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at the end of 2020, private capital youfu investment and fengxiang investment took over the helm of southern manganese industry (01091.hk) by acquiring the equity held by citic group. after several years, southern manganese industry group (hereinafter referred to as "southern manganese group"), a wholly-owned subsidiary of southern manganese industry, its main operating entity, and the company with the largest income, began to fall into a dispute between the private capital major shareholder and the management over the control of the company's operating rights. at the same time, in recent years, the performance of southern manganese industry has also been declining, with a loss of more than 100 million yuan in the first half of this year.

on the morning of september 2, in response to the issue of the company's management rights being fought over by the major shareholders of listed companies, the management of southern manganese group and all employee representatives spoke publicly for the first time and issued a "letter to the media", stating that the major shareholder youfu investment and others were irresponsible to southern manganese, and that the company's management and all employees will resolutely safeguard their rights in accordance with the law and resolutely safeguard the interests of state-owned shareholders and small and medium-sized shareholders. "at present, the company's operations are not affected by the pressure of major shareholders controlling listed companies, and various production, operations, technological research and development and other businesses are still carried out in an orderly manner."

previously, in early august, southern manganese group publicly accused southern manganese industry's directors zhang he and xu xiang of being involved in related-party transactions and profiteering. zhang he and xu xiang were representatives of the listed company's board of directors appointed by youfu investment.

recently, youfu investment requested southern manganese industry to hold a shareholders' meeting on september 6 to propose the removal of li weijian and li junji from their positions as executive directors of southern manganese industry. li weijian and li junji work for both the listed company and southern manganese group and are the representatives of southern manganese group in southern manganese industry. tensions have begun to rise between the major shareholders and the management of southern manganese group.

first public statement

on the morning of september 2, nan manganese group held a briefing on the issue of the struggle for control of the company. pan junhong, deputy general manager of nan manganese group and deputy director of the rights protection committee, said at the meeting: in early august, nan manganese group received public reports about suspected violations of regulations and laws by individual senior executives within the company, involving the listed company's largest shareholder youfu investment, the third largest shareholder fengxiang investment, the listed company's executive director, nan manganese group director and deputy general manager zhang he, nan manganese group deputy general manager xu xiang, as well as an external manganese company and related parties.

"these reports revealed the close relationship between youfu investment, fengxiang investment, zhang he, xu xiang and a certain manganese company. under their influence and manipulation, subsidiaries of nanmanganese group signed a number of bulk transaction contracts involving manganese ore with subsidiaries or affiliated units of the manganese company. when these contracts were actually performed, there were serious overdue delivery, failure to perform at the agreed price in the contract, and unfair related transactions such as buying high and selling low, which have caused the company to suffer heavy losses. in addition, large advance payments have been made to the overseas subsidiaries of the manganese company or its affiliated companies, but the goods have not yet been actually delivered, and the company faces major risks." pan junhong said.

according to the person in charge of the nan manganese group, after receiving the report from the masses, the nan manganese group took decisive measures at the first time to conduct an internal investigation into zhang he and xu xiang in order to avoid major losses to the legitimate rights and interests of all shareholders and all employees of the company.

at the same time, nan manganese group held a staff representative meeting of nan manganese group on august 8 to discuss relevant matters, and unanimously reviewed and passed a number of resolutions, including: suspending the positions of zhang he and xu xiang, two senior executives delegated to the group by the listed company, and requiring the group to immediately terminate all unequal trade cooperation with the companies previously designated by the capital party in order to stop losses, and at the same time claiming compensation for losses and refund of prepaid payments.

"this decision promptly stopped zhang he and xu xiang from continuing the transaction with the manganese-related company at a price about 80% higher than the contract price, avoiding further losses for the southern manganese group and also preventing losses for shareholders other than those associated with the transaction." wang pingjie, deputy director of the southern manganese group's rights protection committee and legal director of the audit and supervision department, said on the spot.

wang pingjie said that at present, southern manganese group has sent a circular to the counterparty regarding the relevant ore trade involved, requiring it to perform its obligations as agreed or return the advance payment and bear liability for damages. based on the reporting clues and preliminary investigation, it has submitted a complaint letter and related materials to the hong kong stock exchange and the china securities regulatory commission on august 10 and august 12 respectively. southern manganese industry also received inquiries from the stock exchange on related issues on august 27. any subsequent progress will be disclosed to the public in a timely manner.

the result will be known on september 6th?

the predecessor of nan manganese group can be traced back to the daxin manganese mine, which was discovered during the "great leap forward" in 1958 and built in 1963. the latter is now also the most important asset of the group company. in 2005, citic resources, a subsidiary of citic group, and guangxi dameng manganese industry co., ltd. (established based on the daxin manganese mine) jointly established citic dameng mining co., ltd., which was listed on the hong kong stock exchange in 2010 and became a model for the mixed reform of central and local state-owned enterprises.

at the end of 2020, citic group returned to its core business and sold its shares to youfu investment and fengxiang investment. the equity of southern manganese industry's listed company was adjusted as follows: youfu investment held 29% of the shares, and guangxi dameng manganese industry group co., ltd. held 22.64% of the shares - the latter's shareholder is guangxi communications investment group, which is under the supervision of the guangxi state-owned assets supervision and administration commission.

at present, southern manganese group is a wholly-owned subsidiary of southern manganese industry, the largest source of income and main industrial company of southern manganese industry, and the largest comprehensive manganese mining enterprise in china.

data shows that nan manganese group is an important part of china's manganese industry. it is a national high-tech enterprise with the world's longest manganese industry chain and the richest manganese product line. its electrolytic manganese metal production capacity ranks second in the world and electrolytic manganese dioxide production capacity ranks first in the world. its mineral industry spans three places: guangxi daxin tiandeng, guizhou zunyi, and the republic of gabon. among them, daxin manganese mine is the largest national super-large manganese mine with the largest proven reserves in china. in 2023, nan manganese group's revenue will exceed hk$17 billion.

however, southern manganese group, as a representative of the domestic manganese industry, is currently facing the dilemma of being controlled by major private shareholders in its business operations, and the performance of southern manganese industry's listed companies is also showing a downward trend.

in 2023, southern manganese's revenue increased but its profit did not, with annual revenue of hk$17.134 billion, up 6.90% year-on-year; gross profit of hk$934 million, down 31.90% year-on-year. as of the end of 2023, southern manganese's total assets were hk$11.366 billion. in the first half of 2024, southern manganese's revenue fell 25.86% year-on-year to hk$5.733 billion, with a net loss of approximately hk$163 million.

"the manganese ore trade with ghana and australia has occupied the company's cash flow and has become a major cause of losses in the first half of 2024." a relevant person in charge of the southern manganese group told the securities times e-company reporter that these trading activities were led by two representatives of youfu investment stationed in the group. for this reason, the southern manganese group has submitted reporting materials to the hong kong stock exchange, the china securities regulatory commission and higher authorities under its real name.

the shareholders' meeting of southern manganese industry to be held on september 6 may, to a certain extent, affect the future of southern manganese industry and southern manganese group.

it is understood that the major shareholder youfu investment has requested the board of directors to convene a shareholders' meeting to propose the removal of li weijian and li junji from their positions as executive directors of southern manganese industry, and plans to remove li weijian from all positions in the listed company, including director, chairman, and chief executive officer.

it is worth mentioning that, among the four executive directors of southern manganese, li weijian and li junji represent southern manganese group, while zhang he and xu xiang represent the largest shareholder, youfu investment. this means that once li weijian and li junji are removed from their positions, southern manganese will be completely controlled by youfu investment, and southern manganese group and the guangxi state-owned assets it represents may lose their voice in southern manganese.

however, the outside world still does not know whether guangxi state-owned assets will take action in the future. once guangxi state-owned assets takes action, southern manganese industry may be caught up in a dispute over control of the listed company.

regarding the shareholders' meeting, at this briefing, the management of nan manganese group stated: "so far, youfu investment has not provided detailed reasons or any explanation for the relevant proposals. its purpose and motives are suspicious. youfu investment's self-interested behavior during this sensitive period is not conducive to the company's normal management, business order and the stability of the workforce."

nan manganese group calls on all state-owned shareholders, small and medium shareholders, etc. to unite and save themselves, recognize the current violations such as improper related transactions between major shareholders and their related persons and related parties, and jointly defend their legitimate rights and interests, "participate in shareholders' meetings and resolutely oppose major shareholder youfu investment's manipulation of listed companies."

the case involves the former richest man in ningxia

interestingly, the battle for control of southern manganese industry may also involve jia tianjiang, the former richest man in ningxia and founder of tianyuan manganese industry.

specifically, in the current equity structure of southern manganese, youfu investment holds 29% of the shares, guangxi dameng manganese industry group co., ltd., which belongs to guangxi state-owned assets, holds 22.64% of the shares, fengxiang investment holds 5.39% of the shares, and citic metal, which belongs to citic group, holds 4.97%.

according to the complaint letter from southern manganese group, youfu investment and fengxiang investment are persons acting in concert. the complaint material stated that when youfu investment took over the equity of the largest shareholder of southern manganese industry from citic group, its funds mainly came from tianyuan manganese industry, and the largest and third largest shareholders concealed their relationship with each other from the hong kong stock exchange.

in addition, the nan manganese group stated in the materials it submitted that during the period of its tenure at the nan manganese group, the representative of the controlling shareholder engaged in bulk ore trading with companies such as weimin (china) co., ltd., hong kong tianyuan manganese international trading co., ltd., and united mining trading co., ltd., buying high and selling low. in the absence of any agreement in the contract, when the market price of the ore was higher than the contract price, the settlement was made at the market price, and when the price of the ore was lower than the contract price, the settlement was made at the contract price, resulting in huge trade losses for the group.

according to public information, hong kong tianyuan is an affiliated company of tianyuan manganese industry, which was once the world's largest electrolytic manganese enterprise and the largest private enterprise in ningxia. its founder jia tianjiang was once on the hurun rich list and was once known as the richest man in ningxia.

however, tianyuan manganese is currently in the stage of bankruptcy reorganization. on september 22, 2023, the company filed an application for bankruptcy reorganization with the court, and its current actual liabilities and guaranteed liabilities totaled 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), which is seriously insolvent.

"we have sufficient evidence for the information involved in the reporting materials and will make them public in due course," wang pingjie, legal director of the audit and supervision department of the southern manganese group, told the securities times e-company reporter.

it should be noted that since the conflict between youfu investment and the management of southern manganese group was made public, the share price of southern manganese has increased by about one-fold from august 14 to august 30.

in view of the recent surge in the company's stock price, some media asked whether southern manganese group had recently increased its holdings in southern manganese. in response, the relevant person in charge said: "we have not increased our holdings."

how will youfu investment react to the first public response from the management of southern manganese group and the public "declaration of war" against the major shareholder? where will this old state-owned enterprise in guangxi go in the future? securities times e-company reporters will continue to pay attention.