15 July 2015
Companhia
Mineira de Naburi (“CMdN”)
The Owners of CMdN, General
Veloso and Diogo Cavaco, have noted the discussion on the LSE Blog disclosing
the recent claim from HMRC to recover over £1.1m of VAT from Pathfinder.
Quite extraordinarily
Pathfinder seems to have actively chosen not to make a separate RNS announcement
in April 2015 when it first received a claim from HMRC for repayment of £1.1m.
Instead, disclosure of this claim was made several months later and hidden away in Note 16 on page 22 of the 2014 accounts called “Contingent Liabilities”:
Instead, disclosure of this claim was made several months later and hidden away in Note 16 on page 22 of the 2014 accounts called “Contingent Liabilities”:
“In April 2015 the Company received an assessment
from HMRC demanding the return of all VAT previously refunded to the Company.
Together with interest, this assessment is for £1,109,765. “
Pathfinder had another
opportunity to disclose this claim in its recent announcement of results for
2014. Again it buried this information
completely and tried to claim that “…there are no immediate plans to
seek…funding.”
If this £1.1m VAT claim from
HMRC is successful (and in the current political climate in the UK it seems
highly likely to succeed), Pathfinder now has no net cash reserves at all and
estimated net cash liabilities immediately payable of probably over £300,000.
Technically
Insolvent
To remain solvent in the UK,
a company must pass two tests – a working capital test and a net assets test.
Under the working capital
test a company must have sufficient cash to meet its liabilities as they fall
due. Given the HMRC claim, it would
seem that Pathfinder fails this test.
Under the net assets test, a
company must have assets greater than its liabilities. Given the $9.9m unconditionally owed to BHP,
it would seem that Pathfinder also fails this test.
By continuing to trade while
insolvent the Directors of a company are in breach of their fiduciary duties as
Directors and personally liable for any additional liabilities incurred.
Shareholders of Pathfinder
Minerals should request urgent and detailed clarification from the Board as to
why the £1.1m claim from HMRC claim was not separately disclosed when it was
first received and why they believe this claim will not succeed.
The Directors continue to
pay themselves salaries (£398,688 in 2014 alone) and expenses and incur
liabilities. Unless this claim is resolved, Pathfinder would appear to be
insolvent and therefore until it is resolved all such payments should cease
immediately.
Shareholders should also ask
whether in light of the failure to disclose this claim in April 2015, when the
Board of Pathfinder first knew about it, there has been a false market in the
shares of Pathfinder.
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Notes for Editors:
In the High Court judgement
obtained by Pathfinder Minerals in October 2012, the judge correctly found that
the Share Option Agreement by which Pathfinder Minerals claimed to own shares
of CMdN was indeed an option agreement, under which the option could only be
exercised upon payment of the purchase price of US$10m, which has not been
paid. Accordingly, under Mozambique law ownership of CMdN shares never passed
to Pathfinder Minerals.
To this day, the Promoters
of Pathfinder Minerals, Nick Trew, Gordon Dickie, John McKeon and Tim Baldwin
have only ever paid a total of US$100,000 between them to purchase an Option (the
“Option Purchase Price”) over shares of CMdN. They never exercised the Option or paid for
the shares.
The
Owners remain highly confident however that while it is likely to take several
years for this case to be finally resolved, they will be successful in
defending their rights of ownership under Mozambique law.
