Investment Matters

Indiore update

Background

Many clients have a small investment in Indiore, a company based in Perth and listed on the ASX.  Indiore’s shares have been suspended from trading since it announced it was ceasing operations in India, where it previously had a large operation, and undertaking a strategic review to identify restructuring opportunities.  The suspended share price is $0.069.

What are we doing?

In the interests of our clients, we have been following the strategic review carefully.  The new business plan is focused on developing a significant iron ore operation in Australia.  After considerable research and analysis, we have decided to invest a small amount in the new Indiore business, at a 39% discount to its last traded price.

This small re-investment achieves two outcomes:

  1. It provides the best opportunity to capitalise on what is now a rebuilt company, quite distinct from the previous business.
  2. It averages-down clients’ purchase cost, enhancing the upside.

We consider it is not in our clients’ best interests to write off our existing investment and allow the company to potentially fail.

What proportion of my assets are invested in Indiore?

Indiore is a small weight in clients’ portfolios, representing around 0.6% of clients’ total investments.  Its weight in the Australian equities’ allocation is around 1% for most clients.

What has been done to fix the business?

Indiore has been restructured so that it is essentially a new company, with largely new directors and management, that is clearly separate from the old business.

The Indian business where the issues (and potential future liabilities) lay has been sold for a nominal sum and is no longer part of the company.

What is the plan for the future?

The company will now apply for relisting (under a new name: ‘Elmore’) and begin to implement the strategic plan.

Under the plan, Elmore will acquire a substantial crushing plant and begin crushing an existing stockpile of iron ore in West Australia.  It will reinvest into the business the cashflow this generates (over two years) and will relocate the old (Indian based) separation plant to West Australia and put it into production.  It will then become a long term (20+ year) producer of beneficiated iron ore.

Why is First Samuel investing?

We are acutely aware of the client sentiment surrounding what occurred in India.  But we must always look at what we consider will be in the best interest of our clients.

We believe the chosen plan is by far the best for clients.  And have therefore agreed to participate in a share placement (broadly in proportion to our current ownership).  It is expected the business will generate positive cash flows in a relatively short period of time.  Subject to share price changes, it will remain a small weight in First Samuel clients’ portfolios.

- Dennison Hambling