1,600 kilograms of tungsten bars, valued at HK$150 million, equivalent to HK$93.75 million per ton. In mid-June, Malaysian businesswoman Wang Xinlan successfully exchanged these tungsten bars for a 14.3% stake in CHINA RAREEARTH (00769.HK) under these terms.
"Are there tungsten bars? Where exactly are they? I don't know," said Jiang Quanlong, founder of CHINA RAREEARTH, to reporters more than two months later.
In May 2024, 71-year-old Jiang Quanlong regained control of CHINA RAREEARTH, hoping to leverage external forces to help the company overcome its difficulties. However, various parties continue to dispute the company's operations, and he himself has been "removed" from the board of directors due to debt issues.
A series of questions surrounding the controversial transaction remain unanswered to this day. Recently, reporters traveled to Yixing in Jiangsu, Ganzhou in Jiangxi, and Hong Kong to clarify the true situation of this transaction.
**Jiang Quanlong: Questioning the Actual Value of Tungsten Bars**
On May 28, CHINA RAREEARTH announced that the company, through its wholly-owned subsidiary Wealthy Energy Limited, would issue 400 million new shares at HK$0.375 per share to Zhongjing International Limited (hereinafter referred to as "Zhongjing International") as "consideration shares" to acquire 1,600 kilograms of tungsten bars with purity not less than 99.995% (4N5), with a total transaction value of HK$150 million.
However, Jiang Quanlong, founder of CHINA RAREEARTH, believes there are many suspicious aspects regarding the progress of this transaction.
According to a document provided by Jiang Quanlong, the day after the announcement was issued, the Hong Kong Stock Exchange sent the company a post-vetting enquiry - first opinion document, which required the company to explain the valuation method and basis for the tungsten bars, and inquired about the background of the seller Zhongjing International and its sole shareholder Wang Xinlan. The Hong Kong Stock Exchange also required the company to supplement disclosures about the commercial model of tungsten sales, including how the business operates, how it generates revenue and profits, and supply sources; while also disclosing the value-added services provided by the company and its competitive advantages, future plans, and business prospects.
According to Jiang Quanlong, on the evening of May 28, he sent a WeChat message to Wang Xinlan: "Ms. Wang Xinlan, hello, this tungsten bar business must be done solidly. Many people have different opinions. I will ask Mr. Zhang Wei (assistant) to contact you. If there are any problems, please tell me truthfully so that I can make corrections."
Subsequently, he contacted relevant institutions to evaluate the value of the tungsten bars.
During an interview, Jiang Quanlong presented two reports. One was a tungsten bar product market report commissioned from the China Tungsten Industry Association, which mentioned that in the first half of 2024, the domestic market quotation range for 99.995% high-purity tungsten bars was 1.5 million yuan/ton to 1.55 million yuan/ton.
Jiang Quanlong also produced a tungsten bar inspection report provided by the seller. Based on this inspection report, the China Tungsten Industry Association inquired with manufacturers, and on July 31, the manufacturer quoted 2,000 yuan/kilogram (ton-level transactions including freight, approximately 2 million yuan/ton).
Another report issued by an asset evaluation agency in Jiangsu showed that, with July 31 as the evaluation base date and using the market approach as the valuation method, the market value of 99.995% high-purity tungsten bars was 1.6 million yuan/ton.
The quotations for high-purity tungsten bars in the reports presented by Jiang Quanlong differed by dozens of times from CHINA RAREEARTH's acquisition price.
**CHINA RAREEARTH: Jiang Quanlong's Complaints Are "Groundless"**
It was noted that CHINA RAREEARTH issued an announcement on June 11, stating that the company encountered multiple challenges when obtaining quotations for 99.995% high-purity tungsten bars.
According to the announcement, industry practice dictates that suppliers only provide quotations to genuine buyers (i.e., actual users of tungsten). Additionally, due to the characteristics of high-purity tungsten products, most suppliers do not list prices online and may not be able to provide comprehensive data for all purity levels.
CHINA RAREEARTH disclosed that the valuation assessment of the tungsten bars was prepared by Youying Asset Appraisal Limited (hereinafter referred to as "Youying Asset Company"). Youying Asset Company's quotation reference for tungsten bars came from the average quotation of three companies for tungsten powder at US$13,653.20/kilogram.
These three companies were Millipore Sigma, Sigma-Aldrich Corporation, and Otto Chemie Private Limited. Among them, Sigma-Aldrich Corporation is a brand under Millipore Sigma.
CHINA RAREEARTH announced that based on the average price of US$13,653.20/kilogram and a downward adjustment factor of 0.896656, the adjusted average price for tungsten with purity not less than 99.995% was US$12,242.23/kilogram. The valuation of tungsten bars containing 1,600 kilograms of tungsten with purity not less than 99.995% on the valuation date (April 30, 2024) was approximately US$19.588 million (about HK$153 million).
Regarding the above evaluation method and results, Jiang Quanlong expressed his objections. He provided to reporters a draft evaluation report without the official seal of Youying Asset Company, in which item 9 mentioned: "In forming our value opinion, we relied heavily on information provided by management. The accuracy of this information has not been verified, and we assume it to be accurate. We have not conducted further investigations to determine whether all necessary data has been provided, and we have no reason to believe that any important data has been concealed. It should be particularly noted that we did not conduct on-site inspections of the inventory, nor did we visit warehouses where the inventory is stored... Therefore, the accuracy of the information and the completeness of the inventory cannot be independently verified. This valuation reflects the circumstances existing at the time of evaluation and should be viewed accordingly."
Regarding the source of this evaluation draft, Jiang Quanlong told reporters: "The evaluation report draft issued by Youying Asset Company was provided by company secretary Xu Meifeng during the board meeting on May 28 as background material for the tungsten bar transaction. We have requested the formal version but have never seen it."
In the announcement issued on June 11, CHINA RAREEARTH also mentioned that Youying Asset Company adopted certain specific assumptions in making its valuation. These included: "The information provided by the company's management regarding the tungsten bars and the statements made (including basic information about the tungsten bars, such as weight and purity, and inspection reports on the purity of the tungsten bars issued by independent testing institutions) are accurate and reliable." Additionally, the company stated that to prepare for the acquisition, it had conducted some market research, including consulting industry experts about the details of the tungsten bars.
CHINA RAREEARTH stated at the time that since the tungsten bars were located in Hong Kong, delivery and completion would take place in Hong Kong.
On June 16, the company issued an announcement declaring the completion of the acquisition, with Zhongjing International acquiring approximately 14.3% equity in CHINA RAREEARTH. According to public information, Zhongjing International is registered in the British Virgin Islands, with sole shareholder Wang Xinlan from Malaysia, whose family is involved in palm oil, logging, gold mining, and investment management.
However, behind this transaction, conflicts between relevant parties remain unresolved, with Jiang Quanlong filing complaints to the company's board of directors regarding the tungsten bar acquisition.
In CHINA RAREEARTH's announcement on August 29, the board of directors responded that the relevant complaints were "groundless." The board stated that the acquisition was formally authorized by the board on May 28, 2024, when five directors present at the meeting (including Jiang Quanlong) unanimously agreed and approved the acquisition. Jiang Quanlong also participated in preparing for the completion of the acquisition and signed the agreement on behalf of the company regarding the acquisition.
Why did Jiang Quanlong, who now raises multiple complaints, previously agree to the acquisition during the board meeting and sign his name on the relevant agreement?
"This signature is mine! But I didn't read the content in detail. So after discovering impropriety, I immediately warned Wang Xinlan," Jiang Quanlong said.
Regarding the board meeting, Jiang Quanlong stated: "I agreed to the May 28 meeting. But I didn't understand the specific details of the tungsten bar transaction discussed at the time, nor had I seen detailed written materials about the tungsten bar transaction. As chairman of the board, I have always focused on grasping the overall direction. During the meeting, I required the then responsible directors and relevant personnel to oversee the transaction carefully and be cautious to avoid problems. The tungsten bar transaction was a major transaction for the company. From agreement signing to transaction completion, there should be many preconditions, including cargo inspection, testing, evaluation, handover, and other basic conditions. The reason I proposed postponing the announcement of transaction completion in the board WeChat group on June 16 was because the above transaction processes and details had not been confirmed, especially since I had not seen the cargo inspection report. Based on risk considerations, I opposed completion."
A chat record shown by Jiang Quanlong to reporters showed that around 5 PM on June 16, company secretary Xu Meifeng sent a notice in the directors' WeChat group, stating that the transaction had been approved by the Hong Kong Stock Exchange, all preconditions for the transaction were completed that day, and an announcement of transaction completion would be issued.
Jiang Quanlong then requested a delay in disclosure. He said: "I disagree with issuing the announcement today! I don't know the transaction conditions and processes. It's appropriate to delay until a suitable time! I disagree. Whoever acts beyond their authority takes responsibility."
**Due to Debt Issues, Jiang Quanlong Has "Exited" the Board**
Following the tungsten bar transaction, Jiang Quanlong applied for a trading suspension, and the company's shares were suspended from trading starting June 18.
On July 6, CHINA RAREEARTH announced that the board had recently received a complaint letter. According to the listed company's announcement disclosure, Yixing Xinwelicheng Rare Earth Co., Ltd. (hereinafter referred to as "Xinwei Rare Earth") and Yixing Xinwelicheng Refractory Materials Co., Ltd. (hereinafter referred to as "Xinwei Refractory Materials") were involved in potential asset misappropriation, leading to debt accumulation and frequent visits from banks and suppliers.
These two companies are core operating entities of CHINA RAREEARTH. According to reporters' visits and observations, Xinwei Rare Earth is currently in a state of production suspension, with dense weeds growing along the walls adjacent to the factory buildings on both sides of the road, further highlighting the silence of the factory area.
On July 22, CHINA RAREEARTH announced that the board had instructed legal advisors to conduct due diligence on the above companies and Jiang Quanlong. The due diligence report showed that Jiang Quanlong had multiple outstanding debts totaling over 200 million yuan, with no other enforceable assets to fulfill repayment obligations. The announcement stated that Jiang Quanlong had not provided any positive response to the board and independent investigation committee regarding the aforementioned matters. According to the company's articles of association, the board confirmed that Jiang Quanlong resigned as director effective November 26, 2024. In the list of board members shown in this announcement, Jiang Quanlong's name was no longer included.
Additionally, CHINA RAREEARTH's announcement issued on August 29 mentioned that legal advisor investigations showed that various subsidiaries were involved in at least 45 litigation cases and 9 enforcement-related cases; Xinwei Rare Earth and Xinwei Refractory Materials respectively owed banks and enterprises approximately 258 million yuan and 260 million yuan in judgment debts; subsidiary management personnel may have misappropriated funds; subsidiaries made false statements or declarations during audits in fiscal years 2023 and 2024.
Currently, all related matters have no final conclusions. After Zhongjing International acquired shares, how has the tungsten bar transaction progressed? What changes will there be in CHINA RAREEARTH's company operations?
Since September, reporters have repeatedly attempted to contact Wang Xinlan and Guo Jinying, executive director and co-acting chairman of CHINA RAREEARTH, to discuss the above questions.
On September 9, based on information provided by knowledgeable sources and public materials, reporters visited CHINA RAREEARTH's Hong Kong office, Wang Xinlan's office and residence in Hong Kong, and Guo Jinying's relevant address in Ganzhou.
At the Billion Centre in Sheung Wan, Hong Kong, a woman claiming to be Wang Xinlan's colleague said Wang Xinlan was not present. "Her working hours are somewhat different from mine. I don't see her every day because sometimes she's in meetings outside and won't come back to the office. Sometimes we also contact each other by phone," the woman said, claiming she would forward the interview request to Wang Xinlan before hastily closing the door.
At Wang Xinlan's Hong Kong residence, after much communication, reporters contacted Wang Xinlan through the property phone, but Wang Xinlan clearly refused the interview, saying "no comment."
On the same day, reporters came to CHINA RAREEARTH's Hong Kong office located in the Harbour Crystal Centre in Tsim Sha Tsui, attempting to find Xu Meifeng for an interview. Outside the office, reporters encountered a company employee who refused to forward the interview request. Subsequently, the building's security told reporters that CHINA RAREEARTH had contacted the Harbour Crystal Centre's management and informed them that the company would not accept interviews.
On the evening of September 9, reporters came to an address related to Guo Jinying provided by knowledgeable sources, but the place was empty, the doorbell showed insufficient power, and the door handle had accumulated dust for a long time.
Reporters also sent relevant questions via email to Xu Meifeng's mailbox and CHINA RAREEARTH's company secretary email, but as of press time, no response was received.