CLIVE Palmer’s Mineralogy has stepped up its battle against CITIC Pacific Limited by issuing the Hong Kong-listed company with a 21-day termination notice on its rights to a Western Australian iron ore joint-venture project.
Mineralogy has seized news this month that the Hong Kong Government issued legal proceedings against five former directors of CITIC, including its former chairman, over a failed foreign-exchange hedging transaction that led to multibillion-dollar losses for investors six years ago.
The Hong Kong Securities and Futures Commission has alleged that CITIC and the former directors had engaged in “market misconduct involving the disclosure of false or misleading information about the company’s financial position” in relation to foreign exchange losses in 2008.
But CITIC has hit back at the latest action by Mineralogy.
It says in a statement that it is “surprising that Mineralogy would take this action when the WA Supreme Court is scheduled to hear an application at 3:30 p.m. (Perth time) today for an injunction restraining Mineralogy from taking further steps in reliance on (the termination notice) and other notices issued by Mineralogy”.
Mineralogy says the termination notice follows a default notice it served on CITIC two years ago, and it argues further that CITIC should have revealed the default notice to shareholders at the time.
“Not only has CITIC Pacific Limited failed to rectify the defaults in the notice, the directors of CITIC Pacific failed to declare the default notice to the market in Hong Kong and may have breached the law,’’ says Mineralogy director Clive Mensink.
“The Hong Kong Stock Exchange and authorities should immediately commence an investigation into the failures of CITIC Pacific and its directors to declare the default notice in 2012 and the current termination notice to the market in accordance with the law and rules of the Hong Kong Stock Exchange.
“Not only has CITIC Pacific Limited failed to disclose important material facts to the market, they have sought suppression orders and obtained from Australian court orders to suppress information from the market and CITIC Pacific shareholders.
“The current board is suppressing information in the same way the former board did. Five of those directors are now facing action from the Hong Kong authorities.”
Mineralogy and CITIC have played out a very public spat over the past year, with both launching separate legal actions on matters relating to their business dealings.
Mineralogy has alleged CITIC failed to pay it royalties from its WA mining operation, while CITIC has accused Palmer of diverting to his federal election campaign funds that were intended for the development of a port.
The troubled Sino Iron Project in WA has cost Citic more than $8 billion so far and it is unlikely to let the termination notice go unchallenged.
In its statement today, CITIC says it “looks forward to this matter being resolved by the court”.
“Mineralogy has been restrained by the court or has undertaken to the court not to rely on several default and termination notices on three separate occasions over the past two years,” it says.
“In addition to the $US415 million paid by CITIC to Mineralogy to acquire its rights at the Sino Iron Project, all royalties that are owed and calculable have been paid in full by CITIC to Mineralogy.”
The company revealed in its half-year report an element of frustration in its dealings with Mineralogy.
CITIC says Mineralogy in April had withdrawn its allegation that the mining rights and site lease agreements were terminated as part of the court proceedings involving the alleged unpaid royalty payments.
“Before leave was obtained from the court, Mineralogy changed its position a further time,” says Citic in its report.
CITIC also says it is seeking legal advice on the matters brought against it by the Hong Kong regulators.
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