Astron - ATR: A zircon player in Aus and China

[pijo]

I see the Astron share price has dropped by a dollar from the peak it hit when the sale of its zirconium chemicals business was announced. Following this drop of a third, the share price is now lower than before the sale was announced. Is this a sign that there are problems with the Imerys sale?

The sale had to be re-negotiated when the EBITDA was found to have been wrongly stated by Astron. Have Imerys found another problem? I am hearing rumours that there are problems with stock.

Today is the day of the EGM to approve the sale. There is no doubt that the EGM will approve the sale as Astron Managing Director Alex Brown owns a majority of the shares. But will it be approved by Imerys? I trust Mr Brown will give an explanation to the meeting as to the poor performance of the share price and if the poor performance is caused by problems raised by the due diligence process.

[alexroseinnes]

From the EGM this am - money expected in the bank around the 25th of this month. Over $3.00 per share!

[weasel]

From the EGM this am - money expected in the bank around the 25th of this month. Over $3.00 per share!

But the shareholders will not get one cent, and will rely on this company's management using it prudently. Not convinced based on their recent track record.

Also see that mining in Gambia has been suspended - could be a technicality, but still not good news.

Wease

[pijo]

From the EGM this am - money expected in the bank around the 25th of this month. Over $3.00 per share!

I am a fairly simple sort of person and I am not afraid of asking dumb questions.

If over $3.00 per share is going into the company on Jan 25 why is the current share price $2.15. Does that mean the companies residual activities will have a negative value of about -$1.00

[alexroseinnes]

Good question, and the answer as to why the sp is low is because they sold their cash generating assets. They are now like an IPO with money. Have to prove that they can make cash going forward and will invest the millions prudently.

[pijo]

Metal Pages is a well respected internet subscription magazine. On January 31 it carried the following story.

Astron to invest in Liaoning for Ti & Zr plant
BEIJING 31-Jan-08. Australian zirconium chemical and rare earth producer Astron will invest $1 billion to build a major plant for titanium and zirconium products in China's Liaoning province.
The plant, which is located in the Coastal Industrial Base of Yingkou, Liaoning province, is designed to produce 400,000 tpy of titanium dioxide, 60,000 tpy of zirconium oxychloride, 10,000 tpy of titanium alloys, and 10,000 tpy of zirconium metal.
The first phase of the project, with $120 million of investment, is expected to come on stream by the end of 2009.
Astron was established in Australia in 1984 and has set up several subsidiaries in China's Liaoning and Shandong province.

Astron has just sold its Zirconium Chemicals business of which zirconium oxychloride is an important part to Imerys for A$ 194 million.

As part of the Imerys deal for the next two years Managing Director Alex Brown is supposed work 50% of his time for Imerys and his wife and Executive Director is supposed to work for Imerys 100% of her time

This leads to the following Questions

1) Are Imerys happy that having bought Brown’s zirconium chemicals business he is setting himself up manufacturing a major zirconium chemical.

2) How can he and his wife develop a major zirconium chemicals facility while at the same time work for what will be a competitor, Imerys on their zirconium chemicals.

3) Investing US 1 billion is extremely price sensitive information but Brown has not announced it to the stock market. He does appear to have announced it to the press though. Will the authorities take action over what appears to be a serious breach of its listing rules.

He did have the perfect opportunity to make the announcement. On the date of the report in Metal Pages he published a "quarterly activities report" classed as "price sensitive" on the stock market. This report made no mention whatever of his proposed investment.

Pijo

[pijo]

I am amazed. Astron put out an announcement on Feb 15 that

“Carnegie Minerals has advised Astron that they have received notification from the Government of the Republic of Gambia of the cancellation of the licence to mine heavy mineral sands in the Gambia

Negotiations are still underway with the government in Gambia to resolve outstanding issues aand resume the mining operations.”

Today the Sunday Feb 17 the Sunday Telegraph in London published a report saying.

The Gambian government has alleged that Carnegie minerals have been smuggling Uranium and Silicon out of Gambia. All Carnegie staff have been withdrawn. A Carnegie employee flew back in to negotiate and was promptly thrown in jail.

So it looks like Carnegie are not running their plant and relations with the government are such that it is unlikely to open in the future. I cannot see anyone from Carnegie going to Gambia to sort out the situation if they are likely to been thrown into jail the moment they lsnd

I do think that Astron should have advised us of this situation

Pijo

[cantab]

Goldman Sachs to buy 5.5m shares on market, could take a long time at this rate!

Not too many companies doing buybacks - are there any others? CBA cancelled theirs with $400m remaining.

[pijo]

I do not understand the logic behind the buy back. The directors control 76% of the shares. Are they going to sell their shares? There is no sign of them doing so. If the buy back only buys back the shares the directors do not hold, then as Cantab says it will take a long time. At least several years. If they achieve it the directors will control 84% of the shares. Which is virtually taking it private and using the shareholders money to do so! It is not that long ago that Brown was complaining about the lack of liquidity in the shares. The buy back will make liquidity much worse.

The only logic I can see to this deal is that the share price cannot fall. Every time there is a seller the company steps in and buys the shares. With the finance to buy 5.5 million shares the company is unlikely to run out of money. There was me thinking share support operations are illegal especially as Brown’s son has a conviction for manipulating the share price. Now Brown himself seems to have found a legal way of doing it.

[cantab]

A lot of companies would love to be in Astron's position of strength - $200m or thereabouts in the bank and undertaking a share buyback for 10% of the shares which at $2.00 will only cost $11m. Even if they don't get them all or it takes a while, every share that Astron snaffle at a low price will increase the NTA and EPS of the remaining shares. The directors of Astron should be congratulated on getting the company into such a strong postion.

Is Astron perhaps the only company on the ASX undertaking a share buyback at the present time?