‘These people have no idea of the harm they inflict’: Orinoco shareholders take their fight to regulators
Orinoco Gold (ASX:OGX) might have new management, but it’s still got a bunch of old problems — and shareholders aren’t happy.
A number of investors in the troubled gold miner have turned to the ASX and ASIC in the hopes of sparking a shake-up of the current corporate regulations.
Brazil-focused Orinoco has faced numerous problems with production at its Cascavel gold mine, and is facing allegations of poor operating procedures, gold theft and conflicts of interest.
In the past year Orinoco’s share price has disintegrated from a 52-week high of 13c to trade at an all-time low of 0.4c. That’s a 97 per cent dive.
It once traded at nearly 35c — in late 2012.
The steep fall has cost investors dearly.
“I am lucky my shareholding is small and am only down a small amount — $4000,” one shareholder told Stockhead.
“There are others who have lost many thousands and they are all mum and dad investors.”
One such investor, who didn’t want to be named, has lost his entire lifesavings — hundreds of thousands of dollars — by backing Orinoco.
He became a shareholder in mid-2016, which was around the time when the company notched its second peak of 23.5c before starting its downhill slide.
“The toll on shareholders has been extreme, with some losing all their life savings, such as me and my family, and at least two investors that I am aware of who have lost their relationships,” he said.
“These people have no idea of the harm they inflict on others … and perhaps they don’t care.”
One of the key issues shareholders raised with the ASX is former managing director Jeremy Gray’s connection with Orinoco’s largest creditor, Cartesian.
At the time Mr Gray was heading Orinoco he was also a large shareholder in Cartesian.
Orinoco had disclosed this fact in the fine print in one of its announcements, but many shareholders weren’t aware of the connection.
“It’s totally unrealistic to expect every mum and dad shareholder to read a 15-page finely printed disclosure document to find out that in one line it says that management may have shares in competitors, and it may set up a conflict of interest,” one shareholder said.
After shareholders became aware of the situation and raised concerns with the company, Orinoco announced Mr Gray was stepping down — that was in January this year.
A month later two other Orinoco executives connected with Cartesian also stepped down.
Another shareholder who did not want to be named told Stockhead investors have been disadvantaged by a particularly “shonky” finance deed amendment as a result of Mr Gray’s connection to Cartesian.
He was referring to an amendment made to a financing deal done between Orinoco and Cartesian.
Shareholders allege that while they were asked to vote on a “variation deed”, the deed did not mention anything about the loan being secured against all of Orinoco’s Brazilian assets at the time of the vote.
In the letter sent to the ASX and seen by Stockhead, shareholders said that particular change didn’t appear in any announcement prior to them voting on the variation deed on January 13, 2017, but it did appear in the annual report released after shareholders approved it.
ASX spokesman Matthew Gibbs confirmed to Stockhead that it had received a complaint regarding Orinoco, but the matter was concluded in February.
One of the shareholders said that ASIC has asked for more information regarding Orinoco, but ASIC spokesman Gervase Greene told Stockhead the regulatory body doesn’t discuss any complaints it may or may not receive.
Orinoco had not responded to Stockhead’s questions by the time of publication.
Stockhead also tried to reach Mr Gray for comment, but he had not responded at the time of publication.
It’s not just about the big sums of money lost by shareholders though, for some it’s about inciting change to the way listed companies can operate.
“I think this is more than a story about OGX, it’s a story about how the corporate regulations are so lax, that they can allow a company managing director to simultaneously be a major shareholder of the company’s largest creditor, setting up a clear potential conflict of interest,” one shareholder said.
“The regulations also allow private capital raisings to dilute normal shareholders and allow companies to smash the share price by manufacturing a crisis.
“Normal shareholders don’t get a look in, because the capital funds help each other to ensure that resolutions are passed.”