New | Legal battles shroud future of Siberian Mining Group
Does a US$728 million financing deal for an abandoned coal mine, a group of South Korean businessmen and a falsified mineral survey report lie behind the problems at Hong Kong listed Siberian Mining Group (SMG).
Those are issues being considered by Hong Kong’s High Court in the latest in a series of shareholder-led legal actions against SMG management.
SMG itself, seven former SMG directors, global mining advisory group SRK Consulting, and Korean businessman Choi Sungmin, are all named as defendants in a writ that alleges shareholders were misled over the 2008 purchase of the Lapichevskaya coal mine in central Russia’s Kemerovo region, and the subsequent issuance of US$728m in convertible notes to the vendor as part of the purchase agreement.
The writ allegations are “false” and the situation is “very complicated,” SMG’s former chairman Lim Ho-sok told the South China Morning Post. Named as a defendant in the writ, Lim declined to comment further citing ongoing legal action.
The writ was filed November 5th by Charles Zhi, also known by his Korean name Chi Chang Hyun, a shareholder and one time consultant to SMG. The writ asks for shareholder compensation from the former directors and for the convertible notes to be repaid.
The Hong Kong stock exchange wrote to SMG earlier this year questioning whether the mine’s value had been properly reported in the annual accounts. SMG has yet to release its 2012 and 2013 annual reports and the firm is currently on its third set of auditors in two years.
Zhi told the Post he and his friends invested US$7m in SMG stock in 2009. Since then the share price has dropped 99 per cent and trading in SMG was suspended last year. Zhi expects SMG to be delisted.
A separate petition to wind up SMG was filed on November 7 in the High Court by Korea-based shareholder Hyun Hi Hun. A spokesman for Hyun told the Post the filing was designed to “put pressure” on SMG management to resign so that a buyer could be found for the troubled miner.
In his writ, Zhi suggests that a doctored SRK report misrepresenting the value of remaining mineral deposits was used to persuade shareholders to back SMG’s acquisition of Lapichevskaya. Zhi alleges that SMG management was influenced by Choi – who Zhi says bought the mine for only US$2 million in mid-2008 through a company called Cordia.
Choi exercised control over key personnel at SMG as an undisclosed concert party after block buying chunks of SMG shares via various nominee companies, alleges Zhi.
David Pearce, general director of SRK Consulting Russia Ltd, said his company would not comment.
Choi did not respond to emails or phone calls asking for comment. A spokesman for the Supreme Prosecutors Office in Seoul confirmed an investigation into Choi was underway but declined to give details. Earlier Korean media reports questioned Choi’s business dealings at Cordia and at a Korean energy firm called Luxon Energy.
The mine lies deserted five years after its purchase, claims Zhi.
