update on General Nice: attack of the Dishonest Persons

After failing to comply with Chinese court orders, companies part of General Nice (俊安) group, the owner of the Isua iron-ore project in Greenland, as well as two members of the family in control of it, have been added to the “List of Dishonest Persons Subject to Enforcement,” as the name (失信被执行人名单) of a Supreme People’s Court-issued list of judgement defaulters is often translated in PRC sources. The companies directly affected by the judgements behind the listing are not the direct owners of the Greenland project, so the only relevance for Greenland is what it can suggest about the Group’s practices and financial health. However, a more direct Greenland connection comes from a separate source. According to a long-time Hong Kong publisher and financial analyst, the Hong Kong parent of the Greenland entity has been directly targeted by a lawsuit in that city.

Both individuals involved are related to the company’s chairman, Cai Suixin 蔡穗新. They are his father, Cai Mingzhi 蔡明志, and his sister, Cai Suirong 蔡穗榕. Both have long had a number of positions in multiple Group companies. Cai senior is, or at least used to be, one of the main ultimate owners of the company, together with his son. Cai Mingzhi’s political contacts in Guangzhou province reportedly opened many doors for General Nice, a (mostly) private player in a state-dominated sector. For more on the history of General Nice, see my General Nice backgrounder.

The List lists people and companies that have failed to comply with court judgements. Its purpose is to induce compliance by public shaming. For example, a sample of it was once displayed for two weeks on an enormous screen at Changsha railway station. It’s searchable online. An evolving (and quite Orwellian) ‘social credit’ system is expected to impose a range of penalties on those on the wrong side of it, and that includes denizens of the List like the Cais. If they don’t remove themselves from it on time, they could be prevented from buying plane tickets, to mention just one possible consequence. I’ve written about the List of Dishonest Persons before: one noted member of it is Huang Nubo 黄怒波, everyone’s favourite poet-tycoon-mountaineer, known for his attempts to buy land in Iceland and Norway. Since I wrote that almost three years ago, old Huang Nubo List entries have been removed, suggesting he has perhaps paid up, but he has been honoured with a new one, over a new dispute that need not concern us here.

The judgements that landed the Cais on the list concern, among other companies, General Nice (Tianjin) Industry Co., Ltd (俊安(天津)实业有限公司). One of the creditors is an Agricultural Bank of China branch. The sums General Nice (and General Nice-linked) companies have failed to disburse as ordered by the courts total more than 70m yuan. Of course, it is possible that all those outstanding amounts have just been paid, but the online version of the List hasn’t been updated yet.

In a separate development, Target, a Hong Kong publication by venerable Hong Kong financial analyst, journalist, editor, restaurant reviewer and poet Raymonde Sacklyn, reported in late April on a lawsuit brought against General Nice Development Ltd (俊安发展有限公司) and all three Cais by ICBC, over a mortgage and a guarantee. General Nice Development, another Group company, is the ultimate owner of the Jersey entity that owns the Greenland company that owns the Isua mine.

I’ve mentioned worrying developments about General Nice (while still omitting a few) in several posts, starting with that ‘backgrounder‘ in 2015, months after the company entered the Greenland game. The Cais’ group has kept afloat despite all these. In a surprising move, last year they attempted to purchase a derelict naval base in Greenland, only to be blocked by the Danish intervention, as leaked to Defence Watch and (months later) Reuters. In my previous long-ish read on China and Greenland, I speculated that the attempt to buy the base, despite hardly making any obvious business sense, catered to a Chinese state interest in it, perceived or explicit. The Isua mine purchase can also be read in that context: if questionable as a commercial investment, sitting on the licence can make General Nice useful in the eyes of state entities that would like to see the Greenland mine stay in Chinese hands.

This blog has featured poetry in the past, namely that of Huang Nubo, a celebrated poet under the pen name Luo Ying 骆英. I have quoted his verses about Château Lafite, about stockpiling condoms. I have mentioned how he flies first-class because that helps him write, and hope he’ll make it out of the List of Dishonest Persons before the Social Credit System can prevent him from flying. With such precedent, I feel obliged to quote from Sacklyn’sserendipitously-titled poem The Loan:

The body dies and, then, putrefies:
Nature decides the timeframe of this glorious fate.
Man bemoans his ultimate demise,
Fearing the unknown; the darkness; and, the empty plate[.]

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General Nice’s Greenland subsidiary under compulsory dissolution [UPDATED: now back in GN’s hands]; accounting docs ‘disappeared’

After last week’s news about a HK subsidiary of General Nice (俊安集团) going into liquidation and a general picture of problems with creditors, it has now emerged that their Greenland subsidiary, London Mining Greenland A/S, is undergoing a compulsory dissolution process (tvangsopløsning). According to Sermitsiaq, a request to have the company dissolved was filed at the Court of Greenland in August 2016. The distressed Greenland subsidiary owns the mining license for the Isua iron mine.

Sermitsiaq also talks of accounting problems related to the transfer of London Mining Greenland from its previous owner to General Nice in late ’14. All accounting materials for that year appear to have disappeared: the location of “electronic data as well as physical documents” was unknown at the time of compiling the following annual report.

In other General Nice news: a North Sydney office building GN’s HK-listed arm North Sydney bought for $50m in ’13 to try and offset losses in their main business (mentioned in my General Nice backgrounder) is now part of an asset restructuring, and should end up being at least partially owned by Huarong, the asset manager that has also taken over management of the HK-listed subsidiary.

[UPDATE (Jan 3): Sermitsiaq reports today that two weeks ago the Court of Greenland allowed General Nice to retake the Greenland subsidiary, after four months under management by a liquidator. The reason for the dissolution order was that the company had failed to produce an annual report on time. Other than the report, a requirement to come out of dissolution was a capital injection, which apparently also happened. It remains unclear whether those missing documents related to the transfer to General Nice have materialised.

So the Isua mine in Greenland is back in General Nice’s hands for the time being. It remains to be seen whether the company’s dire situation in Hong Kong will affect the Greenland subsidiary.]

General Nice subsidiary forced into liquidation

A company part of General Nice Group (俊安集团), the Chinese coal and iron trader that owns Isua iron mine in Greenland, has been ordered into liquidation by Hong Kong’s High Court, after a petition by Australian creditors. The company, General Nice Resources (Hong Kong) Ltd (俊安资源(香港)有限公司), is not directly connected to the Greenland project, but there is an indirect link: Isua is owned (through a Jersey company) by another Hong Kong entity, General Nice Development (Hong Kong), which has a 40% stake in the company that has just fallen into liquidation. Thus, while the Greenland mine’s ownership and management remains unaffected, a subsidiary of its owner has just been ordered to wind up.

The liquidation petition was launched by KordaMentha, an Australian insolvency firm appointed by General Nice as receiver of Pluton Resources, the owner of an iron mine on Cockatoo Island, WA. KordaMentha are said to be owed several million AUD for expenses incurred during their time at Pluton, where General Nice have a controlling stake. Pluton has seen a good amount of drama in the last couple of years, with disputes between General Nice, a Chinese partner, a Chinese client and Australian contractors, including multiple, at one time simultaneous, receiverships, a police intervention, and litigation in Hong Kong and Australia, up to the Supreme Court. To the extent what I’ve read about Pluton can be summarised in any meaningful way, General Nice claim they’ve been pumping funds into Pluton to keep it alive despite low iron prices, while everybody else claims General Nice owe them money.

Last year, another creditor, Baosteel subsidiary Ningbo Steel (宁波钢铁), had asked for General Nice Resources HK to be wound up. General Nice acknowledged the debt, but sued back, arguing Ningbo Steel were trying to hurt their reputation. Ningbo eventually dropped the liquidation petition and apparently got paid, but GN’s case against Ningbo went on for some time. In a nutshell, GN say Ningbo’s petition was defamatory and frivolous as they were going to pay anyway, while Ningbo say the petition was justified since they got paid thanks to it.

But there’s more. General Nice Group, including the Greenland licence-holder, is ultimately largely owned by its chairman, Cai Suixin 蔡穗新, and his family. (I wrote an overview of the Group some time ago.) Another recent Hong Kong court order targeted Cai directly. In late October, a High Court judge forbade Cai from removing assets from Hong Kong (or to keep at least US$20m within HK). The order was requested by a Mainland bank.

And still more. Besides that Mainland-related injunction against Cai, two more banks are trying to claim debts, according to Oriental Daily News. A month ago, Société Générale filed bankruptcy petitions against Cai Suixin and his sister Cai Suirong 蔡穗榕, who’s also involved in various companies in the Group. And in yet another case, last week HSBC petitioned the High Court attempting to recover mortgaged property in the Le Cachet (嘉逸轩) development in Happy Valley (跑马地) from Cai Suirong.

General Nice’s Arctic foray is not easy to interpret. The takeover of the Isua mine, which has no development perspectives in the medium term, and the (thwarted) attempt to buy a derelict naval base in Greenland (something I’ll be writing about soon), don’t seem to make much sense as commercial investments for a company that could use some profits. Perhaps the value of these Arctic moves is favour with state entities (including SOEs) related to them, rather than directly generated profits.

[Update, Dec 30: General Nice Group chairman Cai Suixin 蔡穗新 and high executive Lau Yu 柳宇 are resigning from their posts at the Group’s Hong Kong-listed company, “for personal reasons and hoping to devote more time to other business.” Their replacements come from Huarong 华融 Asset Management, a large state-owned company specialised in distressed assets, that is said to be in the process of restructuring some other General Nice assets.

The Hong Kong-listed company is not related to the Isua mine in Greenland. The company gone into liquidation discussed in this post is a shareholder in it. I explained the (rather colourful) history of the listed arm here.

A story by Walter Turnowsky about the General Nice Resources liquidation, referencing this post, appeared today in the online edition of Greenland paper Sermitsiaq.]

the 60% saga: update on Shenghe in Greenland

Two separate sources say Greenland Minerals and Energy, the Australian company that has agreed to sell a stake in a Greenland uranium and rare earth project to Shenghe 盛和 Resources, now denies the agreement includes an option for Shenghe to increase its interest to a controlling one once the project enters the development stage.

An option to acquire a controlling stake (up to 60%) in the Kvanefjeld (Kuannersuit in Greenlandic) project is discussed in clear terms in a Shenghe Shanghai Stock Exchange disclosure, as I was seemingly the first English-language source to report. The language suggests GME is not bound to sell Shenghe such a large share, should they ask for it.

The purchase option should be good news for GME, so it’s hard to see why they would deny it.

It’s been known for ever that some sort of more or less Chinese state-connected involvement would eventually begin in Kvanefjeld. GME had long had a non-binding agreement with a unit of China Nonferrous (中色); as explained in some detail in my post from last week, Shenghe’s main shareholders are also mostly state organs.

This information has now reached the mainstream media. Various experts quoted by Politiken draw (geo)political implications of the deal. Rear Admiral (kontreadmiral) Nils Wang, an Arctic expert with the Danish Defence College, expects the deal to attract attention in the US: “It’s very easy to interpret this not just as the classic Chinese-style long-term thinking, but also as two [the other one being General Nice (俊安集团) purchase of Isua] of China’s slowly creating for themselves in Greenland the same kind of soft-power influence they already have in Iceland”. In Greenland, Aaja Chemnitz Larsen of the opposition party Inuit Ataqatigiit (IA), talks of “a need to know how big an influence China can get over the project”, on which she intends to query the Greenlandic and Danish governments. So that’s already a Greenlandic politician and a Danish kontreadmiral for whom the 60% number and Shenghe’s state connections could be interesting data points.

General Nice buys into Canadian oil

General Nice (俊安集团), owners of the Isua iron ore project in Greenland, have acquired a 30% stake in a small Alberta oil company through their HK-listed arm, Loudong General Nice Resources (楼东俊安). The operaton cost Loudong General Nice, where General Nice and related parties are shareholders, some $65m in consideration shares.

The Calgary-based target of the acquisition, Rockeast Energy, has a few oil licences in Alberta. The company was, already before General Nice’s entry, at least partially Chinese-run and owned. Rongshi United Investment Management (嵘世联合) aka Runiworld have a stake in Rockeast, and some sort of ‘alliance‘ has existed between Rockeast and Zhefu 浙富 Holding Group. Zhefu, chaired by Sun Yi 孙毅, primarily make hydropower equipment, but they have an interest in Canadian oil since the purchase of a number of oil fields from Zargon. As of last year, Zhefu’s Canadian subsidiary, Ascensun Oil and Gas, shared an address with Rockeast. It’s unclear who did General Nice buy the stake from, since the transaction was made through a series of BVI companies.

Loudong General Nice Resources, the HK-listed company that has bought Rockeast, is partially owned by General Nice Group (I’ve written about other shareholders here). The Isua licence in Greenland is not owned through Loudong General Nice, but through a Jersey-based of another, non-listed, company of the group. I have a whole series of posts and a background article on General Nice.

A bit as in the case of the Greenland mine and other recent acquisitions, this latest move can be seen as part of General Nice’s effort to diversify away from its historical core business, Shanxi coal, by buying cheap overseas assets.

Meanwhile in Australia, Pluton Resources, partially owned by General Nice, has halted operations at the Cockatoo Island mine amid a dispute with the Western Australian government over unpaid royalties.

some good news for General Nice

A quick update on General Nice (俊安集团), the license holder for the Isua iron mine in Greenland.

Some two weeks ago, the group’s Hong Kong-listed company, Loudong General Nice Resources (樓東俊安), entered a conditional agreement to issue some $50m in convertible bonds to state-owned investment manager China Huarong 华融. That money would help pay for an investment in a Mainland logistics business Loudong GN have been talking about for some time.

Loudong General Nice have had a tough couple of years as their historical core business of Shanxi coal generated considerable losses, but they’ve been trying to diversify away from it and have already managed to get some new Mainland shareholders on board, as I’ve reported recently. Their shares are trading at almost three times what they were worth not two months ago.

General Nice’s HK-listed company is not directly involved in Isua.

Meanwhile in Australia, a troubled General Nice investment is starting to look better. Pluton Resources, the operator of the Cockatoo iron mine off Western Australia, where General Nice own a majority stake, has come out of receivership, where it had landed after a dispute with Chinese partners and creditors. Encouraged by a rebound in iron prices, they are now seeking to finance new activity at Cockatoo and a new project with a $50m bond offering.