By Lucian Miers | Sunday 8 January 2017
Disclosure: The author has a short position in one or more of the shares mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
I have often grumbled about the inadequacies of the AIM NOMAD system which has always seemed to me to be an inherent conflict of interest. That is to say that NOMADs are expected to ensure that their client companies adhere to the AIM rules and given that they are paid by these companies, the temptation to ignore transgressions is irresistible, particularly given the reputation for inaction by the regulatory authorities.
In the spirit of New Year resolutions, and, to keep NOMADs on their toes, I would encourage investors who contact companies with specific issues which require clarification, to copy in the NOMAD. This ought to ensure a coherent reply, rather than PR bluster. I will attempt to pen one per month for 2017.
For an example of what I mean by “specific issues which require clarification” let’s take Harvest Minerals (HMI), a company I wrote about recently.
Harvest’s main asset is mineral rights to the Arapua Fertilizer Project , in the state of Minas Gerais Brazil, which was acquired in 2014. The vendor is not named and no consideration appears to have changed hands at the time. The AIM admission document of Sept 2015, however, states that US$ 1,000,000 is payable to RV2 Rio Verde Mineracao ltda.(RV2) on the commencement of commercial production. RV2 appears no longer to exist. HMI has recently received a trial mining permit which allows for limited commercial production. On 22 Dec HMI announced that it had signed an agreement to supply up to 45,000 tonnes of fertilizer in 2017 (subject to tests proving satisfactory) to a local coffee producer.
All this begs a few questions. Namely:
1 Was RV2 the vendor of the Arapua Fertiliser Project?
2 Does RV2 still exist? If not with whom has it been replaced regarding the agreement?
3 Is Luis Azevado, or any other director of HMI, related in any way to RV2 and if so has this been disclosed as a related party transaction?
4 Will any sales of product in 2017 be treated as commercial production as per the agreement with RV2, and will it trigger the payment of $1m or not?
I am short Harvest Minerals and fully appreciate that Executive Chairman Brian McMaster, who has described me as an internet troll, is under no obligation to correspond with me despite the fact it would take five minutes to clarify the above.
He is however obliged to keep the market informed of any material developments and to abide by the rules of AIM. NOMAD Strand Hanson is similarly obliged to use its best efforts to ensure that he does so.
Ensuring that these questions are answered would be a step in the right direction. I will write to McMaster, copied to Strand Hanson and see what happens. Watch this space.
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tips from Tom & Steve and ahead of a new shorting idea from Lucian Miers click HERE
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