Referring to its announcement on 13 April 2012 in relation to an article published on Hong Kong Economic Journal on 13 April 2012 which cited a report issued by Glaucus Research Group on April 11, Shougang Fushan Resources (HKG:0639) (SFR) has released a further announcement to refute such allegations or comments concerning its group in the report. SFR says that it has no information about the identity of Glaucus and, as indicated in the report, Glaucus is a short seller and will make money if the price of SFR's stock declines.
SFR says that the report contains certain allegations or comments on SFR, which are groundless or misstatements. SFR reserves its rights to take legal actions against Glaucus.
The report commented that SFR overpaid for the acquisition of the three coal mines from Fortune Dragon Group Limited in 2008 at a price of RMB97 per tonne of reserves.
SFR says that, based on the total reserves of the mines of 200 million tonnes according to JORC Code standards, the SFR group acquired the mines at RMB42 per tonne of reserves. The consideration paid by the SFR group for the acquisition of the mines was HK$10.53 billion. It should be noted that the mines have already contributed more than HK$7 billion to the SFR group's post-acquisition profit attributable to the owners of SFR up to 31 December 2011, SFR says.
The report cited that Wong Lik-ping and Xing Libin disposed of a significant portion of their interests in SFR within 18 months after the completion of acquisition of the mines by the SFR group.
SFR says that it is not in a position to comment on any acquisition or disposal of the shares of the company by any shareholder. However, SFR notes that its current largest shareholder, i.e. Shougang Holding (Hong Kong) Limited, together with its associates, has continuously increased its shareholding in SFR since 2008 from 9.8% to 29.4% to date.
The report alleged that the EBITDA margin of SFR is fabricated. SFR emphasizes that its financial statements were prepared in accordance with Hong Kong Financial Reporting Standards and reflected and gave a true and fair view of the state of affairs of the group. SFR also says that the high profit margin achieved by the group was due to the fact that the resources owned by the group are premium coking coal which is of relatively higher market value than other types of coals.
It is mentioned in the report that the frequent changes of the chairman of SFR is suspicious. SFR says that the resignations of the chairmen of the company in recent years were due to their other personal engagements or retirement.
The report accused that the SFR group has substantial unusual transactions with Xing. SFR wishes to note that after the acquisition of the mines by the SFR group, the transactions between the group and Xing constitute connected transactions of the company. All such transactions were carried out in accordance with the requirements of the Listing Rules. For the year ended 31 December 2011, the sales of products/services by the SFR group to Xing and his associates and the purchase of products/services by the group from Xing and his associates amounted to values representing 0.15% of the total sales and 0.8% of the cost of sales of SFR for the financial year ended 31 December 2011.
Source:chinesestock.org