Real Gold admits governance flaws
Naomi Rovnick and Sophie Yu
Real Gold Mining, which is under investigation by the Securities and Futures Commission for corporate governance breaches, admitted its management methods, internal controls and understanding of how a listed company should conduct itself are 'not good enough'.
Trading in the Inner Mongolian miner's shares was suspended on May 27, when it was reported that the firm might have filed different accounts with the Hong Kong exchange and the mainland authorities.
Real Gold also admitted to secretly funnelling about HK$1.5 billion of shareholders' funds to the company's founder, Wu Ruilin.
In June, the miner confirmed that Wu had pledged all of the listed company's assets to a mainland bank as security for personal loans.
'We have flaws in our management, internal controls and our understanding and practice of HKEx regulations,' finance director Cui Jie said while unveiling the company's financial results for the half year to June.
Net income rose 10.3 per cent from the same period last year to 355.2 million yuan (HK$433.4 million). Turnover grew 26.9 per cent to 734.2 million yuan. The company will pay a dividend of 5 HK cents per share.
On August 20, the miner said it secretly lent Wu HK$955 million between February and April. It also revealed having covertly bought some phosphorous mines in Mongolia from Wu for an additional HK$520 million.
Real Gold added it had breached listing rules by not announcing or obtaining shareholders' approval for either connected transaction.
It did not have its valuation of the phosphorous mines checked by an independent valuer, Cui said yesterday through a video link from the mainland.
'Considering Real Gold conducted the research ourselves, and the owner of the mines is our majority shareholder, it is possible the research was not all that fair,' he said. 'We will hire an independent third party to carry out a review.'
The SFC has been investigating Real Gold since at least July 5, legal papers the miner lodged with the Hong Kong High Court seeking a judicial review of the SFC's search methods revealed.
Real Gold sought to prevent the regulator from using evidence it had seized from the miner's information-technology service provider, saying some of that material might be irrelevant, or protected by lawyer-client privilege.
The High Court dismissed the miner's application on August 30.
Real Gold has attempted to form a special committee to review its accounting and internal controls.
Peter Wan Kam-to, a former PricewaterhouseCoopers partner hired to head that committee, resigned on August 19, after less than a month in the job.
The mainland's China Economic Times said in a report a visit to Real Gold's mines between July 16 and 24 showed there was no activity at the company's sites.
A Real Gold spokesman declined to comment on that allegation yesterday.
The daily total production capacity of the company's gold processing plants, in tonnes