This post will be controversial, but something that needs to be aired and considered by all, and best posted during the off-trading time of the weekend!!!
The RED thread on ASF tends to be fairly low key, and generally involves commentary of a supportive nature to RED invesment and its chronic highly discounted share price based on fundamental value of Siana. It has been the bane of my life this shareholding RED, knowing that we have never received full value for our shares despite it having considerable upside, not just because of the exploration potential at Mapawa, but also at the core gold project at Siana!
However, at HC there are a number of more vocal and disenchanted shareholders. Most are genuine in their criticism, and some are longer term shareholders, one of whom is someone called Councilgritter ("CG"). Over the years CG and I have had some interesting dialogue, and one of the main points of our discussions has been RED management.
I have tried to modify my previously highly critical (and previously outspoken) view on this topic over the years, which all revolves around the frustration of having Siana development take so long. In recent times I therefore have focused on the positives of the company, and the slow but certain progress of its development, and to consider the positives of RED from an investment point of view. CG has kept a much lower profile, who acknowledges the discounted value of RED, but now and again posts with some very salient points that should not be ignored by anyone either investing in RED or considering an investment in RED.
This resolution 10 is a case in point for CG who, clearly out of frustration, made the following comment (a portion of the post only!):
"I certainly would only give management a 2 out of 10, however, these guys have struck it lucky with all the stars seemingly aligned in their favour. It's a classic case of a great resource, run by monkeys, however, given the huge free kick they have had with the run in the bullion price, they should just about scrape through, but, if only they had a Rowan Williams from Avoca or any of another half dozen other hard-working mining men involved, RED would be a stand-out. That it's a slow, slow struggle, says it all. I'm still a long-term holder however."
I can only agree wholeheartedly with his comment that the stars certainly have aligned for RED, and clearly its the events out of control of RED such as a rampant gold price and recovery of equity markets (particularly aided by circumstances with China's rise and the US' fall) that have been instrumental in lifting RED to this unenviable position.
I would like to add that the long gestation of RED getting this project to this stage has been very frustrating to us all. Even to RED management! And that the MD who has been charged with the bulk of organising the various phases of outstanding tasks and has finally been able to conclude most of them. I have no doubt that his direct involvement and tenacity at the project has been rewarded by finally overcoming those many obstacles. I for one would have thrown the towel in long ago trying to cope with all the frustrations - so I do give credit to the MD, as a person for having achieved this success with the project going through the washing machine over the years.
But times have now changed! Clearly RED board has had a rethink in recent times with regard to the skill set of board members, including the replacement of 2 directors by others with more experience in the development of projects, with assisting the future development of Siana etc. I would like to think that the board is now close to considering the future of RED with regard to the person chosen to lead the company forward as MD.
I have held a long time view (and earlier on, a much more outspoken view!)that RED has been affected negatively with its management structure, having the Managing Director based in the Philippines, and the non-executive Chairman seemingly responsible for the financing arrangements with the company. My view has always been that the MD should be in control of the company leading all aspects of it from a corporate level, and be in a position to ably represent the company as necessary to the market, its potential investors/lenders/shareholders etc. Since RED is an ASX listed company, with the majority of its shareholders being Australian (including most insto's) then the RED MD should be based in Australia, and working for the benefit of the company. And preferably with a skill set more aligned to one of a financial, corporate or investment aspect, not a geologist with mainly technical skills. And certainly not continuing the arrangement with the MD based in the Philippines who has had to run with the project on the ground, developing it further at the same slow and steady pace, as it has done through all the past years guiding it through all hoops and hurdles that will confront it in coming years.
I believe that RED board now has a responsibility to recognise that current shortcoming, and force change now as it is necessary for the company going forward to extract maximum value for its long-suffering shareholders. If RED seeks to have its shareholders remain involved with the company during this next exciting phase then it should seriously consider this issue.
This is not to say that the current MD should be removed from the project, I have no doubt that he still provides a key link between the company and the various stakeholders and government departments within the Philippines (and he clearly likes being in the Philippines), although the March 2010 appointment of a "Project Director" may be somewhat overskilling this requirement but I'm not the one to judge that.
I guess that Resolution 10 at the AGM is initiating this discussion of mine, as it epitomises long endured frustrations of longer term shareholders in RED. In my view, the events leading up to the drafting up of Resolution 10 was definitely something that RED could of, and should of, had complete control of. Now its left up to us as shareholders either to accept a passive view that the insto's will do the right thing and therefore vote YES of this resolution, or more aggressively force our opinion and vote NO, that opens up the door to a more risky outcome but potentially more rewarding in the longer term for us shareholders.
Unfortunately we only have guidance from RED management that now recommends we take the passive road and vote YES, without any additional information as to why we should trust that such a large capital raising is necessary and in our best interests - on the face of it, certainly its against RED's own commentary just a few months ago when they announced their intention to raise US$40 million (these subsequent events are now seeing us confronted with the possibility of it being increased to US$76 million, thereby blowing out the shares on issue!!!).
I believe that RED needs to make a strong statement to the market within the next week, to guide us more as to why we should vote YES and consider this significantly bigger capital raising, at such a discount, at a time when we expect to have Siana developed on time and on budget as stated in recent ASX announcements.
And soon thereafter I hope that RED board does announce the future progression of the company with the appointment of a new MD. Sure as anything those insto's will force this change in due course IF Resolution 10 is passed, and if its not passed then maybe they will still force the change anyway, as they have overall control now regardless!