Takeovers Panel Flags Unacceptable Circumstances in Alara Resources Rights Issue

• Takeovers Panel declares unacceptable circumstances over Alara's rights issue
• Inadequate disclosure on fundraising needs and ATI's role highlighted
• ATI's delayed substantial holding disclosure breaches Corporations Act
• Alara ordered to pay $2,400 in costs to applicants
• Alara withdraws original rights issue and plans a new offer with ATI

Background to the Rights Issue

Alara Resources Limited, an ASX-listed copper-gold miner with a 51% stake in the Oman-based Al Hadeetha Resources LLC joint venture, announced in November 2024 a renounceable rights issue aimed at raising approximately $15.3 million. The offer was structured as a 5-for-8 issue priced at $0.034 per share, with free attaching options, and was to be fully underwritten by Mahe Capital Pty Limited, with Al Tasnim Infrastructure LLC (ATI) sub-underwriting a significant portion.

The rights issue was intended to fund critical operational upgrades at the Wash-hi Majaza mine, repay loans, and support exploration and working capital. However, over half of Alara's shareholders were deemed ineligible to participate due to their overseas addresses, prompting the appointment of Mahe as nominee to sell their entitlements.

Panel's Findings on Unacceptable Circumstances

The Takeovers Panel's declaration centered on several key failings by Alara. The company did not sufficiently demonstrate a clear need for the full amount sought, nor did it adequately explore alternative fundraising options or underwriters beyond ATI. Crucially, the disclosure in the Offer Prospectus was found lacking, particularly regarding Alara's financial position and the potential control implications of ATI's increased stake.

Notably, ATI's substantial holding disclosures were delayed, contravening section 671B of the Corporations Act. The Panel also highlighted conflicts of interest concerns, given that Alara's non-executive director, Ms Devaki Khimji, holds a significant shareholding and executive role within ATI, a fact not fully disclosed in the prospectus.

Consequences and Costs Order

Following the Panel's intervention, Alara withdrew the original rights issue after the underwriting agreement with ATI was terminated. The company announced ongoing negotiations with ATI to potentially underwrite a new rights issue that complies with regulatory guidance.

The Panel ordered Alara to pay $2,400 (excluding GST) to the applicants who raised the concerns, covering their reasonable costs in connection with the proceedings. The Panel emphasized that any future rights issue must adhere strictly to the guidance in Guidance Note 17 and Chapter 6D of the Corporations Act, signaling heightened scrutiny of Alara's capital raising activities.

Implications for Alara and Investors

This ruling underscores the regulatory risks associated with complex capital raisings, especially where potential control shifts and conflicts of interest exist. For Alara, the challenge will be to restore investor confidence through transparent disclosure and robust governance practices. The involvement of ATI, which could gain significant voting power, remains a focal point for market watchers.

Investors should monitor how Alara navigates its next fundraising steps and whether it can secure underwriting arrangements that satisfy both regulatory expectations and shareholder interests. The Panel's decision serves as a reminder that transparency and fairness are paramount in maintaining an efficient and informed market.

Bottom Line?

Alara’s path forward hinges on transparent governance and compliance as it seeks to relaunch its rights issue under regulatory watch.

Questions in the middle?

• Will Alara secure a new underwriter that mitigates conflicts of interest?
• How will ATI’s increased voting power affect Alara’s strategic direction?
• What alternative fundraising strategies might Alara explore to avoid similar regulatory issues?