Chinese mining company Yancoal may have gotten the green light for a merger with Gloucester Coal, but a $96 million dollar debt may put a dent in its hopes for a place on the Australian Stock Exchange (ASX), says a local mining broker.
Australian PNG Mining (APM) claims that Yancoal–the local arm of China’s fourth largest mining giant Yanzhou–has refused to pay an outstanding $78 million plus interest charges in spotting fees for a multi-billion dollar deal APM helped to broker three years ago.
Last week shareholders approved the merger of Gloucester Coal with Yancoal, a move that will allow Yancoal to list on the stock exchange by ensuring a 30 per cent Australian share ownership. The remaining 70 per cent of shares will belong directly to the Chinese communist regime.
The deal will make Yancoal the largest coal company in the country and the first Chinese coal company to be listed on the ASX.
However, with an outstanding multimillion dollar debt to APM, Yancoal’s listing may be put on hold, as ASX says it is currently investigating the debt claims.
Multi-Million Dollar Debt
According to the documents obtained by The Epoch Times, including dozens of emails, meeting records and technical data analysis, APM appears to have actively facilitated the purchase of Felix Resources by Yancoal in 2009–a claim that Yancoal denies.
Yancoal settled to pay Felix Resources $3.4 billion for four coal mines, in what was Australia’s biggest foreign acquisition in the coal industry to date. Two per cent of that price was to be paid to APM in spotting fees.
APM describes “spotting” as a standard industry process, in which a broker “spots” an opportunity and prepares an evaluation report with technical data for the potential buyer.
AMP says that repeated attempts to claim the outstanding debt have resulted in legal threats, which they find both intimidating and frustrating.
“The disgusting thing is that Yancoal is so powerful and has so much money they engaged the best and most expensive law firm in the country. So they’re saying, ‘Let’s go to court’,” said an APM spokesperson.
APM accuses Yancoal of using “schoolyard bully tactics” against local companies, while reaping the benefits of Australia’s resources. Australia is the world’s number one exporter of coal, shipping over 270 million tonnes per year, primarily to Asia.
“We are not dealing with just a company here. We are dealing with the Chinese government. Why should we take a foreign government to court just to be paid?”
Yancoal, like its parent company Yanzhou, is fully owned by the Chinese communist regime. Since 2004 it has purchased six mines in Australia and invested in excess of $4 billion in direct acquisition fees alone.
The Department of Foreign Affairs and Trade (DFAT) acknowledges that APM has contacted them in an effort to resolve the dispute, but has failed to facilitate a resolution.
“Legal channels exist for the purpose of resolving these kinds of contractual disputes and we would encourage the company to pursue those channels,” said a Department spokesperson in an email.
In a recent article published in Chinese newspaper The Daily Express, Yancoal’s Director Cunliang Lai accused APM of “extortion”.
APM’s Executive Director Paul Moon defended his claim. “Who in their right mind would write out an invoice for $96 million and contact their government about it, unless it was real?” said Mr Moon.
Paul Raftery is a mining engineer with 30 years of experience. He was contracted by APM to prepare the evaluation and provide technical data to Yancoal for the Felix acquisition. Mr Raftery says he used his expertise and also personal contacts within Felix to assist in the deal.
He says the process in the Felix-Yancoal deal was unusual. Yancoal requested that the process would be kept low key. No formal contracts were signed and the negotiations were done in the typical “Asian way”, says Mr Raftery.
“People sat down, agreed on how it would be done. They had the meeting and then they had dinner. You have a commercial discussion and then a meal to celebrate,” he said.
Mr Raftery describes a specific meeting at a Chinese restaurant in July 2008, attended by APM Executive Director Paul Moon and Yancoal’s Director Mr Lai. Details of payment methods for APM’s services were discussed and agreed upon as two per cent of the final offer figure.
While the meeting was carried out via a translator for Mr Lai, there was no misunderstanding, says Mr Raftery.
“There is no question in my mind that he knew what he was doing,” Mr Raftery said.Meanwhile, Yancoal denies that APM was ever appointed as a spotter in the deal.
“Our client had no agreement with APM, either written or oral, concerning the provision of any services to Yancoal or the payment of any fee,” said Cameron Hanson, a lawyer representing Yancoal.
Mr Lai could not provide a comment to The Epoch Times due to limited English skills, while Yancoal’s Company Secretary Laura Zhang stated on the phone that “there is no merit of claim” to APM’s demands.
Meanwhile, a 2009 Annual Report for Yanzhou states that a “consultancy fee” of $150,000 was paid to an unnamed company for the Felix acquisition.
Mr Raftery believes that Yancoal simply used the data provided by APM, as the final purchase price was very close to the evaluation he provided, while paying another company a cheaper rate.
“The irky thing for me is that we wrote in a way they would understand. They used our value.
“We know that they used the report because they came back and asked us questions. The bid was extremely close to what we told them it should be,” said Mr Raftery.
Mr Raftery offers a warning to other businesses considering doing business with China.
“Get the documents signed.”
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