Eastern Platinum Limited (EPL), a prominent holding company with mining interests in South Africa, is facing a serious legal challenge by shareholders concerning the unethical sale of 100,000 metric tons of chrome concentrate worth hundreds of millions of rands.
Registered on the Toronto (ELR) and Johannesburg Stock Exchanges (EPS), EPL is now at the centre of a scandal that has left its investors reeling, with shareholders demanding a thorough investigation into the matter.
The primary focus of the shareholders’ discontent is the unauthorised sale of a substantial quantity of chrome concentrate by EPL’s majority shareholder, Chinese businessman Liu Changyu. Liu, who acquired a controlling stake in EPL in 2016 before increasing his stake to 32% in 2021, is accused of selling the chrome concentrate at a significantly discounted price without the approval of the company’s Board of Directors.
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According to Ulrich Roux, the attorney representing the disgruntled shareholders, Liu sold the chrome concentrate at US$105.11 per dry metric ton. This price is strikingly lower (more than 50%) than the market-related price of around US$213 per dry metric ton at the time of the transaction, costing the company millions in lost profits.
The sale was made to a US-registered company, Great Wall Enterprise, which is connected to Liu’s sister, Liu Dijun. Great Wall Enterprise primarily deals in livestock feeds, cooking oils, and meat products, and more recently, auto sales, which is Mr Liu Changyu’s primary business interest in China. This raises further questions about the legitimacy of the transaction.
“This unauthorised and highly suspicious sale has resulted in a massive loss of income for both the company and the South African Revenue Service (SARS), a crucial source of revenue for the country,” he notes.
In addition to a substantial loss to SARS, the negative impact of the sale on the cash flow of EPL’s subsidiary Barplats Mines Limited (BML) has also left it with significant outstanding debts to local service suppliers.
The shareholders further argue that the sale of the chrome concentrate forms part of a larger pattern of deliberate embezzlement, exploitation of South African mineral resources, and highly suspicious financial dealings orchestrated by Changyu Liu. They assert that the transaction with Great Wall Enterprise was not conducted at arm’s length and that it was deliberately designed to damage the interests of EPL and its other shareholders.
In response to the alarming situation, the shareholders plan to institute urgent proceedings at the High Court of South Africa to obtain an interdict preventing any further unauthorised transactions from taking place. They will also be taking legal action against Changyu Liu for breaching his fiduciary duties, and are calling for his immediate removal.
The shareholders are further urging South African authorities to conduct a full investigation into the unethical sale of chrome concentrate, in addition to seeking urgent legal relief. They believe that a thorough examination of the matter will reveal the extent of the mismanagement and regulatory violations committed by those responsible for the unauthorised sale.
Additionally, they are calling for further investigation into potential money laundering activities by Great Wall Enterprise in the United States, and the recovery of any losses suffered by the South African government as a result of this controversial transaction.
“It is essential to address these issues to mitigate any further damage to the South African economy, and to ensure that both investors and local service providers are not unfairly burdened by the actions of those responsible for this situation,” states Roux.
