China Resources Wins Permits for Shanxi Mines at Center of Suit
China Resources Power Holdings (836) Co. said it obtained exploration rights for two of three coal mines at the center of a shareholders’ lawsuit and graft allegations.
Shanxi province’s Department of Land Resources granted two year permits on July 25 for the Zhongshe and Hongyatou coal mines, China Resources Power said in a statement to the Hong Kong stock exchange today. The third coal mine under scrutiny, Yuanxiang, obtained a 20-year production license in April, the company said last month.
The statement comes after six minority investors sued state-owned China Resources in Hong Kong’s high court, claiming the board failed to properly assess the 2010 transaction and that the purchase of the three mines was detrimental to the company. The directors approved the purchase even though the mines lacked permits and may have violated Chinese law, according to the suit.
“It is inappropriate to comment or respond” to recent press reports on the lawsuit given that legal proceedings are under way, China Resources Power said in the statement.
The power utility and the chairman of its parent, China Resources Holdings Co., deliberately overpaid for the mines, according to allegations in a letter posted on the official Xinhua News Agency website on July 17. The letter was written by a Xinhua reporter named Wang Wenzhi to the Communist Party’s corruption inspector.
China Resources Power rejected the allegations on July 18, saying it paid a fair price for the mines after two independent assessments of their value. The company said it didn’t make the deal public because its equity interest in the projects was below the disclosure threshold. The state-owned Assets Supervision and Administration Commission started an audit of the parent’s accounts, Xinhua reported on July 19.
The shareholders’ lawsuit has no connection to Wang’s letter, Li Su, founder of management consultancy Hejun Vanguard Group, which is advising the investors, said at a briefing last month.
China Resources Holdings controls businesses spanning power generation, cement production, real estate and finance. One unit, China Resources Enterprise, produces the country’s best-selling brand of beer with SABMiller Plc. (SAB) In 2012, the parent company had HK$41.2 billion ($5.3 billion) of profit on HK$404.6 billion of sales, according to its website.
The case is Sze Ching Lok v. China Resources Power Holdings Company Limited, HCMP 1655/2013, in Hong Kong’s Court of First Instance.
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