A whistleblower, Elkin Pianim, has alerted the Attorney General about a US $10m shady investment by the Minerals Income and Investment Fund (MIIF) into the gold exploration and development company, Asante Gold Corporation.
In a 28th July petition, Mr. Pianim tells the AG that the MIIF, headed by CEO, Edward Nana Yaw Koranteng, has committed a financial loss of some US$ 10 million through that shady investment.
Per the letter, the MIIF rushed to undertake this first major investment, and curiously did not take standard procedures to get the best deal, including choosing to pay premiums on shares when traditionally share prices have been haggled down.
On February 22nd, 2022, MIIF subscribed to a share issuance by Asante, purchasing 14.5 million Asante shares at C$1.75/share in what reeked of either insider trading or fraudulent fronting.
“This is the first major investment MIIF has made, and it entailed two clear improprieties: MIIF, as a new investor in Asante deviated from market practice and did not receive a significant discount from Asante’s prevailing market price, but rather paid a premium to both the highest price Asante had ever traded (being C$1.71 on 17th February, 2022), and a 13% premium to Asante’s share price as estimated by Asante itself, in a presentation dated March 10th, 2022,” the whistleblower said.
Secondly, Mr. Elkin Pianim pointed out in his petition to the AG that MIIF deviated from both market practice and Asante’s own historical practice and did not receive any warrants in Asante in addition to the shares purchased.
For illustration, from the period February 2020 – February 2022, 12 mining companies with market capitalization in excess of C$10M listed on the Canadian Securities Exchange which is Asante Gold’s main market, and issued secondary shares. “None of these issuances were priced at a premium to the market, but in contrast were heavily discounted (after appropriate adjustment for tax credits and accompanying sale of warrants), and 10 of these issuances involved warrants,” revealed the whistleblower.
The letter said, “By paying a 13% premium for Asante’s shares, rather than a discount to the trading price, MIIF created an immediate minimum loss to the state of $2.3M. As of the date of writing, Asante’s shares are trading at C$1.16, representing an additional loss to the state of $6.7M. In summary, as of the date of writing, the loss to the state from MIIF buying Asante shares is estimated at $10M.”
The letter pointed out that historically Asante issues subscribers to share warrants for an equivalent number of shares purchased with a strike price 50% above the issue price and a duration of one year from issue.
Consequently, it said, the loss entailed by MIIF not receiving warrants is $14.3M, “calculated using the Black-Scholes model, with a share price of C$1.55, a strike price of C$2.33, a validity period of one year and a beta value of 2.86.”
Prior to petitioning the AG, the whistleblower said, he had made an RTI request to the MIIF for answers but the MIIF had failed to respond within the statutory 14 day period, in what is seen as a calculated attempt at cover-up.
However, the MIIF belatedly responded saying it was constrained to respond late because it had to confer with its lawyers first.
In response to the accusation that the MIIF deviated from standard market practice by acquiring at a premium of 13% and not receiving an equivalent number of warrants, the MIIF said its questionable transaction was from a private placement and not a share purchase.
“Private placement as per the standard practice mostly comes at a premium. Asante announced a private placement to 17 accredited investors on 16 February 2022 to raise up to C$100 million to be used for working capital, including the payment of the second US$ 30 million payment to Resolute Mining Limited for the Bibiani Mine acquisition, initial mine the Bibiani Mine and working capital for the company’s projects at a price of C$1.75 per share. MIIF could not be treated as an exception for this offer as that would be against SEC rules.”