Appeal to Golden Energy and Resources Limited for Review of Offer

Date: March 1, 2023

Chairman & Board of Directors
Golden Energy and Resources Limited

Mr Dwi Prasetyo Suseno, Executive Director, Group CEO
Ms June Sim, SGX RegCo
Mr KK Lai, Investor Relations (WeR1 Consultants)

Dear Chairman,

Appeal for Review of Offer

The bid to take Golden Energy and Resources (GEAR) private has received a fair amount of publicity ever since it was first announced on 9 Nov last year. This includes coverage by the local and Australian press who both have raised questions over the fairness of the offer, as well as Singapore Exchange RegCo, which last week reminded the independent financial adviser (IFA) for the bid to not only exercise due care, skill and professional judgement, but also to ensure that whatever opinion is eventually rendered is based on “reasonable grounds and assumptions that can withstand scrutiny’’.

Much of the publicity surrounding the deal has been prompted by a disgruntled minority GEAR shareholder who has aired his views in public forums and the local and foreign press, whilst also lodging complaints with local regulators.

In essence, the shareholder’s position is that the deal hugely undervalues GEAR and that the authorities should not allow it to pass, at least not in its original form. After examining all the facets of the 9 Nov 2022 announcement, the Securities and Investors Association of Singapore (SIAS) agrees with the reasons advanced. SIAS acknowledges that in any privatisation-cum-delisting bid, buyers will always pitch their price as low as possible so as to extract the maximum value, whilst sellers will always want to receive top dollar. As such, a fair settlement price should lie somewhere in between these two extremes. The problem is that as it stands now, shareholders feel that what is on the table is too low to be remotely described as fair to minorities. The reasons for their position are as follow.

First, the day before the offer was made public, for reasons that aren’t clear, GEAR’s shares suffered a huge plunge, dropping 26% from 90.5 to 67 cents. Upon being queried by SGX on reasons for the large loss, SIAS notes that GEAR pointed to several articles in the local press on the company’s intention to exit the coal business as possible, though not definitive, explanations.

However, whatever the reason for the slide, the point they feel is that the large, unusual fall is a one-off blip that is a distortion that should not be a consideration when evaluating the privatisation bid.

This is because if forced to choose between the two alternatives that GEAR is offering, most Singapore investors will most likely pick the all-cash option of 84.6 cents rather than the offer of cash and shares in the unfamiliar PT Golden Energy Mines, even if the latter option yields a higher dollar value, at least on paper.

If GEAR’s 8 Nov closing price of 67 cents is used as a yardstick, then 84.6 cents appear fair; however, as noted earlier, it is not a reasonable indicator of GEAR’s market price because of the one-off plunge.

Second and more important is that both options ignore GEAR’s remaining assets, mainly its 64% stake in Australia-listed Stanmore Resources, which by all accounts is a profitable, financially resilient company.

In this connection SIAS notes that Stanmore’s shares have risen considerably in the three months since the 9 Nov offer and at the 28 Feb closing price of A$3.53, Stanmore had a market capitalisation of A$3.18b, which implies that GEAR’s stake is worth at least A$2.04b.

It is this runup in Stanmore which we believe has probably prompted SGX RegCo to state in its instructions to the IFA that “if there are any material changes to the traded price of the company’s component assets that have taken place since the announcements, the IFA should consider these changes’’.

For the aforesaid reasons, SIAS feels that there are compelling reasons for GEAR to revise its offer upwards by taking into account Stanmore’s value whilst ignoring the 8 Nov 2022 closing price.

SIAS therefore calls upon the company to do so which will be fair to the shareholders.

However, we are open to discussion on the matters raised in this letter to receive your responses as soon as possible.


David Gerald
President and CEO