Tuesday 18 July 2006 06 – LAWFUEL – Press Release Service – Astron Limited (Astron) has paid a $66,000 penalty following an investigation by the Australian Securities and Investments Commission (ASIC) into an alleged failure to comply with the continuous disclosure obligations contained in the Corporations Act (the Act).
The Sydney-based listed company paid the penalty to comply with an infringement notice issued by ASIC on 21 June 2006 (the notice). The notice alleges that Astron failed to immediately inform the Australian Stock Exchange Limited (ASX) of a significant increase in the mineral resource estimate for its Donald Mineral Sands Project, a minerals sands deposit located in Murray Basin, Victoria (the project).
Astron imports zircon sand into China and manufactures and distributes zirconium chemicals and advanced materials for the ceramics, TV glass, refractories and consumer industries. The project is part of Astron’s strategic plan to secure supplies of zircon.
In its 2005 Annual Report, Astron indicated that it had completed an initial drilling program on a small part of the Donald mineral sands deposit containing an indicated mineral resource of 187 million tonnes at 6.3% heavy mineral. On 6 January 2006, Astron became aware of the contents of a geological report, which stated that total indicated and inferred resources for the project were 693 million tonnes of ore with a heavy mineral content of 5.1%.
According to ASIC, despite becoming aware on 6 January 2006 of the significant increase (of 270%) in the mineral resource estimate for the project, it was not until 12 January 2006 that Astron announced the estimate to the market. ‘Listed companies must make timely disclosure to the market of material information.
This obligation applies to the disclosure of information that may impact positively on company performance as well as negative company information’, said Ms Jan Redfern, ASIC’s Executive Director of Enforcement. The issue of the notice and payment of the penalty by Astron is the first involving a company with a market capitalisation greater than $100 million. Astron elected to comply with the notice. As provided under the Act, compliance with the notice is not an admission of guilty or liability, and Astron is not regarded as having contravened subsection 674(2) of the Act.
An extract of the notice is attached. Further information about ASIC’s administration of infringement notices is available from the ASIC website at http://www.asic.gov.au/clerp9, under ‘continuous disclosure’. For further information contact: Jan Redfern Executive Director, Enforcement Telephone: 02 9911 2191 Mobile: 0411 119 210 Danielle Huck ASIC Media Unit Telephone: 03 9280 3407 Mobile: 0417 540 769
Extract of infringement notice The Facts Astron is a public company listed on the Australian Stock Exchange Limited (ASX) and carries on business importing zircon sand into China and manufactures zirconium chemicals and advanced materials for the ceramics, TV glass, refractories and consumer industries.
In March 2004 Astron acquired the exploration rights for the Jackson and Donald mineral sands deposits located in the Murray Basin in Victoria. Astron then established the Donald Mineral Sands Project, on an area of the Donald mineral sands deposit, for the purpose of setting up a mining operation for mineral sands, including zircon.
The Donald Mineral Sands Project is part of Astron’s strategic plan to secure supplies of zircon. In its 2005 Annual Report, Astron announced that during 2005 the company had completed an initial drilling program on a small part of the Donald mineral sands deposit containing an indicated mineral resource of 187 million tonnes at 6.3% heavy mineral. In 2005, Astron engaged AMC Consultants Pty Ltd (AMC) to prepare a resource block model and mineral resource estimate for the Donald Mineral Sands Project.
In its report dated 4 January 2006 (the AMC report), AMC reported a mineral resource estimate for the Donald Mineral Sands Project as follows: ‘Total indicated and inferred resources of 693 million tonnes of ore with a heavy minerals content of 5.1%. Contained within this resource and within a boundary of composite drill-hole data is an indicated and inferred resource of: 477 Mt @1.1% Zircon, 1.8% Ilmenite, 0.3% Rutile and 1.1% Leucoxene or 5.2 Mt Zircon, 8.5 Mt Ilmenite, 1.2 Mt Rutile and 5.4 Mt Leucoxene.’ (the Information) The mineral resource estimate for the Donald Mineral Sands Project contained in the AMC report represented a significant increase (of 270 %) to that previously announced in Astron’s 2005 Annual Report.
On 5 January 2006 Ronald Hugh McCullough (Mr McCullough), project manager of the Donald Mineral Sands Project, emailed a copy of the AMC report to Alexander Gavin Brown (Mr Brown), the managing director of Astron. On 6 January 2006 Mr Brown received a telephone call from Mr McCullough during which he was informed by Mr McCullough that Astron had received the AMC report, that he had sent Mr Brown a copy of the report by email, that the mineral resource estimate for the Donald Mineral Sands Project had improved on the original mineral resource estimate and that the AMC report concluded that the new indicated and inferred mineral resource estimate for the Donald Mineral Sands Project was of the order of 690 million tonnes (compared to 187 million tonnes previously announced). At about 6.44 pm on 12 January 2006, Astron made an announcement to the ASX (the Announcement).
The Announcement contained the Information and made a comparison to the previous mineral resource estimate of 187 million tonnes of ore with a heavy minerals content of 6.3%. The announcement also stated that ‘by providing additional zircon supplies – such as from the Donald Mineral Sands deposit – we aim to knock on the head any raw material supply constraints to our expansion plans’.
The Contravention This Infringement Notice has been issued because ASIC believes that Astron contravened subsection 674(2) of the Act in the period from 6 January 2006, by which time Astron was aware of the Information, to 12 January 2006, when Astron made the Announcement to the ASX, in that: (a) Astron is an entity to which subsection 674(2) of the Act applies; (b) From 6 January 2006, Mr Brown, in the course of his duties as Managing Director of Astron, came into possession of the Information; (c) By reason of the matters referred to in paragraph (b) above, from 6 January 2006 Astron became aware of the Information; (d) The Information was information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of securities of Astron, because: • The Donald Mineral Sands Project is part of Astron’s strategic plan to secure supplies of zircon • The Information represented a significant increase in the mineral resource estimate for the Donald Mineral Sands Project to that previously announced in Astron’s 2005 Annual Report • The Information would be seen by persons who commonly invest in securities as reflecting positively on the prospect that the Donald Mineral Sands Project would proceed to commercial mining operations and, therefore, on Astron • On 13 January 2006 (being the first trading period after the Announcement was made) the trading volume in Astron shares increased significantly (172,792 shares traded versus 37,577 traded on 12 January 2006) and Astron’s share price increased from the previous day’s closing price (opening at $4.00 on 13 January 2006 versus a closing price on 12 January 2006 of $3.80, and peaking at $4.03 before closing at $3.72) • By reason of the foregoing, the Information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of securities of Astron (e) By reason of the matters referred to in paragraphs (b) to (d) above ASX Listing Rule 3.1 required Astron to tell ASX of the Information on 6 January 2006; (f) ASX Listing Rule 3.1A (the exception to ASX Listing rule 3.1) did not apply to the Information because a reasonable person would have expected the Information to be disclosed to ASX on 6 January 2006; (g) Between 6 January 2006 and until 12 January 2006, when Astron made the Announcement to the ASX, the Information was not generally available; (h) Astron did not tell the ASX of the Information until about 6.44pm on 12 January 2006, when the company made the Announcement to the ASX.