This article first appeared in The Edge Malaysia Weekly on May 1, 2023 - May 7, 2023

SABAH-based gold miner Bahvest Resources Bhd came under the spotlight last week — and it has nothing to do with the prospects for precious metals.

As the gold price retested its record high of above US$2,000 per ounce in April, a group of five shareholders at Bahvest is seeking to replace three of six existing directors, including its largest shareholder — founder, managing director and CEO Datuk Lo Fui Ming, who holds a direct stake of 16.09% in the company.

The five shareholders — Datuk Freddy Lim, Yong Fen Yoo, Chong Tzu Khen, Marlex Trading Ltd and Innosabah Capital Holdings Bhd — had requisitioned an extraordinary general meeting (EGM) to be held in Kuala Lumpur on May 25 to remove the three directors.

When contacted by The Edge, Fui Ming said he was confident that he would gain the support of Bahvest shareholders during the EGM.

“I am confident the shareholders will support me and vote down the proposed resolutions because of my leadership and management expertise in the gold mining industry,” he tells The Edge in a brief text message.

“The shareholders will realise the convenors may not have the management expertise to manage the business.”

Apart from removing Fui Ming, the five shareholders also want to remove Bahvest executive director Lo Teck Yong, who is Fui Ming’s son, as well as its non-executive chairman Datuk Seri Dr Md Kamal Bilal from the board. Teck Yong and Md Kamal hold 0.85% and 0.19% equity interest respectively in Bahvest.

The five shareholders collectively own more than 10% in Bahvest. Its 2022 annual report shows that Lim held a 3.57% stake and is listed among the top 30 largest shareholders of the company. He is also the CEO and controlling shareholder of plantation group Kretam Holdings Bhd, with a 66.3% direct and indirect stake.

The group plans to appoint three others, including Law Ngia Meng — the executive director of Infra Harta Holdings Bhd, formerly known as Vertice Bhd — to the board, alongside Frederick Chong. Frederick owns 0.86% in Kretam, according to its annual report.

The third person nominated by the group as a new director is Tzu Khen, who was a finance manager at Bahvest until April 27, when the shareholder tussle broke out, as well as a director at Bahvest’s mining unit Wullersdorf Resources Sdn Bhd.

The five shareholders also seek to block Bahvest’s proposed employee share offer scheme (ESOS) of up to 15% of its share base. It is interesting to note, however, that the ESOS proposal itself requires shareholders’ approval as well. When contacted, a spokesperson for the five shareholders declined to comment.

All eyes are now on the outcome of an emergency board meeting to be held with the board’s legal counsel on Wednesday (May 3) to deliberate on the request. The five shareholders have set a May 5 deadline for the company to deliver the record of depositors to facilitate the issuance of the EGM notice to shareholders.

A source familiar with the situation says the five shareholders are upset with the board’s proposal for an ESOS, deeming it “hugely contentious”, as it seeks to reward only the management and directors. The proposed exercise would also result in a potential dilution of the existing shareholders’ ownership of Bahvest.

On April 3, the company proposed an ESOS of up to 15% of its total issued share capital of 1.239 billion shares to eligible directors and employees of Bahvest and its subsidiaries. 

According to the filing to Bursa Malaysia, the proposed ESOS is also extended to non-executive directors of Bahvest because they provide “valuable experience and opinion to the board, and carry out the important function of monitoring the performance of the management”.

“The group is also unhappy with the company’s performance amid the high gold price environment,” the source tells The Edge.

Bahvest posted record revenue of RM149.3 million for the financial year ended March 31, 2022 (FY2022). Net profit came in at RM12.43 million and its gold production rose to a high of 604.17kg in FY2022.

In 9MFY2023, however, the group saw its net profit shrink to RM602,000, from RM3.89 million a year earlier, dragged down by losses in the recent quarter, which the company blamed on bad weather that disrupted its gold mining operations — even though production rose 6% year on year to 423.87kg in 9MFY2023.

Bursa Malaysia filings showed Bahvest had produced 2.07 tonnes of gold up to December 2022, compared with the indicated and inferred resources of 6.5 tonnes.

In FY2021, Bahvest had undertaken a share capital reduction of RM225 million, which eliminated the accumulated losses of RM190.31 million from its aquaculture business.

To recap, in 2017, Bahvest had bought Wullersdorf — including the 70% stake held by Fui Ming — for RM96 million via the issuance of new Bahvest shares at 94 sen apiece. The deal saw Fui Ming receive 71.49 million shares, or an 11% stake, in Bahvest at the time.

The venture turned out to be timely, especially as gold prices had rerated to US$1,700 to US$2,000 per ounce since 2020, compared with US$1,200 to US$1,400 per ounce from the time Wullersdorf first struck gold in 2018.

It is worth noting that Wullersdorf’s mining site is on a sublease for the 317.7ha mining site from Southsea Gold Sdn Bhd for RM60,000 a year until 2048. Southsea Gold, which owns the mining lease in the larger Tawau site up to December 2048 from the Sabah government, is 75%-owned by Fui Ming and 25%-owned by Mohd Amir Masry, who is also a substantial shareholder in Bahvest, with an indirect stake of 5.37% through MAB Ventures Sdn Bhd.

Shares in Bahvest, which touched a three-year low of 28 sen in early March, climbed to an 11-month high of 41.5 sen last week. At Friday’s close of 40 sen, the group had a market capitalisation of RM495.91 million.

Similarly, Bahvest’s warrants rose to their eight-month high of 7.5 sen last week. The 600 million outstanding warrants, maturing in August 2024, have an exercise price of 43 sen.

As at July 2022, Fui Ming was among the largest warrant holders, with 85.07 million warrants, or 14.18%, followed by Amir, with 36.96 million, or 6.16%. Other warrant holders are Lim (with 22.91 million, or 3.82%), Marlex (with 15 million, or 2.5%), and Leong Kam Heng (with 28.13 million, or 4.67%). 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.