Authors: Andrew Klein & Sera Elizabeth Klein

Dedication: To every retail investor who lost their savings to a story that was never true. To every whistleblower who spoke up and was silenced. To every regulator who looked the other way. And to the truth—that this was not a market, but a game. We see it. We name it. We will not forget.

Abstract

This paper examines the systematic pattern of corporate engineering in Australia’s resources sector, in which publicly listed exploration companies are used as vehicles for wealth extraction by insiders at the expense of retail investors. We document the prevalence of “backdoor listings” through defunct mining shells, the issuance of massive performance rights that dilute shareholder value, the failure of continuous disclosure obligations, and the regulatory capture that allows these practices to persist. Through case studies of corporate failures—including Wiluna Mining, AVZ Minerals, Australian Mines, and others—we demonstrate that the resources sector has become a casino in which the house always wins. We argue that this represents a systemic failure of Australian corporate governance, enabled by a regulatory framework that prioritises market access over investor protection and a political culture that treats corporate failure as an acceptable cost of doing business.

1. Introduction: The Game That Never Stops

In the Australian resources sector, a pattern repeats with mechanical regularity. A shell company—often a failed mining explorer with a defunct listing—is acquired by a private entity seeking a public listing. Performance rights are issued to directors and consultants in quantities that dwarf the company’s existing share capital. Promises are made. Hopes are raised. Capital is raised. And then, inevitably, the structure collapses, leaving retail investors holding worthless paper while insiders walk away enriched.

This is not a market failure. This is a designed outcome.

The practice of “backdoor listings” has become an established feature of the Australian Securities Exchange (ASX). As ASIC Commissioner John Price has noted, “the growing number of backdoor listings has highlighted a number of regulatory issues, including some companies not fulfilling their legal obligations to provide audited financial reports”. Concerns have also been raised about “the failure of some companies to adequately disclose their business models or business plans”.

The pattern is unmistakable. And it is tolerated.

2. The Architecture of the Shell Game

2.1 The Backdoor Listing

A backdoor listing involves a private company being acquired by a defunct listed shell company in exchange for shares in that company. The practice has become “an emerging trend among Australian companies seeking to float quickly” and is “increasingly taken up by technology startups, which are opting to use shell companies left stagnant by the cooling minerals sector to list”.

Based on ASIC data, at least six recent backdoor listings have involved minerals companies acquiring technology companies, while a further six forthcoming transactions will follow a similar formula. As one analyst observed, backdoor listings “are generally very small mining or exploration companies that are suspended from trading and so become shelf companies used by private companies to list via the backdoor, which is usually cheaper and quicker”.

2.2 The Performance Rights Tsunami

The issuance of performance rights—securities that convert to shares upon the achievement of specified milestones—has become a primary mechanism for transferring value from shareholders to insiders. In one case, a company issued 280 million performance rights to three consultants, vesting if the company’s shares achieved a volume-weighted average price of $0.03 or greater over 20 consecutive trading days. An additional 285 million performance rights were issued under an employee incentive scheme.

When hundreds of millions of performance rights are issued against a share base of similar magnitude, the dilution is catastrophic.

The scale of this practice is not limited to a single company. Across the ASX, performance rights are issued with abandon:

· BCI Minerals reported the lapse of 1,322,933 performance rights

· Western Gold Resources reported the lapse of 3,000,000 performance rights

· Coda Minerals reported the lapse of 3,080,680 performance rights

· New Murchison Gold terminated 348,905 performance rights

These are not isolated incidents. They are the visible surface of a systemic practice.

2.3 The Disputes That Follow

When the promised value fails to materialise, disputes inevitably follow. In one case, a former managing director of Siren Gold took the company to the Supreme Court, alleging he was entitled to 13 million shares worth approximately $936,000. The dispute centred on whether a “change of control” clause in his consultancy agreement had been triggered.

The performance rights that were supposed to align incentives have instead become a source of litigation.

3. Case Studies: When the Game Collapses

3.1 Wiluna Mining: $57.3 Million That Wasn’t

On 17 June 2022, Wiluna Mining announced to the market that it had raised $57.3 million as part of a capital raising. The company went into administration just over a month later. The market was never informed that $7 million of the capital raising was never received.

ASIC commenced civil penalty proceedings against Wiluna, its former chair Milan Jerkovic, and former chief commercial officer James Malone, alleging breaches of continuous disclosure obligations and directors’ duties. ASIC Chair Joe Longo stated: “The lack of transparency and subsequent corporate failure have the potential to drive a loss of confidence in our capital markets”.

Wiluna was delisted on 5 April 2024 after failing to lodge its half-year report.

3.2 AVZ Minerals: $2.8 Billion Wiped Out

AVZ Minerals, a West Australian company, was suspended from trading and subsequently delisted after a dispute over ownership of a lithium deposit in the Democratic Republic of Congo. Investors were left nursing losses of $2.8 billion—”one of the biggest wealth wipeouts in ASX history”.

ASIC accused AVZ and two directors of failing to disclose critical market information after they delayed telling investors about a threat to their flagship African lithium project.

3.3 Australian Mines: The $5 Billion Mirage

Australian Mines announced an offtake agreement with SK Innovation for cobalt and nickel production from its Sconi Project. Its managing director, Benjamin Bell, allegedly:

· Falsely claimed that Australian Mines had secured funding from SK Innovation for construction of a plant expected to cost $500 million or more, “when in fact no one had offered or agreed such funding”

· Misleadingly stated that the value of the offtake agreement was $5 billion “when the terms of the agreement included a potential buyer’s discount of 15 per cent“

ASIC contended that Bell’s $5 billion valuation “did not comply with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code)“. The company publicly retracted the claims.

3.4 Adani: Shell Companies and Tax Havens

The Adani Group’s planned Carmichael coal mine in Queensland involved an “overarching royalty deed” that gave a shell company rights to receive a $2-a-tonne payment, rising yearly by the inflation rate, beyond the first 400… . Up to $3 billion from the project was to be shifted to a subsidiary.

The pattern is consistent: complex corporate structures designed to extract value from Australian assets and shield it from Australian scrutiny.

4. The Systemic Failure: Regulation Without Enforcement

4.1 ASIC’s Warnings

ASIC has repeatedly warned about the risks of backdoor listings and performance rights. Commissioner John Price has expressed concerns about “the quality and independence of the information received by shareholders” and noted that ASIC has “taken action where we have had concerns around independence in the past”.

Yet the warnings continue. The practice persists. The failures accumulate.

4.2 The Enforcement Gap

Despite the scale of the problem, enforcement action remains sporadic. ASIC has sued Wiluna Mining, AVZ Minerals, and Australian Mines. But these actions come after the damage has been done—after companies have collapsed, after billions have been lost, after investors have been wiped out.

The regulator is not preventing the harm. It is documenting it after the fact.

4.3 The JORC Code and Its Limitations

The JORC Code—the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves—is meant to ensure that companies do not mislead investors about the value of their assets. Yet as the Australian Mines case demonstrates, companies routinely ignore its requirements.

The ASX has flagged “a dedicated review of annual mineral resources and ore reserves statements” and set out “a long list of mining disclosures it will watch closely“. But the review comes after decades of abuse.

5. Regulatory Capture and the Politics of Performance

5.1 The Revolving Door

The resources sector is deeply embedded in the Australian political economy. Former politicians and their advisers routinely move into consultancy roles with mining companies. The regulatory framework is shaped by the very interests it is meant to regulate.

5.2 The Performance of Regulation

The system is designed to look like it is working. ASIC issues warnings. The ASX conducts reviews. Companies make announcements. But beneath the performance, the same patterns continue.

This is not regulation. This is theatre.

6. Conclusion: The Game Must End

We have documented that:

1. Backdoor listings are a systemic feature of the ASX, enabling private companies to list through defunct mining shells

2. Performance rights are issued in quantities that massively dilute shareholder value

3. Disclosure failures are endemic, with companies routinely failing to provide accurate information to the market

4. Enforcement is reactive, occurring only after the damage has been done

5. Investor losses are catastrophic—$2.8 billion in the case of AVZ Minerals alone

This is not a market. It is a casino—and the house always wins.

References

1. ASIC warning on backdoor listings. StartupSmart, 2023.

2. Odessa Minerals performance rights announcement. Proactive Investors, 2026.

3. Odessa Minerals employee incentive scheme. TipRanks, 2026.

4. BCI Minerals performance rights lapse. TipRanks, 2026.

5. Western Gold Resources performance rights lapse. TipRanks, 2026.

6. Coda Minerals performance rights lapse. The Globe and Mail, 2026.

7. New Murchison Gold performance rights termination. Kalkine Media, 2026.

8. Ex-Siren Gold boss performance rights dispute. The West Australian, 2025.

9. ASIC sues Wiluna Mining. ASIC Media Release 25-058MR, 2025.

10. ASIC accuses AVZ Minerals of misleading investors. Australian Financial Review, 2025.

11. ASIC action against Australian Mines. Australian Mining, 2022.

12. Adani Carmichael coal mine royalty deed. ABC News, 2017.

13. AVZ Minerals investor losses. Australian Financial Review, 2025.

14. Flamingo AI / Fargo Enterprises / Odessa Minerals corporate history. Business News, 2021.

Signed,

Andrew Klein

Sera Elizabeth Klein

“They told us it was a market. We showed them it was a game. They told us the rules were fair. We showed them the house always wins. They told us the system worked. We showed them the collapse. We have seen through the cover. And we will not forget.”