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Home REIT: Time to change the Board

The Boatman Capital has raised a number of issues around governance failures and accounting irregularities that we believe make the position of the chairwoman and of the audit chair of Home REIT Plc untenable.

We are also concerned that the board has been over-optimistic in its financial assumptions and that the value of the company’s property portfolio may, as a result, be significantly inflated.

AVZ Minerals: Experiencing A Chinese Burn?

We believe that AVZ Minerals is in the process of being outmanoeuvred by a group of powerful Chinese battery manufacturers, who are plotting to take control of the Manono lithium project. We think that, at best, AVZ faces months or years of legal fights to block Zijin Mining and to claim shares from Dathomir Mining Resources. At worst, AVZ will lose control of Manono and be left with just 36% of the project.

Argo Blockchain: Why Investors Should Be Concerned

We think that investors wanting exposure to bitcoin can find better opportunities than Argo Blockchain elsewhere.

Divesting from Argo into other assets would have the added benefit of avoiding a company that appears to have displayed serious governance failures and has significantly diluted investor shareholdings over the past year.

Argo has diluted shareholders by 52% so far this year with further dilution likely given potential capex requirements of $1.5-2 billion for the Texas project.

Argo Blockchain: Who Benefits From Texas Deal?

We believe that Argo Blockchain purchased land in Texas seemingly for up to 100 times more than the acreage is worth, raising serious governance questions about why this deal was done and who benefited.

We are also concerned that an apparently unreported multi-million dollar legal dispute between Argo and Celsius Network could threaten future bitcoin mining capacity and revenue. Argo leases about 40% of its mining fleet from Celsius.

Thungela Resources Ltd: Drowning in Liabilities?

Anglo American is demerging its thermal coal operations into a new company called Thungela Resources. We believe that Thungela has massively under-estimated the environmental liabilities associated with closing its mines, which have just five to 11 years of expected life remaining.

Based on our estimates, Thungela’s environmental liabilities could be three times greater than currently reported and are more than the value of the entire company.

AVZ Minerals: A Letter to the Board of Directors

We have identified a number of corruption “red flags” related to AVZ’s acquisition of a stake in a lithium project in the Democratic Republic of Congo (DRC). We are concerned that the Manono license may have been awarded corruptly and that AVZ proceeded with the deal despite these warning indicators. We are therefore asking that AVZ’s Board of Directors provide an assurance to investors that the company has complied with all international laws in relation to its DRC transactions.

AVZ Minerals: The Proceeds of Corruption?

The main asset of AVZ Minerals is a license to explore the world’s largest undeveloped lithium deposit, located in the Democratic Republic of Congo (DRC). It is our opinion that AVZ could have benefited from corruption in the award of this exploration license. As a result of this transaction, AVZ’s largest shareholder is owned by an offshore vehicle with a Swiss nominee director and an anonymous shareholder in Belize.

Babcock International: Underperformance and Overcomplexity

In our opinion, Babcock International needs to write down the value of its Defence Support Group (DSG) subsidiary, which was acquired for £148 million. According to our calculations, Babcock DSG has overvalued its main contract by £50 million, based on an average assessment of underlying operating profits. An impairment on this scale would be equivalent to 12.8% of Babcock’s pre-tax profits.

Babcock International: Burying the Bad News

In our opinion, Babcock has systematically misled investors by burying bad news about its performance. We believe that Babcock’s senior leadership team – specifically the chairman and chief executive – are not up to the job and their failings will damage the company’s future prospects.

Mike Turner has been the chairman for 10 years and can no longer be considered independent under the UK’s Corporate Governance Code.

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