On the eve of the extraordinary general meeting of shareholders of South Manganese Industry, South Manganese Group reported the major shareholder for violations

On the eve of the extraordinary general meeting of shareholders of a listed company, South Manganese Group Co., Ltd. (hereinafter referred to as "South Manganese Group") sent a whistleblower letter to the Securities and Futures Commission of Hong Kong and the Hong Kong Stock Exchange. In the whistleblower letter, multiple violations by the largest shareholder of the listed company South Manganese Investment Co., Ltd. (01091) (hereinafter referred to as "South Manganese") - Yufu Investment Co., Ltd. (hereinafter referred to as "Yufu Investment") and its two executive directors were detailed and severely accused, causing a stir in the industry. A source close to South Manganese Group confirmed to the Securities Times app that the Securities and Futures Commission of Hong Kong and the Hong Kong Stock Exchange are taking this matter seriously, with the Hong Kong Stock Exchange already involved. As a result, in the fierce game between the major shareholders of the listed company and the physical production enterprise, the ownership of South Manganese Group, with an annual revenue of HKD 17 billion, has become the focus of industry attention. The prelude to this turmoil can be traced back to the workers' representative congress held by South Manganese Group on August 8th this year. At that time, South Manganese Group held a workers' congress and passed multiple resolutions, decisively taking actions including suspending the duties of two senior executives, Zhang He and Xu Xiang, stationed in the listed company. On the other side of the event, the Hong Kong-listed South Manganese did not back down. First, it announced that it had not lost control, and later, due to a motion proposed by Yufu Investment, it announced that a special shareholders' meeting would be held in Hong Kong on September 6th to propose the removal of directors Li Weijian and Li Junji, and planned to remove Li Weijian from all positions in the listed company, including director, chairman, and CEO. Interestingly, both sides in this event have similar claims. Both South Manganese Group and South Manganese stated that they had received reports from the public, with the same reason being suspected of harming the interests of South Manganese Group and the rights of employees. This coincidence reflects the intense confrontation between the two sides in the public opinion arena. Information shows that South Manganese Group is an important part of China's manganese industry, a national high-tech enterprise with the longest manganese industry chain and the richest manganese product line globally. Its electrolytic metal manganese capacity ranks second globally, and its electrolytic manganese dioxide capacity ranks first globally. The mining industry spans locations such as Danxin in Guangxi, Zunyi in Guizhou, and the Republic of Gabon, with Danxin Manganese Mine being the largest known national super-large manganese mine. In 2023, South Manganese Group's revenue exceeded HKD 17 billion. Currently, in the equity structure of South Manganese, Yufu Investment holds 29% of the shares, Guangxi State-owned Guangxi Daming Manganese Industry Group Co., Ltd. holds 22.64% of the shares, Fengxiang Investment holds 5.39% of the shares, and CITIC Metal, a subsidiary of CITIC Group, holds 4.97%. However, according to the whistleblower letter from South Manganese Group, Yufu Investment and Fengxiang Investment are acting in concert. This is another major event for the company following the previous trading suspension of South Manganese. In 2022, the refusal of the auditing firm Moore Stephens to sign the 2022 annual report directly led to a trading suspension of South Manganese for as long as 10 months. South Manganese resumed trading in February 2024, but the stock price plummeted by 60% on the same day, causing a strong market reaction. Less than 6 months later, another ownership dispute occurred, raising doubts about the company's governance standards in the eyes of the public It is reported that South Manganese Group made the following two main accusations in the materials reported to the Hong Kong Securities and Futures Commission and the Hong Kong Stock Exchange: the representative of the controlling shareholder was involved in multiple violations during their tenure at South Manganese Group; UF Investment and Fengxiang Investment are involved as acting in concert, and have close relationships with Zhang, Xu, and Ningxia Tianyuan Manganese Industry Group Co., Ltd. (hereinafter referred to as "Tianyuan Manganese Industry"). For the former, South Manganese Group stated in the submitted materials that the representative of the controlling shareholder, during their tenure at South Manganese Group, engaged in bulk ore trading with companies such as Weiming (China) Co., Ltd., Hong Kong Tianyuan Manganese Industry International Trading Co., Ltd., and United Mining Trade Co., Ltd., adopting a strategy of buying high and selling low. In cases where there was no agreement in the contract, settlement was made at market price when the market ore price was higher than the contract price, and at the contract price when the ore price was lower, resulting in huge trading losses for the group. As for the latter, the report alleges that when UF Investment initially took over the largest shareholder equity of South Manganese Industry from CITIC Group, its funds mainly came from the Tianyuan Manganese Industry system, and the first and third largest shareholders concealed their relationship from the Hong Kong Stock Exchange. However, Tianyuan Manganese Industry is currently undergoing bankruptcy reorganization. On September 22, 2023, the company filed for bankruptcy reorganization with the court, and its current actual liabilities and guaranteed liabilities total more than 150 billion yuan (as of the end of 2022, actual liabilities were 118.421 billion yuan, and guaranteed liabilities were 36.382 billion yuan), leading to severe insolvency. In response to the accusations from South Manganese Group, UF Investment swiftly responded by issuing a lawyer's letter to refute the claims and warning of possible legal action. UF Investment's lawyer's letter stated that the content on the public account is untrue and misleading, which may lead to misunderstandings that the board of directors of the listed company has lost control over South Manganese Group. At the same time, as a major shareholder of South Manganese Industry, UF Investment's interests may be harmed, and they are considering suing the disseminator of incorrect information and seeking compensation for losses. Faced with UF Investment's strong counterattack, South Manganese Group has shown another form of internal unity. At the employee congress, employees expressed their full support for the management, pledged to hold their positions, jointly safeguard the stability and development of the enterprise, and protect the interests of state-owned assets, small and medium shareholders, and all employees. To address the current challenges, South Manganese Group stated that it has begun a series of internal reforms and adjustments. On one hand, strengthening financial management and internal controls to prevent similar unfair transactions from happening again; on the other hand, optimizing business structure, enhancing core competitiveness, and ensuring the steady and sustainable development of the enterprise in the fierce market competition. Since the disclosure of the incident on August 14th until August 29th, the stock price of South Manganese Industry has risen by 93.5%, and it is unknown which party is collecting chips in the secondary market. However, this battle for control is not a one-time event, and the game between the two parties may be a protracted one