Merlin still in hot water over its cosy relationship with consultant
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Merlin Diamonds has had to answer further questions from the ASX over its close relationship with its consultant and shareholders are not happy.
The troubled minnow (ASX:MED) has been told to provide evidence of the agreement between Merlin and AXIS Consultants as well as the minutes of the board meeting which approved the partnership.
Over the course of the agreement, which was put in place in August 2009, Merlin and AXIS have shared several directors including Mordechai and Joseph Gutnick and David Tyrwhitt.
The latest ASX query was made on October 29 and has been publicly released as part of an ASX announcement containing Merlin’s responses.
The local bourse wanted to know which directors voted in favour and which directors voted against the service agreement between Merlin and AXIS.
While Merlin was able to provide a copy of the original service agreement, it said it did not “have any other documents dealing with the entering into of the service agreement as documents are only retained for six years”.
According to Merlin, the service deed was entered into in August 2009 as part of transitional arrangements on the move of the registered office from Perth to Melbourne.
At the time, the previous company secretary was dealing with board matters and resigned on August 12, 2009 and a new company secretary was appointed on that date, Merlin said.
The directors in office at that time were Joseph Gutnick, Tom Reddicliffe and Ian Hastings.
“There is a minute dated 12 August 2009 dealing with certain matters to do with the move of the office to Melbourne, however the service deed is not specifically referred too,” Merlin explained.
Merlin also could not provide proof that it had sought shareholder approval to pay a “financial benefit” to AXIS or whether the board considered it an “arm’s length” arrangement and therefore exempt from shareholder approval.
“There is insufficient information available to the directors of Merlin some nine years since it was entered into to be able to respond to this question,” the company responded.
The ASX previously grilled Merlin over a $13.8 million loan it provided AXIS.
Delving further into the matter, the ASX demanded a copy of the minutes of the board meeting at which the directors approved the loan agreement.
But Merlin again said “the loan agreement was verbally approved by the independent directors”.
The company also noted that it deemed the loan agreement to be an “arm’s length” deal with respect to the terms.
The recent grilling by the ASX has not impressed investors.
One investor told Stockhead that shareholders have been “kept in the dark regarding equipment installation and diamond recovery numbers”.
The ASX is continuing Merlin’s suspension until its queries have been “addressed to its satisfaction”, the bourse said in a market announcement late last Friday.
Stockhead has contacted Merlin for comment but the company has not yet responded.