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Massive shakeout at embattled Metorex Posted: Fri, 12 Dec 2008 [miningmx.com] -- STALWART management at diversified South African mining company Metorex have resigned and the hunt is on for a new chief executive to replace Charles Needham who will take up the post of group managing director once that post is filled. Metorex, which has R2.9bn of debt on its books, announced last week it is raising R922m towards completing its Ruashi copper and cobalt project in the Democratic Republic of Congo (DRC), which has run heavily over budget and is six months behind schedule. Metorex chairman Simon Malone, Keith Spencer and Edward Legg, both executive directors, have all resigned their positions, with the latter two continuing to assist the company as technical advisors. "It is recognised that Metorex has become a company with significant multi-commodity operations in diverse operating environments. Accordingly, the company has commenced with the selection process for a new chief executive officer," Metorex said. "Shareholders are very angry with management so these changes don't come as any real surprise. You can be highly regarded until you really mess things up like this," said an analyst who declined to be named. The changes are said to be driven by Coronation and other big shareholders, upset at the large dilution they face as well as the way the Ruashi project has been managed. "Shareholders have lost faith in the board and that's why people have to go. They assured shareholders a number of times that capex was fine for Ruashi but then they're suddenly R700m over budget," the analyst said. Costs at Ruashi near Lubumbashi had by August already risen to $290m, well above the 2004/05 pre-feasibility cost of $160m, with costing estimates based on Metorex's copper plant at Sable in Zambia. The study also came out before the massive run up in commodity and input prices. The cost of Ruashi is now $320m. Of the R922m capital raising, R700m will go towards the completion of the project. The company's share price has fallen precipitously this year from a high of R24.80 to below R2 each after Metorex announced its fund raising plans, which included issuing shares at R2. This was a hefty discount to the R3.81 at which Metorex closed on 27 November when the details were unveiled. The large dilution at the low price caused the share price to fall 40% in the next day's trade. Shareholders vote on 23 December on the rights issue. Metorex has set up a board oversight committee, including Rob Still, the deputy chairman of Metorex who will take up a limited executive role. The committee, made up entirely of non-executive directors, will monitor and review the progress in completing Ruashi, the key focus of Metorex now. The committee will ensure Ruashi hits its targets and bring in new executives to manage Metorex. It will oversee a process to reduce Metorex's debt, which could include the sale of non-core and expensive assets. Consolidated Murchison, the antimony and gold mine, is one of those already slated for a potential shut down.
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