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Otago diatomite miner and manufacturer Featherston Resources has been thrown a lifeline from administration, but its new financial backing means most historical shareholders will be left out of pocket in their $15 million investment.
It is understood separate shareholder groups in New Zealand and Australia are exploring legal options, with some hearings having already taken place in the Supreme Court of New South Wales, in Sydney, and more to come.
At the heart of the matter is who now takes control of the diatomite asset, mined at Middlemarch and processed at a $1 million plant on the Taieri Plain.
While up to $15 million had been poured into the venture by more than 200 shareholders since 1997, and, on launching almost three years ago, there were expectations of turning over $9 million a year, the company's revenue for the past two financial years from sales has been a paltry $100,000.
Auckland-based administrators Rodgers Reidy had estimated creditors were owed more than $A4 million ($NZ4.23 million).
At a meeting last Thursday, creditors voted to accept an offer by Malaysian-backed Plaman Group, of up to $A4.8 million; which covers creditors' claims, an outstanding debt of convertible notes and essentially represents a takeover of Featherston.
The administrators from Rodgers Reidy were unavailable for comment after the creditors' meeting, but a shareholder was contacted and said the $A4.8 million Plaman Group offer had been accepted, of which only about $A100,000 was set aside to buy out the historical shareholders' stakes.
''It's nothing really. New Zealand shareholders are talking now and looking at their [legal] options,'' said the shareholder, who asked not to be identified.
In what appeared to be an 11th-hour petition, Australian-based shareholders made an unsuccessful bid in the Supreme Court in Sydney on Friday to have Plaman's offer set aside, because of information in the administrators' report.
The New Zealand shareholder said there was a variety of issues and claims of concern to be considered, some of which centered around the earlier convertible notes issue.
In September 2012, FRCN Pty Ltd loaned Featherston about $A1.72 million, in convertible notes, and was granted a charge over all Featherston's assets.
The loan, a total cost of $A2.06 million, was due for repayment in September 2013. In a supplementary report, the administrators noted that on December 13, 14 shareholders, representing about 12.5% of Featherston's share capital, started proceedings against several parties, including some Featherston directors and FRCN Pty Ltd.
The shareholders are seeking to have the convertible note deed overturned. It is understood the case is to come before the Supreme Court in Sydney, in February.