HPL probes shares in project

HIGHLANDS Pacific Ltd is investigating the sale of its 20 per cent interest in the Frieda River project in West Sepik, the company confirmed yesterday.
In documents lodged with the stock exchange, Highlands chairman Ken MacDonald, pictured, said the board was exploring all options to ensure value of Highlands’ stake in the Frieda project was recognised and maximised.
“Consistent with this, Highlands initiated a process in December to explore options to maximise the value of its 20 per cent interest in the Frieda River project, including a potential sale,” MacDonald said.
Highlands had engaged Cutfield Freeman & Co to assist in this process. “The process remains at an early stage but progress has been positive,” he said.
“No decision has been made to sell Highlands’ interest and Highlands will continue to work towards a development path for the project that maximises value for Highlands shareholders and other Frieda River stakeholders.”
The disclosure of potential sale was included in documents lodged for a special meeting of Highlands’ shareholders to be held on May 18, to consider a move by Highland’s 14 per cent shareholder Guangdong Rising Assets Management Co (GRAM), to spill the Highland’s board and install three of its own nominees.
This would effectively give GRAM control of Highlands without any payment being made to Highland’s shareholders.
Highlands had denounced the move as opportunistic and urged shareholders to vote against the GRAM proposals.
“You are not receiving any payment or premium for a change of control,” Highlands said.
“If GRAM wants control of Highlands, it should make a takeover offer and pay a full price with a premium for control.”
According to Highlands, the company’s existing directors had always acted in the interests of all shareholders, however, they warned that GRAM may be conflicted due to its interest in the giant Frieda River project.
GRAM/PanAust holds an 80 per cent interest in Frieda River, while Highlands holds 20 per cent and the two companies have been in dispute over GRAM’s development plan and funding for the project.
Highlands warned in its explanatory memorandum that if GRAM were to grab control of Highlands board, there would be a real risk of a material divergence between GRAM’s strategic objectives in relation to the project and interests of Highlands’ 7310 shareholders.
“GRAM may be motivated to advance its interests in the project even if this conflicts with the interests of Highlands and its shareholders,” the company said.
Highlands had argued that GRAM’s US$5 billion (K15.83bn) development plan involved material technical risk associated with proposed construction of a very large integrated tailings and hydro power dam in the seismically active Frieda River area.
“Highlands has disagreed with GRAM’s approach and has argued that the ‘feasibility study’ is deficient and that a smaller, lower risk project could be more easily funded and provide better risk adjusted returns,” Highlands said.