QVT Financial LLP
Announcement concerning
Extraordinary General Meeting of
CARDINAL RESOURCES PLC
Europa Partners Limited
5 March 2007
QVT HAS REQUISITIONED AN EGM OF CARDINAL RESOURCES PLC AND IS TODAY WRITING TO
SHAREHOLDERS TO EXPLAIN WHY THEY SHOULD VOTE FOR BOTH RESOLUTIONS: (1) THE
REMOVAL FROM OFFICE OF ROBERT BENSH, CHAIRMAN AND CHIEF EXECUTIVE; AND (2) THE
APPOINTMENT TO THE BOARD OF IGOR EFFIMOFF ON TUESDAY 27 MARCH 2007.
Following the requisition by QVT Financial LLP ("QVT") on 24 January 2007 of an
Extraordinary General Meeting ("EGM") of Cardinal Resources plc ("Cardinal
Resources" or the "Company"), QVT is today writing to shareholders to explain
why it requisitioned the EGM now to be held on Tuesday 27th March 2007.
QVT is advising shareholders that it requisitioned the EGM to remove Mr Robert
Bensh, chairman and chief executive, from the board of Cardinal for the
following reasons:
1. Cardinal's future prospects have been greatly mortgaged to Silver
Point Finance LLC ("Silver Point"), which has conditionally been granted
warrants in effect over more than 50 per cent. of the Company's share capital
and is being paid interest rates of 15 per cent. p.a. already and, it is
understood, set to increase.
2. Whilst these warrants remain outstanding the ordinary
shareholders are unlikely to receive any takeover premium that might accrue to
them in an industry which is consolidating. QVT believes the warrants are
potentially a "poison pill." QVT has so far successfully blocked them from being
exercisable at the parent company level, against management's wishes.
3. The full terms of the Silver Point financings have never been
disclosed despite repeated requests from QVT, which QVT finds inexplicable given
the materiality of these agreements. QVT suspects that Silver Point has voting
rights over subsidiary assets and a veto over distribution policies although no
proper account has ever been given of this.
4. The original object of the Silver Point financing, according to
Cardinal's management, was to reinstate the Company's interest in the
Rudivsko-Chernovozavodske ("RC") Field. This has not been achieved, and Mr Bensh
has resorted to criticising Cardinal's joint-venture partner via paid
advertisements in the press.
5. Mr Bensh has been no more successful in negotiating with
Cardinal's joint-venture partners in the Ukraine than he has with Silver Point:
he was persuaded by them that raising finance would open the way to the RC
reinstatement, and shareholders have been left with the cost of a failed
initiative, with none of the benefits.
6. Cardinal's central costs remain excessive. The Company has no
obvious need for offices in both Houston and London. The London head-office
seems disproportionately large.
7. The consideration for the acquisition of the Rudis Field from the
Hares Group comprised a cash element of only US$6 million, yet the Company has
established facilities to borrow up to $55 million on highly expensive terms,
when the IPO Prospectus stated that it would be fully funded until February
2007.
8. The market's verdict on Cardinal's management has been a 65 per
cent. decline in the share price prior to QVT's intervention.
QVT believes that:
1. There is an urgent need to refinance the Silver Point facilities
by the issue of ordinary shares to existing shareholders by way of a rights
issue - which is what should have been done in the first place. The potential "
poison pill" warrants should be removed.
2. Cardinal's central costs must be curtailed substantially and made
appropriate to the size of the Company.
3. Cardinal needs to reopen a dialogue with its joint-venture
partners and not criticise them in the press. Igor Effimoff, whom QVT is
proposing should be CEO of Cardinal, is well-placed to do this.
Igor Effimoff is a seasoned executive with 35 years of upstream technical and
managerial experience internationally, both onshore and offshore with profit and
loss responsibility over the past 26 years. His experience is in exploration and
production, as well as business development, in North America onshore, Gulf of
Mexico, the Caspian region, FSU, Middle East, North Africa, West Africa,
Malaysia, South America and Australia. He is technically current, culturally
diverse and speaks English, Russian, Polish, French, and Farsi, and has a
hands-on management style. From 1994 until mid-2005 his activity has primarily
been focused on Russia, Azerbaijan and Turkmenistan. Currently, Igor Effimoff is
Principal of Houston based E&P Consulting, an upstream and midstream,
geological, geophysical and engineering consultancy, evaluating investment
opportunities and providing business development services to clients
internationally and in the USA.
QVT urges Cardinal shareholders to vote FOR both resolutions. QVT intends to do
so in respect of the shareholdings of funds it advises, totalling some 17.6% of
Cardinal's issued ordinary share capital.
Cardinal shareholders who have queries concerning the EGM process, including the
valid casting of proxies FOR the resolutions, should contact Anthony Quinn or
Dominic Dennis at HQB Partners on: Tel. +44 (0) 207 621 1351 or email:
info@hqbpartners.com.
This information is provided by RNS
The company news service from the London Stock Exchange
QVT Financial LLP announces Cardinal Resources - EGM
| Source: QVT Financial LLP
New York -- (MARKET WIRE) -- March 5, 2007 --