Member Info for Hounddog10

Cadell. Thank you. Yes, Zurrin’s comments do rather stick in the craw. Talking of an independent future when an insider was being given a remarkable six months to prepare an opportunistic low ball bid. I think the Board may not be on totally steady legal ground here. They do not appear to have sought other suitors and also seem not to have taken some obvious steps that might have propelled the share price up eg dual list on TSX/ASX, appointing a new CEO, moving forward with Singida expansion, increasing interim dividend etc. From the outside it appears that Patel was being given a clear run. It is the length of time the Patels were given that is rather troubling - at least six months.

Transactions = instructions

Voting must happen by 1.00 pm and 1.15pm on Feb 27th. This is set out, along with the overall timetable, on page 13 of the Scheme Document. There are two votes - one for the Court scheme and one for the AGM.. Effectively both votes are in relation to the takeover. Technically for the Court vote you can turn up in Guernsey on the 29th Feb, the date of the Court meeting, and give your vote in person to the Court. Presumably you have to have the relevant paperwork to prove your share ownership. You cannot do this for the AGM vote.

The reality is everyone will vote through their stockbroker/online platform. Most of these have proxy voting through part of the online CREST platform and so it is more or less instantaneous. However, some appear not to have this - so you are back to postal voting or for the stockbroker to relay on transactions to the custodian. Therefore, many have a formal requirement that they need at least a week or more notice.

So best to contact your stockbroker/custodian now to see how much time they will give you. As, I say for many you can do it immediately online but don’t assume that.

The Scheme Document is on Shanta’s website under Investors/Takeover Offer

https://www.shantagold.com/_resources/Scheme%20Document.pdf?v=0.059

It is this article. I am not sure it is that negative but it does note that junior miners are out of favour and hard to know when they come into vogue again.

https://www.thisismoney.co.uk/money/investing/article-13038037/SMALL-CAP-IDEA-Junior-mining-sector-period-capitulation.html

Mog. I agree that they won’t be able to hold out too much longer on info on Singida and WK. Also there is still some time to go. The court meeting is at the end of the month but then there has to a court hearing. That can only happen when various preconditions (many of them regulatory approvals in Tanz and Kenya have been obtained). No doubt they are quite well advanced on this but I would be surprised if the court hearing happens much before end March and could easily be much further away.

It is interesting that they do not appear to have RNSed this. The headline claim figure is big enough to do so. Perhaps they have settled for much less.

Oh OK the Centrepoint LIBOR claim more imminent than I thought. I hope this does not prompt more successful LIBOR claims. I had got the impression that the banks were winning the claims on LIBOR.

Seany. The following are the potential big potential payments.

-£1bn tax case on HBOS Irish losses. HMRC claiming Lloyds owes £1bn of extra tax. Case heard in May 2023. Would have thought we should have had judgment by now - but no RNS. Likely to be appealed if lost. So may not get resolved for some time

- Plevin claims. This is a narrower version of PPI. Various cases and rulings have been adverse to the banks. No idea really of quantum. Worst £2bn?? Perhaps more likely a few hundred million. Play out over some time I would have thought

- Indemnity claim on Visa/Mastercard sale. Potential liability not disclosed in the accounts but I thought I saw £400m somewhere

- Libor Centrepoint entrepreneur case - £1bn. Being heard at the moment I think

Car loans, as you say and now Iran.

Except for the tax I think any payouts will be tax deductible for Lloyds so knock off 25%. The tax case and Visa/Mastercard are the most imminent along with a bit of Plevin. I think if they get hit in any one year with a lot of these one offs they will use the 1% (£2bn) management buffer to smooth out the effect.

It never seems to end but they are gradually getting rid of these exposures.

You may not be registered for notifications. To do so you will need to change your personal profile. In any event you should be able to vote by logging in and going to Portfolio (top left of the screen). Link gives more detail.

https://www.ii.co.uk/help/using-your-account/account-administration/shareholder-voting#

Harrogate. I was thinking about it. However, I am not clear that they have broken any specific AIM rule rather that it is not in the spirit of disclosure that we find out this only now. The problem also is that AIM Regulation is absolutely useless and will do nothing.

Kat. Yes, he gets a guaranteed £732,000 plus the Remuneration Committee can, at their discretion, give him up to another £366,000. I am sure they will do that. This is on top of his £366,000 pay and annual bonus (160% of salary).

The payout linked to the takeover was originally there if he lost his job (redundancy essentially). However, given he resigned it seems to have morphed into reward for delivering the takeover.

On current terms the Lloyds pension funds are not overfunded. In fact a £250m payment around now is being used to get them into current funding equilibrium. I think that is the end in terms of putting more money into the schemes (some poster some time ago violently disagreed with me seeing it as a perpetual issue but he or she is wrong). In any event the issue only gets reassessed three years from now and the £250m deals with it for the moment.

I think structurally, given the regulation, most of these defined benefit schemes have a moderate to large degree of overfunding but it will likely take many years to become apparent and therefore is not relevant to the current share price. The most relevant factor is that they do not need to put in sums of around £2bn each year (as they have done) which would otherwise have gone to shareholders. But there are other one off payments rearing their head. Not too worrying but potentially painful,

Indeed (if the comment was for my post). Bestinvest actively say that you can vote on your shares in iSA/SIPP and it is published in various areas including IC. Not idea what is going on. Probably some glitch and cannot be bothered to do anything about it.

3/3

The new contract was on broadly the same terms as the previous contract. However, it now incorporated timing clauses for bonus payments specifically around a takeover timetable. One part of one clause envisages that Zurrin might be gone by the announcement of Q4 results in January 2024. This clause also talks of him going based on a Long Stop Date for the takeover of 30 April 2024. The Long Stop Date is a date required by Takeover Rules when an unused Scheme ceases to exist. The Long Stop Date in the Scheme Document is 9 October 2024. So again, in September 2023, there is the sense that they still thought they could do the transaction much earlier.

On 19 December 2023 there is a Deed of Variation to the Settlement Agreement. Essentially this means that Zurrin’s bonuses would all be in cash (previously about half in shares) and accelerates his bonus payment for 2023 to be paid in January 2024.

He is very firmly going to be off.

A certain amount of conjecture but it is probably not too far off the mark.

2/3

The eventual announcement of the bid comes on 20 December 2023 - an extraordinarily long six months after the Confidentiality Agreement was signed. This is particularly unusual as Ketan Patel has had over two decades association with the business and must know it intimately. My guess is that they were finding it much more difficult than expected to finance the bid which is nearly all in debt ($150m) with no doubt the primary assets and cash flow being relied upon by the lending bank being that of Shanta itself. It is also remarkable that all they have is a short term, one year bridging loan which in the Scheme Document they say they will refinance. Of course, in the Scheme Document they bizarrely contend this is a much more stable way of financing Shanta.

At the date of the Confidentiality Agreement Zurrin’s revised contract was only out to 30 September 2023 and the takeover clearly could not have been completed in three months (but it could have been announced and been well underway and having the CEO in the departure lounge might be another good reason for Shanta to be bought out). It might also be that the Patels assumed they could have managed without Zurrin for a few months post 30 September 2023 (given I assume they must have someone else in mind as CEO post takeover). Of course, at that stage, it may also have been that Zurrin was not prepared to go beyond 30 September 2023 or that there was informal agreement he would extend.

Things then must have started to get much harder for the Patels. Interest rates continue to rise making debt more expensive, the gold price moves strongly upward and in particular the Shanta share price starts recovering. I think the major reason that the takeover premium is so pathetic is that the intention was for the bid to be announced months earlier when the share price was much lower. I think this likely also runs to some of the ridiculous reasons for the takeover given in the Scheme Document. They may have made more sense in, say, July 2023 and it would not be surprising if the Scheme Document was largely drafted around then and has become progressively outdated.

Zurrin then gets a new contract on 30 September 2023. Rather tellingly it is not termed another variation agreement but “Settlement Agreement”, implying both finality and a new agreement. Again I am rather surprised this was not disclosed to the market. It is definitely a related party transaction but depending on interpretation it may not pass the size test for disclosure. However, the spirit of the rules might suggest that disclosure would have been the preferred option. If properly and fully disclosed it may have tipped off a careful reader that a takeover was underway.

1/3

I have been mulling over the details of the various extensions/variations of Zurrin’s contract of employment (pages 67 - 69 of the Scheme Document) and how that interacts with what might have been going on behind the scenes. It is quite complicated but I have tried to extract the main relevant areas.

Zurrin resigned on 23 April 2023 and at that point he enters into a Variation Letter to extend his employment, more or less on the same terms, to 30 September 2023 (he was originally on three months notice). Noticeably the major variation to his contract was that he would be entitled to a bonus of a minimum 100% of base salary (but could be doubled at the discretion of the Remuneration Committee) if the company was taken over. This was available to him before but only in a situation when the company was taken over and he lost his job, not in a situation where he had already resigned. I think the fact that he must have negotiated to retain this is suggestive that the Patel takeover was contemplated even then. There is also some argument that this variation in terms should have been disclosed to the market.

On 29 June 2023 Shanta enters into a Confidentiality Agreement with the Patels and this is when the internal processes relevant to takeover commence. It is noticeable that at this point two things had happened - (1) Singida was that month up and running very successfully in commercial production; and (2) the share price was at a recent low of 9p due to the Odey situation.

I have voted no on 658,249 of my shares. I still have 481,089 shares with Bestinvest that I am trying to vote on. They are telling me it is not possible and only reply to my emails when I ring them up. I am starting to get quite annoyed with them.

Fleccy. Thank you. I wasn’t aware of that. It seems Brightwell are currently focused on admin services to other schemes but I agree it is likely to morph into actually aggregating other schemes and eventually do a deal to separate from BT.

The preliminary results came out on 18 May last year. It will be around that date for 2024. Impossible to get results out in mid April which is two weeks after year end.

CeeD. An interesting point. As a matter of law company directors owe a fiduciary duty to all shareholders and on an equal basis. This is also woven into the Listing Rules and the Takeover Code and implicit in the AIM Rules.

The section you quote hardly seems to comply with this principle, as you point out, and is also total rubbish because Patel does not want to sell his shares. He wants to buy the rest of the Company.

The problem is that there is not much remedy at law. There is an insane principle called “reflective loss” in UK company law. This says that ANY loss suffered by shareholders is merely reflective of a loss endured by the company and it is for the company to sue. Obviously, this then goes back to the directors actioning a law suit, which if it effectively means suing for their own actions isn’t going to happen. It is a bit more complicated than that and the Supreme Court in the last 18 months somewhat relaxed the principle but it does seem to give directors a good deal of protection as against eg USA where lawsuits fly in against companies all the time.

Investors, particularly individuals, are then left, in this case, with the protections of the Takeover code which is quite disclosure orientated and if the Panel sees adequate disclosure of a deal it is rarely minded to intervene.