Transcription of The Stock Network Interview with Far East Gold (ASX:FEG), CEO Shane Menere
Lel Smits: Far East Gold is heading towards two shareholder meetings in October and November as a dispute over the company’s board and future direction comes to a vote. The company has called an extraordinary general meeting for Wednesday the 21st of October following notices seeking the removal of three directors. A separate Xingye meeting is scheduled for the 3rd of November with shareholders facing two sets of resolutions.
Far East Gold Managing Director and CEO Shane Menere joins me today to explain how the company reached this point, what shareholders are being asked to decide and what’s at stake for Far East Gold. Shane, welcome back to the Stock Network. Thank you very much for having me back, Lyle.
Now, Shane, following on from our last conversation, what do you want shareholders to understand today? I want the shareholders to lead this discussion with three things very clearly understood.
Shane Menere: First, we believe Far East Gold has substantial value and we’re working to turn that value into stronger financial and operating positioning. Second, we’re facing a serious contest, as everyone is aware, over the future direction of the company and shareholders need to understand what is being proposed and make their own voices heard.
And third, Justin Werner, Paul Walker, Chris Atkinson and myself intend to stay and do the job shareholders entrusted us to do, subject to their decision at the meetings. We’re not planning to resign. We remain committed to achieving the best outcome we can for all shareholders.
Now, this has been a difficult and regrettable period. I understand shareholders’ frustration. We share it.
Our determination has not changed, however. We’re progressing the business, pursuing commercial opportunities, protecting shareholders’ ability to participate in the value we believe exists in the portfolio.
Lel Smits: And, Shane, can you recap for us, how did Far East Gold get into this situation? So, earlier this year, Chenier made an unsolicited takeover bid.
Now, we assessed that offer carefully. We obtained independent advice and explained our position to shareholders and to the market at large, of course. Lonegan Edwards assessed FEG’s value at between $0.32.4 and $0.44.4 per share on a controlling interest basis and concluded that that $0.13 offer was neither fair nor reasonable.
So, that was an independent assessment prepared for the takeover. It was not a management share price target or a promise about future trading prices or anything like that. Now, that distinction really matters.
Why? Because our position to the offer had a clear commercial foundation, and we believe shareholders were being asked to surrender their exposure to the company at a price that simply didn’t adequately recognise its value. So, the takeover bid has since closed. However, the contest over FEG’s direction has continued through proposals to remove directors.
So, for shareholders, that means the question has changed. They now need to decide who they want overseeing their investment and negotiating the company’s next steps. And in terms of the approach, how would you describe Chenier’s approach to this point? Yeah, look, in my view, the approach has been really quite aggressive.
I say that because of the scale of the changes being sought and the pressure this contest places on the company at an important stage of its development. So, Chenier is entitled to put proposals to shareholders. Equally, we have a responsibility to explain their implications and to recommend the outcome we believe best protects shareholders’ interests.
So, I’m going to focus on the proposals themselves and then people can draw their own conclusions. So, my concern is that this prolonged contest consumes management time, company resources and attention and could otherwise be directed towards development and commercial transactions. And that’s really regrettable for me personally and for the board of directors who represent this.
Shareholders should expect their investment to be managed with that clear focus on creating value. So, we’re going to continue to welcome constructive engagement with Chenier. Any proposal they bring forward should be assessed on its terms, its funding certainty and its benefit to the company as a whole.
The same standard applies to every investor. So, that’s our position right now.
Lel Smits: Okay, and Shane, we’ve also heard about these removal notices.
Can you outline exactly what they propose to do?
Shane Menere: Sure. On the 2nd of September, there was a notice that named Justin Wern and Paul Walker, Chris Hackett and myself for removal. So, it also proposed removing certain subsequent appointed directors, with an exception for appointments made through Chenier’s contractual nomination rights, of course.
Those 4 named directors are the members of the independent board committee that assessed the takeover offer. So, if those removals succeeded while the other 3 directors remained, the board would comprise Chenier’s nominee and 2 former vendor nominees. So, that’s a fundamental change in FEG’s governance.
So, my view is that removing the entire committee that the challenge to take a valuation would be deeply damaging as an outcome for the protection of other shareholders’ interests. So, shareholders should consider who they want evaluating future funding proposals, negotiating asset transactions and deciding how value is realised. Those decisions will shape their investment well beyond the meeting dates.
Yes. And in terms of the board positions you referenced there, does that mean you’re actually fighting to retain your positions? 100% we are. You know, we’re fighting to deliver the best results we can for shareholders, not to retain our jobs.
So, the final decision on board compositions belongs to shareholders and we respect that. Until they make that decision, we have responsibilities to discharge and walking away from, you know, during a difficult situation and tough negotiations would not help us to fulfil them. So, I’ll be very clear for a moment, we are not planning to resign under pressure.
We intend to stay, continue to work and put our case directly to shareholders. We know that commitment must be backed by delivery and shareholders want commercial progress, a stronger financial position and a credible development pathway and that’s what we’re working towards. So, our resolve comes from our belief that the assets and our responsibility to the people who have supported us and backed this company through exploration and acquisitions and the takeover contest.
Their loyalty deserves that sustained effort.
Lel Smits: Absolutely. And Shane, in terms of next steps, there are two meetings that are now coming up. Can you outline what those meetings represent and also the process from here?
Shane Menere: Yeah, two separate meetings, Lel, with separate resolutions and separate voting instructions. So, the company convened a meeting, from FEG’s shareholders, that was convened on the 21st of October. Now, it follows a requisition from a couple of shareholders seeking the removal of Monique Tang, Justin Hastings and Michael Thurnbeck.
A majority of the board recommends for all three resolutions. So, Chenier’s meeting is on the 3rd of November and our recommendation is against all five resolutions. So, shareholders must vote separately at both meetings.
So, please read those notices, mark your instructions against every resolution. Now, I will say this, I appreciate that voting can sometimes be frustrating. I myself, when I voted through my platform, it was a challenge to get there, but shares may be held through different brokers, custodians, platforms and people receive several emails, different forms and different deadlines, but please persist.
If you hold shares through a custodian or a nominee, contact that provider early. Early is the key and ask how to submit your instructions for each meeting. If you’re having trouble finding the materials, contact our shareholder support team, which is Tim Young.
His phone number’s across all of our announcement out there in the public space. So, please do contact him and he is happy to help you through that. So, don’t assume that completing one form deals with both meetings and please do not assume that somebody else will vote on your behalf.
Lel Smits: And Shane, I mean, you’ve told us this is important, but why do you think the shareholder participation in this vote is so important?
Shane Menere: Xingye has disclosed holding of 34.57%. They achieved that by receiving only one substantial vote during the bidder’s process from our ex-vendor. So, it’s therefore particularly important that our shareholders participate with that holding. So, a shareholder can strongly support the company and still have no influence on a resolution if they do not vote.
And that’s why I’m making this appeal directly and trying to bring it really clear in all of our shareholders’ minds. So, whether you’re a large holding or a modest holding, please exercise your rights. Read the material, decide your position and submit your instructions early.
These meetings concern people who make decisions about your company’s assets, funding and future. So, please give those decisions the attention they deserve. We’re doing the work to present a credible, commercial and very strong pathway, we feel.
Shareholders have the opportunity to decide who they want responsible for delivering it.
Lel Smits: Okay. And Shane, in terms of the commercial picture here, can you give us an update really on what is happening commercially and also if there is actually the genuine investor interest?
Shane Menere: Sure. Yeah. Look, we’re seeing investor interest really quite strong at both the FEG corporate level and the individual asset level. And we’re actively progressing those discussions.
There’s a number of moving parts. Obviously, we’ve got to get the best outcome for shareholders. A corporate investor may see an opportunity across a portfolio.
An asset investor or operating partner may be particularly interested in one project and bring the funding, expertise, development and capability suited to that asset. So, we’re considering these opportunities together with a clear view of what each could contribute to FEG. Now, our objective is to secure a transaction or a combination of transactions that strengthens the company to give us a greater capacity to execute our strategy.
So, I want to be precise about where things stand. Discussions are progressing very well. And although there’s no certainty, things are really looking quite strong and quite positive.
So, we’ll announce material developments through the proper channels. But shareholders should understand that substantial commercial work is taking place alongside this governance contest that we’re in right now. We’re engaging with all interested parties and evaluating those pathways to realise value.
Lel Smits: Yes. And Shane, in terms of a type of deal that Far East Gold would be seeking, what kind of deal ideally are you looking for?
Shane Menere: We’re looking for a deal that improves FEG’s position in a meaningful way. That means assessing the value offered, the certainty of funding, the conditions attached, obviously, and what shareholders retain after completion.
At the corporate level, we’re considering investment that could support that broader strategy. At the asset level, we’re looking at potential investment partnerships and sales and operational positions where the commercial terms justify them. So, an asset sale could be a sensible decision if it realises appropriate value and allows the company to get that direct capital towards its strongest priorities.
So, a partnership can also make sense if the partner brings capital and capability while FEG retains that worthwhile exposure to future success. So, we need to judge the complete outcome, how much cash comes in, what obligations remain, who funds development, what risks are transferred, what future participation does or do our shareholders retain, I should say. So, those are the questions that matter in these negotiations.
Lel Smits: Okay. Shane, in terms of these discussions, how do you think they would put Far East Gold in a much stronger position than where you are now?
Shane Menere: Well, that’s the objective. You hit the nail on the head.
The objective is to put us in a much stronger position and that’s why we’re putting substantial effort into them. So, a well-structured transaction could strengthen our funding position, reduce competing demands on capital and give us that clear focus and pathway. So, we’re also considering the bigger picture, how to bring investment and commercial capability that can help move the portfolio forward over the time and ultimately to a transaction that shareholders are happy with.
Our ambition extends beyond addressing the immediate pressures. We want FEG to emerge with a stronger foundation, a more focused allocation of capital and that practical pathway for its projects to either develop and or sell and partner with. So, I hope we can bring a suitable deal to conclusion very soon.
However, I don’t want to give shareholders any artificial deadline or anything like that. Now, the commitment I can make is that we will continue to pursue all of these opportunities actively, assess them carefully and communicate material outcomes when we can.
Lel Smits: And Shane, in terms of your broader strategy, how does Eidenberg fit into these plans and the strategy that you’ve discussed?
Shane Menere: Eidenberg’s flagship and Eidenberg remains central to our strategy.
So, Burris Gold secured that 51% ownership with that contractual pathway towards 80%. The project has reported an MRE of approximately 780,000oz at 3.1g per tonne. So, that’s a mineral resource with further technical work required to support those development decisions, of course.
But we have completed a scoping study and that was prior to the Lonergan Edwards valuation a couple of months back. And the scoping studies identified that conceptual pathway to development and further smaller drilling program to get us to a target of some indicated and measured ounces in the ground as well. So, that gives us a clear purpose for the commercial strategy.
Realising value elsewhere in the portfolio could help us concentrate capital and management attention on advancing Eidenberg. So, the sequence is really straightforward. Create the value, realise the value, whether terms are right and reinvest with discipline. So, we want each transaction to contribute to that broader objective.
Lel Smits: And Shane, really, I mean, you’ve put together a strong case here, but how do shareholders know that you’re actually going to be able to deliver?
Shane Menere: Right, well, and that’s the big one, they should judge us on the outcomes. They should also look to what the future could potentially grow into.
And investor interest is encouraging, but it’s got to be converted into those transactions that make commercial sense. So, technical progress must support that next development decision. And that strategy has got to be reflected in how we allocate capital and manage the business.
So, we understand the shareholders want tangible results, and we want them to be working very hard at getting this right for a long time. So, we’re very, very much committed to this. So, there’s uncertainties sometimes in project development.
And my commitment is to be candid about those. Look, at the same time, the board management team really remain determined to pursue the opportunities available to FEG. And the current pressure has reinforced the need to focus discipline and delivery.
And the current environment certainly speaks to the value of the assets that we hold. Otherwise, Chenier wouldn’t be fighting so hard for them. So, we believe we’ve got a credible pathway to this, to a much stronger company, and we’re working to establish that.
Lel Smits: Okay. And finally, Shane, what is your final message to shareholders?
Shane Menere: My strongest message is this level. FEG is a future worth working for, and we are staying to pursue it.
So, we’re continuing the operational work. We’re progressing investor discussions at both the corporate and asset level. So, we’re looking at a larger strategic investment opportunity and potential asset sales that could materially strengthen the company.
So, this hostile situation is regrettable, and it’s been demanding for the company and frustrating for shareholders. I truly do get that. But it won’t stop us pursuing the best results, certainly won’t stop me driving this all the way.
And we intend to get those results for the people who supported FEG. So, Justin, Paul, Chris, and I, we intend to remain and see that work through, subject to shareholders’ decision. So, please read the notices and vote on every resolution at both meetings.
Our recommendation is for all three resolutions on 21st of October and against all five resolutions on November 3rd. Then hold us accountable for delivery. And so, we intend to emerge from this period with FEG stronger, more focused, and better positioned to realize the value of its assets for shareholders.
Lel Smits: Well, Shane, ahead of this critical period for the company as shareholders face those keyboard votes, thank you for sharing Far East Gold’s position, also responding to Xingye’s challenge, and all the best for the period ahead.
Shane Menere: Thank you so much, Lel. Thank you so much for our shareholders and supporters sticking through all of this.
We’ll get through this. Please just make sure you do lend the attention to that vote. It’s a critical thing at this point.
Ends