The Shanghai Securities Regulatory Bureau previously warned Pengxin Resources (SH600490, share price 3.86 yuan, market value 8.542 billion yuan) for failing to disclose on time the major issue of its controlled subsidiary, SMCO Mining Co. Ltd., having its copper mine seized and gradually transferred by a minority shareholder.
On July 19, the company disclosed some details about the occupation of the copper mine while responding to a regulatory letter from the Shanghai Stock Exchange. The responses indicated that SMCO appeared helpless in the face of the minority shareholder's encroachment. According to the listed company, SMCO had been protecting its rights through legal means, but to little effect. As things progressed, the minority shareholder even began forcibly removing ore from the mine, leaving SMCO with no choice but to observe from a distance.
Forced to Watch the Ore Being Taken, Estimate Quantities
In January of this year, Pengxin Resources announced that it received a report from SMCO stating that its minority shareholder, La Générale des Carrières et des Mines (the National Mining Company of Congo, hereinafter referred to as "Congo Mining"), and its partners JMT Investment Sarl (hereinafter referred to as "JMT") and Business Deal Mining Company Partnership, had unlawfully entered a low-grade copper ore pile (K01 ore pile) controlled by SMCO.
The listed company stated that it had attempted several methods to clear the area, but none had been effective. According to information from the site, Congo Mining had openly seized the mine pile, dispatched security and military police to guard it, claiming the ore pile as its own, and had completed the construction of roads and the installation of equipment. The ore was then being removed in stages.
According to an announcement issued by Pengxin Resources on July 19, in February 2021, Congo Mining began conducting geological surveys at the SMCO site and, in April of that year, claimed there were tailings beneath the ore pile. By the end of May 2021, Congo Mining's partner JMT had begun removing ore from the K01 pile.
By July 2022, Congo Mining had forcibly removed ore from the K01 pile and transported it out through the SMCO factory. Pengxin Resources estimated that by July 2022, approximately 3435 trucks, amounting to about 150,000 tons, of ore had been taken from the company's pile.
"We can only estimate from a distance, unable to accurately measure the amount of ore removed or test the grade," the listed company said. "As of the end of the year, it is estimated that a total of about 640,000 tons of ore had been taken away. By this time, SMCO had completely lost control of the ore pile."
According to the listed company, based on the last inventory count before the K01 pile was lost and the book value of the remaining ore, the book value of the stored ore was $14.27 million.
Whether the listed company can recover its losses remains uncertain.
Luoyang Molybdenum's Copper Mining Rights Issue Resolved
SMCO's copper mine is located in Congo. Notably, just the night before, on July 18, Luoyang Molybdenum (SH603993, share price 5.85 yuan, market value 126.356 billion yuan) announced that it had resolved its Congo (gold) TFM copper and cobalt mining rights issue.
According to Luoyang Molybdenum, the company reached a consensus with Congo Mining on the TFM rights issue, and the settlement amount totaled $800 million. It will be paid in installments by the company's controlled subsidiary, TFM, to Congo Mining from 2023 to 2028. TFM promised to distribute at least $1.2 billion in shareholder dividends to Congo Mining within the existing service period starting in 2023 (inclusive). Congo Mining has the right to subcontract 20% of the project and has the right to sell 20% of TFM products corresponding to its equity ratio.
In August 2021, Luoyang Molybdenum announced that it would invest $2.51 billion to build the Congo (gold) TFM copper-cobalt mixed ore project (hereinafter referred to as the "TFM project"). The TFM copper-cobalt mine has six mining rights, covering an area of more than 1,500 square kilometers, and is one of the largest and highest-grade copper and cobalt mines in the world.
According to Luoyang Molybdenum's plan, the TFM project will be completed and put into operation in 2023. Once it reaches production capacity, it is expected to increase the annual copper output by approximately 200,000 tons and the annual cobalt output by approximately 17,000 tons.
However, there had been some contention over the rights issue due to the expansion plan of the TFM copper-cobalt mine, as reported by cls.cn.
