Investors & Media
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Into the ground
Source: Mining Journal
Publication: mining-journal.com
16 September 2005
[Ken Gooding] SHANTA Gold, which is exploring for the metal in Tanzania, started trading on London's AIM on July 11. Less than two months later, on September 1, Shanta announced that both its chief executive and chief financial officer would stand down after serving three months' notice.
So what's going on? Turns out that Shanta hoped to raise the equivalent of about US$15 million ahead of its listing. In the event, it had to settle for its minimum target of US$8 million - the company's advisers say market conditions had changed for the worse.
After mulling over the situation, the board closed Shanta's office in Johannesburg and moved all operations to Dar es Salaam. As both the chief executive, George Bennett, and the finance man, Walter Vorwerk, live in Johannesburg, they are stepping back to become non-executive directors. Mr Bennett, who helped to woo investment institutions in London, will continue to keep in touch with those investors. Mr Vorwerk will continue to do the accounts.
What are they giving up? Well, Mr Bennett's contract called for him to be paid US$159,000 a year and Mr Vorwerk was on US$124,500. But there will be no compensation. Mr Bennett, a 44-year-old former investment banker with HSBC, says: "We have not listed Shanta to raise money and then receive a big pay-out. There is no such pay-out to either Wally or myself." The directors' sacrifice and the closure of the Johannesburg office will save about US$400,000 over the next two years, "to be spent on additional exploration". It's a strategy that other juniors would do well to follow: when you fail to raise all the money you hoped for, put most of what you do get into exploration, not into directors' pockets.