillion-dollar annual sales targets, Australian-based and privately-owned Featherston achieved only limited sales of diatomite for domestic or export use and raised just over $100,000 over two years.

Featherston is in administration and receivership and a creditors meeting is scheduled for Auckland tomorrow. Among more than 200 shareholders - and creditors - are many from around the South Island.

Auckland-based Rodgers Reidy has proposals for creditors to decide on from separate Malaysian and Hong Kong investors, who are offering respectively $A4.8 million and $A4.15 million, to be used to pay creditors, but leaving shareholders open to compulsory acquisition or with diluted holdings.

The proposal by Plaman Group, representing a Malaysian listed company, and with Australian banking interests, wants to take Featherston out of administration, which would be to the detriment of long-suffering shareholders, who have poured millions into the company, but who want to retain their stake and help rebuild Featherston. They would get an unspecified cash payment, but otherwise be bought out.

The second $A4.15 million proposal, by Ashlaw Legal Services Pty Ltd, on behalf of a Hong Kong investor, would dilute shareholders' interests by about two-thirds.

Joint administrator for Rodgers Reidy Ltd in Auckland, Paul Vlasic, organised the creditors meeting and said in a ''supplementary report'' to shareholders last week, obtained by the ODT, that Featherston had ''known creditors'', owed in total $A4.18 million ($NZ4.43 million).

When contacted yesterday, Mr Vlasic said money had been set aside under the Plaman proposal to buy out shareholders, but it was ''complex'' to determine exact the amount per dollar invested, as some individuals would be paid as part of groups or trusts.

He hoped to be in a position after the creditors meeting to disclose more detail.

In a private note circulated to Featherston shareholders in recent days, obtained by the ODT, a major shareholder who criticises the Plaman Group offer describes themselves as '' ... one of a number of very angry shareholders who are appalled at the behaviour of the mandated financial advisers to the company''.

''You will find there is an active and informed group of dedicated and committed Kiwi shareholders, whom I am sure will be joined by their Australian counterparts in vigorously opposing your [administrator's] recommended course of action and the Plaman Group, no matter what happens at your proposed watershed [creditors] meeting on Thursday,'' the shareholder said.

Mr Vlasic noted that creditors would be paid in full under the proposals, but under slightly different terms, while if Featherston was placed in liquidation ''no dividend is expected to be paid to any class of creditor''.

Nor, under liquidation, would it be possible to sell or transfer the diatomite mining permit, issued by Government agency New Zealand Petroleum & Minerals, which covers the diatomite mine in the Maniototo.

Further muddying the situation is Supreme Court litigation in Australia over the receivership, and roles of receivers and directors.

simon.hartley@odt.co.nz

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