JOHANNESBURG (miningweekly.com) – The Australian Securities and Investment Commission (Asic) has started civil penalty proceedings against Padbury Mining and two of its directors over a bungled $6-billion funding announcement for the Oakajee port and rail project, in Western Australia. 

The civil action in the Federal Court of Australia is against Padbury, its MD Gary Stokes and executive director and chairperson Terence Quinn, whom Asic wants banned from managing companies.

The proceedings relate to Padbury’s announcement in April last year that it had secured funding from a private Australian equity investor for the development of the project, without disclosing the name of the investor. The company was hesitant to release details of the arrangement and only later revealed that Sydney entrepreneur Roland Frank Bleyer was the source of the funding, through Alliance Super Holdings and its parent company Superkite, after the ASX and Asic demanded more documentation on the deal.

The funding deal was terminated in late April.

Asic said in a statement on Wednesday, announcing the civil action, that it believed the Padbury announcement to shareholders was misleading, because the funding agreement was subject to conditions precedent that had not been met or disclosed.

The failure to disclose the conditions precedent, which included procuring $1.3-billion in demand guarantees in three tranches, together with the failure to disclose the identity of the funding providers, meant that Padbury had breached its continuous disclosure obligations, the regulator explained.

Asic also believed that the directors were involved in the disclosure breach and, thereby, breached their own continuous disclosure obligations in the Corporations Act. “The directors breached their duties of care and diligence by causing or otherwise permitting the company to make a misleading announcement and also by failing to ensure the company met its continuous disclosure obligations,” it stated.

Besides seeking an order banning Stokes and Quinn from managing companies, Asic was seeking financial penalties against the two directors.

Padbury’s plans for Oakajee had involved the development of a 35-million- to 45-million-tonne-a-year iron-ore export facility, using Cape-sized vessels with up to 240 000 t capacity. It was expected that yearly exports could be increased to over 100-million tonnes over time.

Padbury’s shares are suspended from trading on the ASX.