'Detention' puts hold on General Moly loan

US firm seeks to clarify report that chairman of Sichuan Hanlong is in Chinese custody

PUBLISHED : Thursday, 21 March, 2013, 10:41am
UPDATED : Friday, 22 March, 2013, 2:03am

General Moly, owner of the largest rare-earths deposit in the US, suspended work on a US$665 million loan after a report that the chairman of the Chinese company arranging the credit has been detained in China.

The company is seeking clarification from Sichuan Hanlong Group about the reported detention of Liu Han, Colorado-based General Moly said in a statement. The stock fell 14 per cent to US$2.37 on Wednesday in after-hours trading in New York.

General Moly joins Australia's Sundance Resources, subject of a A$1.14 billion (HK$9.18 billion) takeover by Hanlong, in seeking information on Liu's status. Liu and his ex-wife were detained after attending the National People's Congress in Beijing this month, according to a report by the Shanghai Securities News, which cited unidentified people familiar with the matter.

"It has obviously put the takeover deal under pressure," Evan Lucas, a market strategist at IG Markets, said.

Sundance chairman George Jones said he would have a meeting yesterday with Hanlong's "senior people" in Perth. The meeting would not include Liu, who was "uncontactable", Jones said.

Sichuan Jinlu Group, a chemical company, was not able to get in touch by telephone with Liu, also its chairman, according to a statement late Wednesday from the company to the Shenzhen Stock Exchange.

Hanlong, an investor in highway and power projects, is Jinlu's third-biggest shareholder. Wu Shijun, a media official with Hanlong, declined to comment. Jinlu's shares dropped nearly 4 per cent. Liu's detention was related to Macau casinos, the China Securities Journal reported, without further elaborating. Wu couldn't be immediately reached for comment on this report.

Hanlong, or an affiliate, was obligated to arrange and guarantee the term loan General Moly sought from China Development Bank to develop its Mt Hope molybdenum deposit in Nevada, General Moly said. Hanlong hadn't completed talks with potential Chinese partners to complete the Sundance acquisition, as required by the National Development and Reform Commission, Sundance said.