General Moly Suspends Work on $665 Million LoanSoraya Permatasari and Sonja Elmquist
General Moly Inc., owner of two molybdenum mining projects in Nevada, suspended work on a $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, Lakewood, Colorado-based General Moly said in a statement. The stock fell 14 percent to $2.37 yesterday in after-hours trading in New York.
General Moly joins Australia’s Sundance Resources Ltd., subject of a A$1.14 billion ($1.18 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 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 Ltd., said by phone from Melbourne.
Sundance Chairman George Jones said he will be having a meeting today with Hanlong’s “senior people” in Perth. The meeting won’t include Liu, who is “uncontactable,” Jones said by phone from the Western Australia capital.
Sichuan Jinlu Group Co., a chemical company, isn’t able to get in touch by telephone with Liu, also its chairman, according to a statement late yesterday from the company to the Shenzhen Stock Exchange. Chengdu-based Hanlong, an investor in highway and power projects, is Jinlu’s third-biggest shareholder. Wu Shijun, a media official with Hanlong, declined to comment today. Jinlu’s shares dropped 3.9 percent to 7.92 yuan at 1:33 p.m. local time.
Liu’s detention is related to Macau casinos, without further elaborating, China Securities Journal reported, citing unidentified people. Hanlong’s Wu couldn’t be immediately reached for comment on this report.
Hanlong, or an affiliate, is 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 yesterday in the statement.
“We hope to re-establish term loan negotiations with Hanlong and CDB in the near-term, but will concurrently assess other financing alternatives,” General Moly Chief Executive Officer Bruce Hansen said in the statement.
Hanlong hasn’t completed talks with potential Chinese partners to complete the Sundance acquisition, as required by China’s National Development and Reform Commission, Sundance said yesterday in a statement. As such, it’s unlikely that Hanlong will meet a March 26 deadline to produce a credit-approved term sheet, according to the statement.
Perth-based Sundance, whose stock is suspended, said it expected to resolve the matters by April 5, said was seeking information from Hanlong on the reported detention of Liu.
Sundance’s shares, which last traded 53 percent below Hanlong’s 45-cent offer price on March 19 in Sydney, reflected that it’s increasingly unlikely the deal will go through, IG Markets’ Lucas said. “The funding deal from Hanlong looks very, very uncertain.”
General Moly said in November 2010 that Hanlong had informed the company it had signed an initial agreement with the Export-Import Bank of China for as much as $1.5 billion in loans. This followed an announcement that March that Hanlong would source and guarantee the loan as well as buy a 25 percent stake in General Moly for $80 million once the loan is secured.
“Until we get an explanation, I’m a bit concerned,” Sundance’s Jones said yesterday in an interview. The Securities News report didn’t cite a reason for Liu’s detention. Hanlong owns about 14 percent of Sundance.
A former Hanlong unit executive in Australia, Calvin Zhu, was sentenced to 27 months in jail after pleading guilty to three counts of insider trading, an Australian regulator said last month. The Australian Securities & Investments Commission also said on its website on Feb. 15 that it’s investigating other people associated with Hanlong Mining Investment Pty and won’t make any further comments on that probe.
The regulator investigated Zhu, former vice president at Hanlong Mining, and other individuals, on allegations they took A$1 million from Hanlong Mining, created a company where the money was deposited, and traded shares and contracts of Bannerman Resources Ltd. and Sundance before Sichuan Hanlong offered to buy them.