ASX kicks Capital Mining out, details relationship with Chapmans
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Capital Mining, the explorer-come-cannabis investor, has finally been kicked off the ASX without warning on Friday.
In a note to the market, the ASX said it was removing the company (ASX:CMY) from the bourse due to “potential Listing Rule breaches”, and a failure to respond to a query letter by deadline.
On Friday, the market operator detailed the financial arrangements between Capital Mining and Chapmans (ASX:CHP), which itself is under considerable pressure from the ASX, and questioned the credentials of two new directors and the Malaysian company they allegedly work for.
ASX loses patience
The ASX said lawyers for the company say two of the newest directors, alleged resources experts from Russia, Artem Fedula and Alexander Krasnikov, had resigned.
Yet no final director’s interest notices have been issued for them nor for two other directors.
The company Mr Fedula and Mr Krasnikov work for, Malaysian investor ADP Capital Sdn Bhd, has also taken down its website but according to this white paper may or may not be undertaking a cryptocurrency initial coin offer (ICO).
ADP Capital lists struggling Chapmans, which was also suspended from trading on Friday, as one of its business and funding partners.
The ASX particularly wanted to know whether the relationship between Mr Fedula, ADP and Chapmans was disclosed to the administrators before the deed of company arrangement (DOCA) proposed by Mr Fedula was executed.
A DOCA is a binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with.
“Having regard to the matters raised in the query letter and the subsequent developments mentioned above, ASX has formed the view that it is appropriate to remove Capital Mining from the Official List under Listing Rule 17.12.”
Listing Rule 17.12 is when a company is unable or unwilling to comply with or breaks a listing rule.
The ASX was also keen to know more about the new directors — such as where they lived and why “the fact that Artem Fedula was born in Siberia and that region has substantial mineral reserves has a bearing on his expertise to be a director of a mining company”.
It asked for specific details of the “strong relationships from the resources and related industries” that Mr Fedula claims.
The Chapmans-Capital Mining relationship
Capital Mining’s downfall with the ASX began last year, when the market operator questioned why the company was paying millions to directors in fees, as well as fees paid to Chapmans.
The last blow came when the market operator sent Capital Mining a query letter on November 28, a letter which the ASX says has gone unanswered.
That letter outlined financial arrangements uncovered by the corporate administrator between Capital Mining and Chapmans.
Up until recently, the two companies shared Anthony Dunlop and Peter Dykes as directors.
Capital Mining loaned to Chapmans $1.9m in 2016 and $1.7m in 2017, according to the administrators’ report.
Chapmans had only paid back $750,00 by June this year.
An undated loan agreement shows the explorer issued a loan of an unspecified amount to Chapmans, due in 180 days, and organised by its directors Peter Dykes and former stockbroker Peter Torney.
Chapmans also charged consulting fees to Capital Mining of $1.4m in both 2016 and 2017.
The ASX wants to know whether the board considered legal action against Chapmans over those consulting fees.
The administrators also tried to find out what services the directors of Capital Mining were providing for those consulting fees, but “no such information was forthcoming”.