It has taken 12 months, but emerging mining powerhouse Oxiana Resources has finally come clean on the issue that triggered last year’s staggering 46.9% vote against its remuneration report.

Chairman Barry Cusack came straight out and acknowledged the details of the issue after I spelt them out at yesterday’s AGM in the following terms:

CEO Owen Hegarty was initially issued four million options in 2004 with a one-year performance period which was subsequently changed in a move that enriched the Oxiana founder by millions of dollars.

Cusack’s obfuscation last year was extraordinary when I asked him to explain the cause of the revolt. The AGM wasn’t told anything meaningful, and then The Australian quoted him saying the revolt related to “hurdle rates, retirement benefits, length of time measuring performance”.

Oxiana then released this statement two months after the AGM. It once again muddied the waters by throwing in a range of issues rather than accepting that the revolt was caused by an extension of the original performance period.

Cusack, who is an old Rio Tinto executive just like Hegarty, yesterday tried to portray the board as being tough for clipping the CEO of 50% of his options. He admitted that a mistake was made in the 2004 annual report which said the four million options in question had a performance period based on the 2004-05 financial year.

It is indeed true that two million of these options did lapse during 2006 and, given that the pricing was only $1.25 — shareholders have been saved the expense of an additional $3.68 million profit for Hegarty. But he’s still struggling along with a shareholding worth more than $100 million.

Cusack said Hegarty was unhappy about this, given that Oxiana has been the best-performed stock in the top 200 over the past five years. However, based on the one-year performance period published in the 2005 annual report, Hegarty arguably shouldn’t have received any of these four million options.

The tough facts of the situation is that Oxiana shares only rose from about 80c to 90c in the 2004-05 financial year and then took off in July, 2005, to reach a peak of about $1.40 by the end of calendar 2005, and then a record high of almost $3.80 by June, 2006.

If the original performance period hadn’t been changed later due to a “mistake”, shareholders would today be $3.68 million better off. It’s a shame such a good-news company couldn’t come clean on all this much earlier.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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