China Billionaire’s Vanishing Signals Sundance Bid Collapse

The billionaire chairman of Sichuan Hanlong Group is missing and may be under investigation for harboring a murder suspect, threatening the Chinese company’s $1.19 billion plan to buy Australia’s Sundance Resources Ltd.

A man named Liu Han is being investigated for sheltering his brother, who was arrested for murder, the Xinhua News Agency reported March 22, without giving further details. Sundance’s efforts to contact Sichuan Hanlong’s Liu Han have failed since at least March 21.

An investigation into Liu would be the highest-profile case against a Chinese businessman since leaders completed a once-a-decade transition this month with promises to crack down on corruption. His disappearance increases the likelihood that the Sundance takeover will collapse, with closely held Hanlong facing a deadline tomorrow to produce a term sheet. Shares of Sundance were suspended March 19 after falling 6.7 percent that day and 46 percent since November 30.

“Given the situation in China, frankly when foreign companies deal with Chinese businesses, especially the non-state-owned companies, there’s always a risk,” said Huang Jing, a political science professor at the National University of Singapore. “In the wake of such a high-profile anti-corruption campaign by the new leadership, people like Liu Han can be in trouble any time.”

African Ore

Hanlong, with investments in energy, technology and real estate, owns about 14 percent of Sundance and had planned to buy the rest for A$1.14 billion ($1.19 billion). Sundance’s flagship project is a $4.7 billion deposit that straddles Cameroon and Republic of Congo in Africa.

The deal has been stalled before. After agreeing in October 2011 to buy the remaining Sundance shares it didn’t own for A$1.36 billion, Sichaun Hanlong lowered its bid because of a plunge in iron ore prices. Sundance accepted the revised bid in December and also agreed to extend the deadline for Hanlong to deliver a term sheet.

Sichuan Hanlong, based in Sichuan province’s capital city Chengdu, said in December it was looking for state-owned Chinese enterprises to partner with it to develop the project.

Hanlong hasn’t finalized its discussions with potential Chinese partners, as required by China’s National Development and Reform Commission, Sundance said in a statement March 20. As such, it’s unlikely that Hanlong will meet the deadline tomorrow to produce a credit-approved term sheet, according to the statement.

‘Seems Remote’

The deal going ahead “seems remote with the recent circumstances that have developed,” Peter Rudd, resources and mining manager at Altitude Private Wealth in Melbourne, said by phone. “The banks I don’t think would find themselves in a position to do any lending.”

Paul Armstrong, of Read Corporate, an external spokesman for Sundance, declined to comment on the future of the Hanlong takeover bid when contacted by phone. Sundance Chairman George Jones said in a phone call March 21 that Liu was “uncontactable.”

Shares of Sundance fell 6.7 percent to 21 Australian cents before being suspended March 19. The shares have fallen more than 46 percent since November 30.

The disappearance may scuttle a second deal as well: General Moly Inc., the Lakewood, Colorado-based owner of two molybdenum mining projects in Nevada, suspended work on a $665 million loan that was to be arranged by Sichuan Hanlong after the report that Liu had been detained.

230th Richest

Liu Han was ranked the 230th richest person in China with wealth of 6.3 billion yuan ($1 billion), according a list of the 1,000 richest people in China published September 2012 by the Shanghai-based Hurun Report. That was up 26 percent from 2011, Hurun said.

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 in February that it’s investigating other people associated with Hanlong Mining Investment Pty.

Both Xi and new Premier Li Keqiang promised to crack down on corruption when they took their state posts earlier this month. Liu Han was a member of the Sichuan province’s political consultative conference, a government advisory body, as of 2009.

“Liu Han’s detention wouldn’t have happened under the last administration,” said Xu Zhongbo, chief executive officer of Beijing Metal Consulting Ltd. “It only happens in this big anti-corruption environment.”

Liu Detained

Liu and his ex-wife were detained this month, according to a report by Shanghai Securities News, which cited unidentified people familiar with the matter.

According to the March 22 Xinhua report that was posted to the website of China’s Ministry of Public Security, the murder suspect who had been given shelter was Liu Yong, from the Sichuan Province city of Guanghan. Sichuan Hanlong Chairman Liu Han’s residence is in Guanghan, according to a 2003 statement by Sichuan Jinlu Group Co.

Xinhua reported in 2009 that a man named Liu Yong incited gunmen to kill three people at an outdoor teahouse in the Sichuan city of Deyang.

Sichuan Hanlong is the third-largest shareholder of Sichuan Jinlu, and Liu Han is Sichuan Jinlu’s chairman. Sichuan Jinlu said in a statement March 20 that it wasn’t able to get in touch with Liu.

Sichuan Hanlong media official Wu Shijun declined to comment when reached by telephone today. Two calls to the office of Sichuan Jinlu Group’s board secretary rang unanswered today, as did a call to the Ministry of Public Security in Beijing.