Flinders shareholders resist China ‘Belt & Road’ investment in prized Pilbara resource – Part 1

May 4, 2023
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EXCLUSIVE: Construction by NZ company Todd Corporation on a $6 billion iron ore project at Balla Balla between Karratha and Port Hedland is expected to start on June 1.
This is despite resistance by Flinders minority shareholders to China’s ‘Belt & Road’ investment in the Pilbara project supported by the McGowan Government and Opposition in WA.
Todd is majority shareholder of Flinders Mines Limited whose 4000 minority shareholders have survived several takeover and delisting attempts since Todd bought into the ASX-listed WA company in 2014. The second biggest shareholder OCJ Investments (Australia), controlled by Melbourne-based expatriate Chinese investors led by Chunlin Ouyang, holds 22% of Flinders, which owns the iron ore deposit.
The Chinese Government will fund 50% of the Balla Balla project in exchange for 50% ownership of Flinders.
Minority shareholders contacted StreetWise this week to say the Flinders board had not told shareholders work on the port facilities at Balla Balla would start on June 1. Nor had it informed the ASX. They only found out about the June 1 estimated start date in a ‘design variation’ of BBIG’s proposed port site to the Department of Climate Change, Energy, the Environment and Water in June 2022 (below).
Flinders has not responded to StreetWise questions sent on Monday.
The Flinders shareholder told StreetWise there is no indication the project will start on June 1.
StreetWise reported on September 13, 2022, streetwisemedia.com.au/depuch-island-the-future-of-ulurus-dark-sister, that Flinders’ minority shareholders asked the Australian Securities and Investment Commission to investigate the board of Flinders over claims of market manipulation, deceptive conduct and making false and misleading declarations about the project.
In 2017, the McGowan Government ratified a State Agreement signed by former premier Colin Barnett to build a 162km rail line to link Flinders’ inland mine to port facilities at Balla Balla next to one of the most extraordinary collections of rock art in the world at Depuch Island.
The total project cost consists of $1.4b for the port, $1.8b for the rail and $2.4b for the mine producing up to 50 million tonnes of iron ore a year for the next 25 years and create more than 4000 jobs.
Flinders was listed on the ASX in 2002, but its mine site has never been developed despite having raised nearly $164m and paid more than $114m for exploration activities between 2008 and 2021.
A Queensland-based shareholder who did not want to be named said Todd wants total control and ownership of Flinders and a major resource project (1.5 billion tonnes plus) regarded by China as, ‘a major Belt & Road project’, but in Australia portrayed as a little-known and ‘stalled’ project.
He said Todd bought into Flinders, “with the promise of taking the company to production via their majority owned BBI Group which was planning a port at Balla Balla”.
“It never happened,” the shareholder said. “We’re lucky we’ve survived this long. If they had taken us out in the beginning, and made a reasonable offer or did their homework, nobody would have blinked. Now they can’t do that because the minority shareholders are so annoyed they are reluctant to accept any offer.
“The profit over the life of the mine on 1.5 billion tonnes of iron ore is mind boggling.”
Todd offered $65m to buy out the Flinders project, but was rejected. It then attempted two takeover bids in 2016 which also failed but increased Todd’s share holding in Flinders from 52% to 59%.
He said Todd the previous year sought to buy Rutila Resources (now BBIG), which planned to build a port at Balla Balla and was in discussions with Flinders to move ore via rail. Todd took over Rutila and delisted it.
The shareholder told StreetWise Flinders had signed 10 MOUs with Chinese steel mills and 30 other contacts had been made by the time Todd became involved in the company. He said the Chinese described Flinders’ iron ore deposit as the, “highest quality resource in the Pilbara region”.
On March 24, 2017, BBIG signed a MOU with China State Construction Engineering Corporation for the construction of the Balla Balla port, rail and mine project.
CSCEC released a statement claiming the Flinders PIOP (Pilbara Iron Ore Project) was an integral part of Balla Balla and China’s ‘Belt and Road’ Initiative, BRI.
It added the MOU was in line with the company’s international development strategy: “By taking this opportunity, the company will achieve a new breakthrough in the Australian market and gain new progress in the process of actively integrating into the national strategy of ‘One Belt, One Road’.”
Flinders response to the MOU was to announce to the ASX on January 25, 2017, that they had “no commercial agreements” with BBIG and, “any future negotiations with BBIG may or may not result in a commercial agreement to use BBIG Infrastructure”.
In China, media reports stated: “During Premier Li Keqiang’s visit to Australia this time, among the eight cooperation documents signed by China and Australia, one was particularly eye-catching, namely a major infrastructure construction project worth A$5b (approximately US$3.75b).”
The value of the company’s stocks rose once the MOU was announced while in Australia Flinders was left out in the cold.
In a November 8, 2019, letter to a minority shareholder, Todd’s CEO stated the Flinders resource was, “low grade”, and, “stranded in that it has no viable means to reach markets”.
The Queensland shareholder said Mr Young held a different view at the time of the MOU signing: “This is the most competitive world-scale greenfields iron ore project on the face of the planet.”
Once the ‘Railway Agreement 2017 Bill’ was ratified by the McGowan Government, Todd declared the project was a, “new and independent gateway to the iron ore rich province of the Pilbara in WA”.
According to BBIG’s website, which features images of Depuch’s rock art, the revival of the historic Balla Balla port will open up the central and western Pilbara as a source of high grade iron ore, “for decades to come”.
BBIG, Flinders and the Australian media did not report that the MOU included Flinders PIOP resource or that it was part of China’s Belt & Road Initiative.
The shareholder said the ASX and Flinders shareholders were misled.

Calling ASIC?

IN December 2018, when the Flinders board sought to delist the company from the ASX, minority shareholders raised $123,000 to challenge the move. They won after the shareholders applied to the Australian Takeovers Panel to investigate the delisting attempt. In its judgement, the panel found the board guilty of unconscionable conduct likely to mislead or deceive Flinders’ minority shareholders.
The Queensland shareholder told StreetWise Todd was found guilty of ‘unacceptable circumstances’ and, as a result, the law in Australia was changed.
Now if a majority shareholder seeks to delist a company from the ASX, it must be achieved by a special resolution needing 75% of the vote instead of an ordinary resolution that only required 50.1% of the vote.
He said the minority shareholders decided to engage Madgwicks Lawyers to investigate the actions of the board. On July 21, 2022, Mgadgwicks partner Catherine Ballantyne presented to ASIC a brief of breaches by the board of rules and regulations of the ASX, which also included criminal matters. Nine months later, no word from ASIC. A submission also was sent to the Parliamentary Joint Committee on Corporations and Financial Services launched in October 2022. The inquiry is into the failings of ASIC.
“ASIC have taken no action even though they have received comprehensive investigative legal reports and numerous shareholder complaints outlining possible corporate and criminal actions,” the shareholder said.
Ms Ballantyne’s brief states Flinders Mines has since 2014 had a strong involvement with TIO, BBIG and related parties with which it had many agreements negotiated between these entities (and their related companies) and, “even shared common director(s) during much of the relevant period”.
It appears these parties while negotiating and pursuing transactions potentially engaged in conduct designed to mislead and manipulate the market in breach of Flinders’ disclosure obligations.
From January 2017 to December 2019, the Flinders board stated on numerous occasions to the ASX they had no formal commercial agreements with BBIG nor project funding and infrastructure solutions.
Ms Ballantyne’s report found there were agreements, either formal, informal or secretive between BBIG and Flinders Mines for the purpose of Chinese funding, BBIG and Chinese feasibility studies and various contracts associated with the project.
She found between January 1, 2016, and September 19, 2019, Flinders claimed it had no existing commercial agreements with BBIG when, “At this time there were tenement management and field services being performed by BBIG for Flinders Mine. It also appeared that during this time BBIG carried on its business as if there was an existing agreement with Flinders Mine including entering into agreements for the sale of iron ore.”
Ms Ballantyne found Flinders entered into agreements with BBIG, whose majority shareholder is TIO, when its directors Michael Wolley and Evan Davies also were directors of BBIG. This was never disclosed nor was Mr Wolley’s previous position as a director of TIO (NZ) Limited from March 9, 2012, to September 23, 2020.
The Queensland shareholder said ASIC had been influenced by Todd Corporation and that the investigation of the Flinders board by ASIC was compromised.
He said the most serious connection involves Mark Weenink who is a board member of the NZ Financial Markets Authority, the NZ equivalent of ASIC, and current Todd Corporation Group General Counsel (head of Todd’s legal team). He is one of the contact people for communication between ASIC and the FMA.
Mark Todd is FMA chairman. FMA works closely with ASIC, both having cooperation agreements to share information related to persons or companies that come to the notice of either organisation in either jurisdiction, before any investigation is complete. This essentially gives Todd Corporation’s legal team access to any complaint and the individuals who complained to ASIC.
The shareholder said Mr Todd and Weenink are close associates, having previously worked together at Westpac NZ and Bell Gully NZ. FMA also has another board member, Steven Bardy, who previously worked for ASIC, and FMA senior adviser Kathleen Bulatovic, a former Todd senior employee.
He added former WA Attorney General Cheryl Edwardes is a current Flinders Mines board member and her husband Colin was involved in early meetings between the State and Federal Governments, Todd Corporation and BBIG.
Flinders’ current General Manager Andrew Whitehead also was Senior Adviser to the WA Premier.
The shareholder said former WA Nationals leader Brendon Grylls is the current WA representative and contact person for the BBIG project. Former NZ Prime Minister Bill English also is a current board member of Todd Corporation.
Flinders’ minority shareholders believe there is little chance of having ASIC commence or successfully investigate their serious complaints because of corporate and political conflicts of interest.
“So the question must be asked,” the shareholder said, “in the country of Australia, does ASIC act in accordance with Australian law, or has ASIC succumbed to the influence from a foreign company in a foreign country. If that proves to be the case, then approximately 4,000 mum and dad Australian shareholders will lose everything that they invested in the ASX listed company of FMS.”
He said the minority shareholders’ concerns have been forwarded to Queensland Senator Matt Canavan and MPs including Michelle Landry (Liberal National Party Queensland), Dan Tehan (Liberal ACT), Andrew Hastie (Liberal WA) and Senator Andrew Bragg (Liberal NSW), who is chair of the inquiry into ASIC.
ASIC, which receives about 10,000 complaints of misconduct a year, said it will co-operate, the matter referred to the Economics References Committee to report by June 2024.
The corporate regulator is accused of allegedly having failed to enforce the law and that Australians had been ‘hurt’ by the agency’s inaction, including Flinders’ minority shareholders.