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Glaucus attacks Fushan 'pump and dump scheme'

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Shougang Fushan Resources Group has come under renewed attack from US short-seller Glaucus Research which accused the coking coal miner of buying mines from related parties at above-market prices, and possibly inflating its profit through connected transactions.

In a report released last week, Glaucus said former major shareholder Xing Libin, who sold three coking coal mines to Fushan for HK$10.5 billion in 2008, had sold them at a valuation of 97 yuan a tonne of recoverable reserves, compared with between 11 yuan and 16 yuan for similar mines.

Fushan dismissed the allegation, saying the correct valuation should be 42 yuan a tonne.

But Glaucus responded by saying 42 yuan was not a fair valuation because it was based on both recoverable and possible reserves, but the US short-seller only used recoverable figures in its calculations.

CCB International analyst Karen Li said she believed 42 yuan was a fair basis for comparison, since the 11 yuan to 16 yuan valuation cited by Glaucus probably included both recoverable and possible reserves. She also said Fushan's profit margins were credible.

Xing owns a number of coal mines in Shanxi province, besides the three sold to Fushan. He sold most of his stake in the firm within 18 months of its listing in Hong Kong via a reverse merger deal, and reaped HK$4 billion after Fushan's share price soared.

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