Group president explains why he believed in the coal story
By CHEW XIANG 28 September 2009
In the end, Jade Technologies’ ‘billion-dollar’ coal mine with 24 million tonnes of high-quality coking coal turned out to be worthless. The stock - then priced between 0.5 and 1.5 cents - barely budged when the news was announced in January.
It wasn’t surprising because the company’s track record is littered with disappointments. It has lost money every year since it listed. The primary business making lead frames was sold off a year ago but its new ventures have all flopped.
The coal mine was the most promising of the detritus left behind when the previous management quit in April 2008 and the present team, led by group president Sam Chong Keen, took over.
In a recent interview with BT, Mr. Sam said that one of the reasons that he had agreed to run the company was that he had believed in the coal story.
‘You know how much money Jade could have made?’ he asks rhetorically. ‘Why did you think I came into Jade! The coal prices at that time were quite astronomical. It was US$250 per tonne. The report said there were 24 million tonnes. At that time, I told myself: I don’t need 24 million tonnes, I just need 10 per cent of that.’
He then launches into a quick back-of-the-envelope calculation. After extraction costs and cuts for its local partner and overheads, the profit could be US$100 a tonne, meaning the shares could be worth a dollar apiece, based on 10 times price earnings ratio, he says.
‘I just needed 10 per cent of 24 million tonnes, and sitting where I was, it didn’t occur to me that it was an impossible dream.’
He would have done fairly well personally too, if this had come to pass. Since his salary is 20 million shares for a two-year contract, that would have netted him $20 million.
Some investors believed in the dream too. At one point, the share price climbed back above 10 cents, after it had plummeted 70 per cent when Anthony Soh, its previous boss, pulled out of a 22.5 cent-a- share takeover bid.
It’s hard to fault the believers for their faith. Mr. Sam is a former government scholar who went to Oxford, worked in the elite Administrative Service and had stints in NTUC, Intraco and Comfort Group. (He was also political secretary to the Minister for Education from 1988 to 1991).
Independent director Wan Soon Bee was also a political secretary and a minister of state in the Prime Minister’s Office and a Member of Parliament from 1980 to 2001.
That’s serious credibility lined up behind a company few would otherwise have valued at any significant amount.
A CIMB report issued to support Dr Soh’s takeover bid valued the company at a low of some $15 million - if the mine failed - and a high of $1.07 billion.
Based on the market price then and since, shareholders didn’t think it was worth much beyond $100 million. Dr Soh’s offer valued the company at about $210 million and Mr. Sam said that that was a factor in his thinking too.
‘The market is king; you can’t argue with the market,’ Mr. Sam says. ‘But yes, if there had been coal, I thought the market undervalued the company. In any case, Anthony Soh made a GO (general offer) at 22.5 cents! There must be some reason why he believed there must be value in it - he borrowed money to take it over.’
The fracas over the botched takeover has spawned three lawsuits, a rebuke from the Securities Industry Council for Dr Soh (his professional advisers weren’t let off either), and lost investors millions of dollars.
The supposedly lucrative businesses - oil refining, diesel trading, property development and now the coal mine - have failed for one reason or another. But Mr. Sam says that he has no regrets associating himself with a company with such a record.
‘If I could turn the wheels back again; if you ask me would I have done anything different, I would say no. If I had rewound my career path right to the day I finished school and came back, I probably won’t make many changes to what I’ve done in the last 30-odd years of my career,’ he says.
But how did a mine valued at a billion dollars by a Russian mining institute turn out to be worthless?
After all, up till late last year, there were optimistic projections from the company that coal would eventually surface. A tender notice was put out for millions of dollars worth of trucks. In a meeting with shareholders, Mr. Sam spoke at length of the work he had done to build up the infrastructure in the region so that coal could be shipped.
Delays were blamed on poor weather - the existence of the ‘black gold’ itself wasn’t put into doubt, although there were the usual disclaimers put out. Did that mislead shareholders?
‘Mining is a very speculative business,’ Mr. Sam says. ‘I’ve been very careful not to be misleading. At every stage, there was always the emphasis that we take this one step at a time.’
He points out that he did what he did given the evidence he had. ‘I saw with my own eyes the coal on the surface, and there had been sightings of coal, and around the area there were coal mines. So there was a lot of circumstantial evidence. It wasn’t as if the whole thing was a fudge. If I’m entirely sceptical about this whole thing, that this whole thing is a fraud, then I wouldn’t have come in.’
The company now has a whole new line of business. It has just raised more than $5 million in an oversubscribed 1-for-2 rights issue. A complex deal to buy 20 per cent economic interest in a titanium dioxide producer was approved by shareholders last month.
Mr. Sam is keen for the new venture to succeed, pointing to the level of due diligence done on the target.
He takes umbrage at a BT report that said that the deal had been shopped around to potential investors, something which was brought up by a shareholder at the meeting to approve the titanium dioxide deal. ‘(The shareholder) said some things in there which I don’t think were factual. Again it gave a very negative impression that this deal was being shopped around, nobody wanted it and we picked up some rubbish. I immediately said this could create a wrong impression on this particular deal.’
‘I took great pains in the presentation to shareholders before the vote to highlight the rigorous due diligence that the board undertook on this deal.’
2 comments:
Jade Tech moves on after coal mining debacle
Group president explains why he believed in the coal story
By CHEW XIANG
28 September 2009
In the end, Jade Technologies’ ‘billion-dollar’ coal mine with 24 million tonnes of high-quality coking coal turned out to be worthless. The stock - then priced between 0.5 and 1.5 cents - barely budged when the news was announced in January.
It wasn’t surprising because the company’s track record is littered with disappointments. It has lost money every year since it listed. The primary business making lead frames was sold off a year ago but its new ventures have all flopped.
The coal mine was the most promising of the detritus left behind when the previous management quit in April 2008 and the present team, led by group president Sam Chong Keen, took over.
In a recent interview with BT, Mr. Sam said that one of the reasons that he had agreed to run the company was that he had believed in the coal story.
‘You know how much money Jade could have made?’ he asks rhetorically. ‘Why did you think I came into Jade! The coal prices at that time were quite astronomical. It was US$250 per tonne. The report said there were 24 million tonnes. At that time, I told myself: I don’t need 24 million tonnes, I just need 10 per cent of that.’
He then launches into a quick back-of-the-envelope calculation. After extraction costs and cuts for its local partner and overheads, the profit could be US$100 a tonne, meaning the shares could be worth a dollar apiece, based on 10 times price earnings ratio, he says.
‘I just needed 10 per cent of 24 million tonnes, and sitting where I was, it didn’t occur to me that it was an impossible dream.’
He would have done fairly well personally too, if this had come to pass. Since his salary is 20 million shares for a two-year contract, that would have netted him $20 million.
Some investors believed in the dream too. At one point, the share price climbed back above 10 cents, after it had plummeted 70 per cent when Anthony Soh, its previous boss, pulled out of a 22.5 cent-a- share takeover bid.
It’s hard to fault the believers for their faith. Mr. Sam is a former government scholar who went to Oxford, worked in the elite Administrative Service and had stints in NTUC, Intraco and Comfort Group. (He was also political secretary to the Minister for Education from 1988 to 1991).
Independent director Wan Soon Bee was also a political secretary and a minister of state in the Prime Minister’s Office and a Member of Parliament from 1980 to 2001.
That’s serious credibility lined up behind a company few would otherwise have valued at any significant amount.
A CIMB report issued to support Dr Soh’s takeover bid valued the company at a low of some $15 million - if the mine failed - and a high of $1.07 billion.
Based on the market price then and since, shareholders didn’t think it was worth much beyond $100 million. Dr Soh’s offer valued the company at about $210 million and Mr. Sam said that that was a factor in his thinking too.
‘The market is king; you can’t argue with the market,’ Mr. Sam says. ‘But yes, if there had been coal, I thought the market undervalued the company. In any case, Anthony Soh made a GO (general offer) at 22.5 cents! There must be some reason why he believed there must be value in it - he borrowed money to take it over.’
The fracas over the botched takeover has spawned three lawsuits, a rebuke from the Securities Industry Council for Dr Soh (his professional advisers weren’t let off either), and lost investors millions of dollars.
The supposedly lucrative businesses - oil refining, diesel trading, property development and now the coal mine - have failed for one reason or another. But Mr. Sam says that he has no regrets associating himself with a company with such a record.
‘If I could turn the wheels back again; if you ask me would I have done anything different, I would say no. If I had rewound my career path right to the day I finished school and came back, I probably won’t make many changes to what I’ve done in the last 30-odd years of my career,’ he says.
But how did a mine valued at a billion dollars by a Russian mining institute turn out to be worthless?
After all, up till late last year, there were optimistic projections from the company that coal would eventually surface. A tender notice was put out for millions of dollars worth of trucks. In a meeting with shareholders, Mr. Sam spoke at length of the work he had done to build up the infrastructure in the region so that coal could be shipped.
Delays were blamed on poor weather - the existence of the ‘black gold’ itself wasn’t put into doubt, although there were the usual disclaimers put out. Did that mislead shareholders?
‘Mining is a very speculative business,’ Mr. Sam says. ‘I’ve been very careful not to be misleading. At every stage, there was always the emphasis that we take this one step at a time.’
He points out that he did what he did given the evidence he had. ‘I saw with my own eyes the coal on the surface, and there had been sightings of coal, and around the area there were coal mines. So there was a lot of circumstantial evidence. It wasn’t as if the whole thing was a fudge. If I’m entirely sceptical about this whole thing, that this whole thing is a fraud, then I wouldn’t have come in.’
The company now has a whole new line of business. It has just raised more than $5 million in an oversubscribed 1-for-2 rights issue. A complex deal to buy 20 per cent economic interest in a titanium dioxide producer was approved by shareholders last month.
Mr. Sam is keen for the new venture to succeed, pointing to the level of due diligence done on the target.
He takes umbrage at a BT report that said that the deal had been shopped around to potential investors, something which was brought up by a shareholder at the meeting to approve the titanium dioxide deal. ‘(The shareholder) said some things in there which I don’t think were factual. Again it gave a very negative impression that this deal was being shopped around, nobody wanted it and we picked up some rubbish. I immediately said this could create a wrong impression on this particular deal.’
‘I took great pains in the presentation to shareholders before the vote to highlight the rigorous due diligence that the board undertook on this deal.’
Post a Comment