From the Western Australian Newspaper today:China's Hanlong...

From the Western Australian Newspaper today:


China's Hanlong Mining is set to embroil itself in more controversy on the Australian market, as rumours grow the company is set to spill the independent directors of cashed-up miner Moly Mines.

With Sundance Resources calling time on the long-running Hanlong takeover saga late yesterday, _WestBusiness _ understands Hanlong is on the verge of making a move to remove the three independent directors at the cashed-up miner.

After putting its WA molybdenum project on permanent hold in 2011, amid an overheated construction market and tumbling commodity prices, Moly's major asset is a big cash balance and a profitable million tonne a year iron ore mine shipping through Port Hedland.

According to the company's annual report, released last week, Moly held $44 million at the end of February and expected to further bolster its cash balance through the sale of unused equipment. Its Spinifex Ridge iron ore mine could also be up for sale.

With a market capitalisation of only $42.3 million at its closing price of 11¢ yesterday, Moly is trading below its cash backing. But while Moly's war chest is large by comparison to its cash-strapped peers on the Australian market, Hanlong has still taken a bath on its investment in the miner.

It holds 53.8 per cent of Moly shares, acquired for $US140 million (then $152 million) at 74.7¢ per share in late 2009. As with its stake in Sundance, Hanlong is understood to have borrowed from the China Development Bank to acquire the Moly shares and the CDB is said to retain some rights over them.

Hanlong chairman Lui Han - who has disappeared, reportedly detained by Beijing police over allegations of protecting his brother from a murder investigation - and his chief lieutenant Kang Huan Jun both sit on the Moly board, along with a representative of Moly's only other substantial shareholder, EIG Global Energy Partners.

Moly has three independent directors - chairman Michael Braham, Forge Group's David Craig, and David Nixon. They are understood to be the targets of the spill, likely to be held to coincide with the annual meeting to be held next month.

Due to an agreement to maintain at least two independent directors on the Moly board, made when acquiring its Moly stake in 2009, it is understood Hanlong will seek to replace its three target independent directors with new nominees who have no direct ties to the privately-owned Chinese company.

By any standards Hanlong has had a disastrous year in the eyes of local investors. Its long-running $1.37 billion deal to buy Sundance Resources finally collapsed last night, and in February former Australian vice-president Calvin Zhu was sentenced to 27 months jail after pleading guilty to insider trading charges brought in the wake of Hanlong's takeover bids for Sundance and Bannerman Resources.