LETTER TO SHAREHOLDERS NOTICE OF GENERAL MEETING EXPLANATORY STATEMENT AND PROXY FORM

Transcription

1 LETTER TO SHAREHOLDERS NOTICE OF GENERAL MEETING EXPLANATORY STATEMENT AND PROXY FORM For the General Meeting to be held on Wednesday 12 th August 2009, at 10.00am Western Standard Time ( WST ) at the Celtic Club 48 Ord Street West Perth, Western Australia This is an important document. Please read it carefully. If there is any matter that you do not understand you should contact your financial adviser, stockbroker or solicitor.

2 This page has been left blank intentionally.

3 Website: ABN: LETTER TO SHAREHOLDERS Dear Shareholder, As announced on 12 June 2009, the Company received a request from Chaos Investments Pty Limited (Chaos), Kimlex Investments Pty Limited, MBM Corporation Pty Limited and Owvimar Investments Pty Limited (Requesting Shareholders), who together hold in aggregate more than 5% of the voting shares of the Company, to convene a General Meeting of Shareholders. The Requesting Shareholders wish Heron to convene the General Meeting to move the following resolutions: 1 Remove Mr Craig Leslie Readhead as a Director; and 2 Appoint Mr Alex Alexandrou as a Director. Mr Alexandrou is the sole director of Chaos. Requesting Shareholders Statement The statement, titled Requesting Shareholders Statement enclosed on page 7, has been received from the Requesting Shareholders. Pursuant to section 249P of the Corporations Act, the Company is required to provide this statement to all our Shareholders with this Notice of Meeting. The Chairman s position Given Mr Readhead s interest in the outcome of the resolutions, Mr Readhead abstained from making any recommendation regarding the resolutions. Mr Readhead was not involved in the preparation of the information in this Notice of Meeting. Board rejects reasons in Requesting Shareholders Statement The Board strongly opposes and rejects the Requesting Shareholders reasons for requisitioning this Meeting and the proposed resolutions and makes the following comments in this regard. Actions taken with unanimous approval of Board The corporate actions referred to in the Requesting Shareholders Statement are all actions taken with the unanimous approval of the Board, on the basis that the Board felt those actions were in the best interests of all Shareholders and accorded with the strategic direction of the Company at the relevant time. Where required, those actions have been undertaken with the prior approval of Shareholders. Development of Heron s Nickel Laterite Projects During the last five years the Company has primarily focussed on development of its two main projects being the Kalgoorlie Nickel Laterite Project (KNP) and the Yerilla Nickel Laterite Project (Yerilla). This focus has been clear and consistent. The Company has been striving to have one or both of these projects in production by this time. However, the collapse in world nickel prices and the especially difficult market for nickel laterite developments has significantly contributed to this not being achieved within the timeframe originally envisaged. The Company nonetheless believes it has made considerable progress towards achieving its production goal for these two projects. This is evidenced by Vale Inco completing a pre-feasibility study on the KNP 100% from Vale s own resources (which Heron now has access to along with all of the source data supporting the study) and Shanshan Ningbo Ltd (Shanshan), recently committing to investigation of developing Yerilla 100% from Shanshan s own resources using technology sourced by Shanshan. Heron maintains its belief that development of its nickel laterite projects will generate significant value for Shareholders and this is a core strategic objective of the Company. Page 1

4 Letter to Shareholders Heron s Capital Structure and Cash Position While being a junior company with no production to generate sustaining cash flow, Heron is reliant on equity capital markets for funds to execute its strategies. Heron believes it has been prudent in raising money only when needed or as part of pursuing strategic opportunities. This is evidenced by the fact that the most recent capital raising was undertaken over 19 months ago to two of its major shareholders, Vale Inco and BHP Billiton, at $1.15 per share which was a significant premium to the then market price. Heron announced a placement to Shanshan as part of the recently announced transaction to investigate development of the Yerilla Project. This placement was a necessary ingredient for Shanshan to enter the whole transaction and accordingly, the Board considered it appropriate to agree to the placement. Agreements and Litigation to enforce them The Board and management team consider each and every agreement very carefully before it is entered into by the Company to ensure it is in accordance with the Company s strategy and in the best interests of Shareholders. Consideration is also given to whether the agreement achieves the commercial outcomes desired as well as whether it protects the Company s rights and obligations from a legal point of view. Appropriate external legal and commercial advice is always sought before agreements are entered and since February 2007 the Company has employed an in-house lawyer who reviews all significant agreements before they are entered into. However even with the best of advice and consideration, commercial reality dictates that disputes will occur from time to time. If Heron believes that a counterparty is not complying with its obligations under one of these agreements, Heron has in the past, and will in the future, use every mechanism to enforce its rights including litigation in the courts. The procedures followed by the Company are considered to be in keeping with best practice. Management Team and Advisors The Company is extremely proud of the quality of its management team as well as the fact it has been able to retain them during a period of incredible demand for high quality resource professionals. Each and every member of the management team is highly professional and committed to increasing the Company s value for all Shareholders. Strategic Direction of the Company and Share Price In common with all Shareholders, the Board would like to see the Company s share price higher than it is today. As a result of the global financial crisis, the shares of all junior resources companies have been strongly sold down and Heron is no exception. The Board has significant exposure to the Company s share price holding as it collectively holds in excess of 20% of the issued capital. Further, the Company s current share price must be assessed in the context of a reduction in the international demand for stainless steel and consequently nickel. It must also be assessed in the context of Heron being a developer of nickel laterite projects in Western Australia at a time of difficulty for the industry. This is demonstrated by the recent decision of BHP Billiton to close the Ravensthorpe Nickel Operation, a significant Western Australian nickel laterite project, and the Goro project owned by Vale Inco, yet to come on stream. The Company believes its stated strategy of continuing to progress its nickel laterite projects to development is the right one. The Company believes this strategy will eventually see the share price respond favourably. Heron believes this strategy will be successful because projected long term international demand for nickel and the uncertain supply from nickel sulphide deposits around the world will restore strength to the nickel price above the previous long term average. In parallel with this strategy the Company is utilising its strong cash position to pursue opportunities outside nickel laterite which have the potential to generate cash flow in the short to medium term and hence provide broader support for the Company s shares. Page 2

5 Letter to Shareholders Strong and Unified Board The Company has a strong and unified Board, led by our Chairman Mr Readhead. Mr Readhead is a lawyer with over 30 years legal and corporate advisory experience with specialisation in the resources sector, including the implementation of large scale mining projects both in Australia and overseas. Mr Readhead is a former president of the Australian Mining and Petroleum Law Association and is a partner of specialist mining and corporate law firm Allion Legal. Recommendation The Board (except Mr Readhead) strongly recommends that Shareholders vote against the resolutions put by the Requesting Shareholders. General Meeting If you are unable to attend the General Meeting, the Board strongly encourages you to participate by completing and returning the enclosed proxy form in the reply-paid envelope. We look forward to seeing you at the General Meeting. Yours sincerely Mathew Longworth Managing Director On behalf of the Board 10 July 2009 Page 3

6 HERON RESOURCES LIMITED ABN NOTICE OF GENERAL MEETING Notice is given that a General Meeting of Shareholders of Heron Resources Limited ( Heron or the Company ) will be held at the Celtic Club, 48 Ord Street, West Perth at 10.00am on Wednesday 12 th August AGENDA 3 Resolution 1 Removal of Craig Readhead as a director To consider, and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution: That, pursuant to section 203D of the Corporations Act, Mr Craig Leslie Readhead be removed as a director of the Company effective immediately on passing of this resolution and the Company to seek an appropriate qualified person to assume the role of Chairman of the Board. 4 Resolution 2 Appointment of Alex Alexandrou as a director To consider, and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution: That Mr Alex Alexandrou be appointed as a director of the Company effective immediately on passing of this resolution. Page 4

7 HERON RESOURCES LIMITED ABN Letter to Shareholders and Explanatory Statement The Letter to Shareholders and Explanatory Statement accompanying this Notice of Meeting are incorporated in and comprise part of this Notice of Meeting. Proxies Please note that: (1) a member of the Company entitled to attend and vote at the General Meeting is entitled to appoint a proxy; (2) a proxy need not be a member of the Company; and (3) a member of the Company entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes. The enclosed proxy form provides further details on appointing proxies and lodging proxy forms. Snap-shot Time The Company may specify a time, not more than 48 hours before the meeting, at which a snapshot of Shareholders will be taken for the purposes of determining Shareholder entitlements to vote at the General Meeting. The Company s Directors have determined that all shares of the Company that are quoted on ASX at 10.00am (WST) on 10 th August 2009 shall, for the purposes of determining voting entitlements at the General Meeting, be taken to be held by the persons registered as holding the shares at that time. Corporate Representative Any corporate Shareholder who has appointed a person to act as its corporate representative at the meeting should provide that person with a certificate or letter executed in accordance with the Corporations Act authorising him or her to act as that Company s representative. The authority may be sent to the Company and/or registry in advance of the meeting or handed in at the meeting when registering as a corporate representative. By Order of the Board Robert Klug Company Secretary 10 July 2009 Page 5

8 HERON RESOURCES LIMITED ABN EXPLANATORY STATEMENT 1 Introduction This Explanatory Statement, along with the Letter to Shareholders, has been prepared to provide Shareholders of Heron Resources Limited ( Heron or the Company ) with material information to enable them to make an informed decision in relation to the business to be conducted at the General Meeting of the Company to be held at the Celtic Club, 48 Ord Street, West Perth on 12 th of August at 10.00am. 2 Reason for this Meeting The Company was served with a compliant notice of requisition of meeting pursuant to section 249D of the Corporations Act (Section 249D Notice) on 23 June A general meeting is required to be called on the request of members with at least 5% of the votes that may be cast at a general meeting of the Company. The Shareholders that requisitioned this meeting are seeking to make changes to the Board through the proposed removal of the Company s Chairman, Mr Craig Readhead, and the appointment of Mr Alex Alexandrou as a Director. 3 Resolution 1 Removal of Craig Readhead as a director The Section 249D Notice requisitioned a general meeting to propose resolutions to remove Mr Craig Readhead as a Director. In accordance with the requirements of the Company s Constitution and the Corporations Act, the Company has convened the General Meeting to allow Shareholders to vote on the removal of Mr Readhead as a Director. For the reasons expressed in the Letter to Shareholders, the Board recommends that you vote AGAINST this resolution. 4 Resolution 2 Appointment of Alex Alexandrou as a director The Section 249D Notice requisitioned a general meeting to propose resolutions to appoint Mr Alex Alexandrou as a Director. In accordance with the requirements of the Company s Constitution and the Corporations Act, the Company has convened the General Meeting to allow Shareholders to vote on the appointment of Mr Alexandrou as a Director. For the reasons expressed in the Letter to Shareholders, the Board recommends that you vote AGAINST this resolution. Page 6

9 HERON RESOURCES LIMITED ABN REQUESTING SHAREHOLDERS STATEMENT The Company has been provided with the following statement by the Requisitioning Shareholders. Pursuant to section 249P of the Corporations Act the Company is required to give this statement to all its members. As major Shareholders and substantial Shareholders in the case of Chaos and MBM we are very concerned about the (past and future) direction of the Company under Mr Readhead's chairmanship in light of: Vale-Inco terminating the KNP Farm-in and Joint Venture Agreement on Thursday, 21 May 2009 after the Company announced on Monday, 9 February, 2009 that "Vale delivers strong KNP Prefeasibility study". The "New leadership team to advance key nickel projects" announced on Monday, 29 January 2007 has failed to deliver value to Shareholders, as shown by the fact that the share price was then $0.79 compared to $0.20 today being a 75% collapse in the share price. The number of shares on issue then was 179,827,347 compared to 240,938,847 today, which represents an increase of 34%. The market capitalisation of the Company was then $142,063,605 compared to today's market capitalisation of $48,187,770 (being approximately $35,000,000 in cash and shares and $13,000,000 value for the Company's projects). This represents a significant dilution of Shareholder value. The number of options on issue then was 24,223,000 compared to 52,750,000 outstanding on Friday, 13 February, 2009, which represented an increase of %. Today, the number of options outstanding is 33,568,776 after 24,000,000 options were 'cancelled' by management, which represents an increase of 38.58%. The number of options outstanding today is 13.93% of the number of shares outstanding. This also represents a significant dilution of Shareholder value. The out of court settlement with Argonaut Capital Limited in regards to litigation commenced by the Company in February 2006, following completion of negotiations with Inco Limited in July 2005 to develop the Kalgoorlie Nickel Project. Commencement of court proceedings against Norilsk Nickel Avalon Pty Ltd to enforce our Company's rights in relation to the Bulong Resource. The five "cleansing statements" made on 26 November, 2007; twice on 27 November 2007; 30 November 2007; 4 December 2007; and on Friday, 7 December, 2007 yet a month later the Company announced that the Jump-up Dam project was not feasible. The sudden termination of the heads of agreement with Echelon Resources Limited on 23 November, We believe that Mr Readhead's removal as a Director and Chairman will enable our Company to appoint a new Director and Chairman that will not only invigorate our Company and lead our Company forward but equally importantly to restore the market's confidence in our Company, our Company's world class nickel assets and projects and our Company's share price to deliver consistent and strong Shareholder value. Mr Alexandrou will resign as a Director when the new Chairman is appointed. Page 7

10 This page has been left blank intentionally.

11 HERON RESOURCES LIMITED ABN PROXY FORM I/We, being a Shareholder of Heron Resources Limited, hereby appoint of or, in his/her absence the Chairman of the meeting as my/our proxy to vote for me/us on my/our behalf at the General Meeting of the Company to be held at 10.00am on Wednesday 12 th August 2009 at the Celtic Club, 48 Ord Street, West Perth and at any adjournment of that meeting in respect of: The whole of my voting rights % of my voting rights (Please complete as appropriate. If no details are inserted and only one proxy is appointed, it will be assumed that the proxy is for all of the voting rights of the Shareholder.) If the Chair of the Meeting is appointed as your proxy, or may be appointed by default and you do not wish to direct your proxy how to vote, please insert X in this box. By marking this box you acknowledge that the Chairman of the meeting may exercise your proxy even if he has an interest in the outcome of the resolution and votes cast by him other than as a proxy holder will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on the resolution and your votes will not be counted in calculating the required majority if a poll is called on the resolution. If you desire to direct your proxy how to vote in relation to the each proposed resolution to be considered at the Meeting, please indicate the manner in which your proxy is to vote by inserting X in the appropriate boxes below. If you do not direct your own proxy on any resolution, he/she will vote on it as he/she thinks fit or may abstain from voting. I instruct my proxy to vote as indicated in respect of: For Against Abstain 1 Removal of Craig Readhead as a Director 2 Appointment of Alex Alexandrou as a Director It is the Chairman s intention to vote against each of the resolutions in relation to any undirected proxies. Signed this day of 2009 INDIVIDUALS CORPORATIONS Director / Sole Director and Sole Secretary Director / Secretary Lodgement of Proxy Form This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below no later than 48 hours before the commencement of the meeting scheduled for 10.00am (WST) on Wednesday 12 th August Any Proxy Form received after 10.00am (WST) on Monday 10 th August 2009 will not be valid for the scheduled meeting: In Person: Heron Resources Limited, Level 1, 37 Ord Street West Perth, Western Australia, 6005 Mail: Heron Resources Limited, PO Box 1380, West Perth Western Australia 6872; or Facsimile: Heron Resources Limited, Page 8

12 This page has been left blank intentionally.