On the eve of the extraordinary general meeting of shareholders of the listed company, South Manganese Group Co., Ltd. (hereinafter referred to as "South Manganese Group") sent a report in real name to the Hong Kong Securities and Futures Commission and the Hong Kong Stock Exchange.

In the report, it listed multiple violations by Youfu Investment Co., Ltd. (hereinafter referred to as "Youfu Investment"), the largest shareholder of the listed company South Manganese Investment Co., Ltd. (01091), as well as two directors, with detailed content and severe accusations, causing widespread attention in the industry.

A banker close to Nanmeng Group confirmed to Zhitong Finance APP that the Hong Kong Securities and Futures Commission and the Hong Kong Stock Exchange attach great importance to this, and the Hong Kong Stock Exchange has already intervened.

As a result, in the fierce battle between the major shareholders of the listed company and the actual production enterprises, the control of South Manganese Group, with an annual revenue of 17 billion Hong Kong dollars, has become the focus of the industry.

The prelude to this storm can be traced back to the worker representative conference held by South Manganese Group on August 8th of this year. At that time, South Manganese Group held a representative conference, where it passed multiple resolutions and decisively took actions including suspending the duties of two senior managers, Zhang He and Xu Xiang, stationed at the listed company.

As the other party in the event, the Hong Kong-listed South Manganese Industry was not to be outdone. First, it announced that it had not lost control, and later, due to a motion put forward by Youfu Investment, it announced that it would hold a special general meeting of shareholders in Hong Kong on September 6th, proposing the dismissal of directors Li Weijian and Li Junji, and planning to remove Li Weijian from all positions including director, chairman, and CEO at the listed company.

Interestingly, both sides in this incident have similar statements. Both South Manganese Group and South Manganese mention receiving reports from the public, with the same reason being suspected of harming the interests of South Manganese Group and employees' rights. This coincidence reflects the intense public opinion battle between the two parties.

Information shows that South Manganese Group is an important component of China's manganese industry, a national high-tech enterprise with the world's longest manganese industrial chain and the richest manganese product line. Its electrolytic manganese metal capacity ranks second globally, and its electrolytic manganese dioxide capacity ranks first globally. The mineral industry spans Guangxi Daxin Tian Deng, Guizhou Zunyi, and the Republic of Gabon, with Daxin Manganese Mine being the largest domestic special manganese mine with confirmed reserves. In 2023, South Manganese Group's revenue exceeded 17 billion Hong Kong dollars.

Currently in the equity structure of South Manganese, UFU Investment holds 29% of the shares, Guangxi State-owned Guangxi Daming Manganese Industry Group Co., Ltd. holds 22.64% of the shares, Fengxiang Investment holds 5.39% of the shares, and CITIC Metal, under CITIC Group, holds 4.97%.

However, according to the report from South Manganese Group, UFU Investment and Fengxiang Investment are acting in concert.

This is another significant event for the company following the previous suspension of South Manganese Industry. In 2022, owing to the refusal of auditing firm Moore Stephens to sign the 2022 annual report, South Manganese's trading was halted for as long as 10 months.

In February 2024, when South Manganese Industry resumed trading, the stock price fell by 60% on the same day, causing a strong market reaction. In less than 6 months, another power struggle occurred, raising doubts about the company's governance standards.

It is reported that in the reports submitted to the Hong Kong Securities and Futures Commission and the Hong Kong Stock Exchange, South Manganese Group made the following two main accusations: representatives of the controlling shareholder engaged in multiple violations at South Manganese Group; UFU Investment and Fengxiang Investment are related parties acting in concert, and have close ties with Zhang, Xu, and Ningxia Tianyuan Manganese Industry Group Co., Ltd. (referred to as 'Tianyuan Manganese Industry').

Taking the former as an example, in the submission, South Manganese Group stated that the representatives of the controlling shareholder, during their tenure at South Manganese Group, engaged in bulk trading of ores with companies such as Weiming (China) Limited, Hong Kong Tianyuan Manganese Industry International Trade Limited, United Mining Trade Limited, buying high and selling low. When the market ore price was higher than the contract price with no agreement, they settled at market price; when the ore price was lower than the contract price, they settled at the contract price, resulting in significant trade losses for the group.

Taking the latter as an example, the report material states that when Yofu Investment took over as the largest shareholder of South Manganese Industry from CITIC Group, its funds mainly came from Tianyuan Manganese Industry, and the largest and third largest shareholders concealed their relationship from the Hong Kong Stock Exchange.

However, Tianyuan Manganese Industry is currently undergoing bankruptcy reorganization. On September 22, 2023, the company filed for bankruptcy reorganization with the court, and its current actual liabilities and guaranteed liabilities total more than 150 billion yuan (as of the end of 2022, actual liabilities of 118.421 billion yuan, guaranteed liabilities of 36.382 billion yuan), and it is severely insolvent.

Faced with the accusations from South Manganese Group, Yofu Investment quickly responded by sending a lawyer's letter to refute it and warned that legal action may be taken. Yofu Investment stated in the lawyer's letter that the content of the public account is untrue and misleading, which may cause the public to misunderstand that the board of directors of the listed company has lost control over South Manganese Group. At the same time, as the major shareholder of South Manganese Industry, Yofu Investment's interests may be damaged, and it is considering lawsuits against the disseminators of false information and seeking compensation for losses.

Faced with Yofu Investment's strong counterattack, South Manganese Group has shown another form of internal unity. At the general meeting of employees, they expressed full support for the management, vowed to hold their positions, and jointly safeguard the stability and development of the company, as well as protect the interests of state-owned assets, small and medium shareholders, and all employees.

In order to cope with the current challenges, South Manganese Group has begun a series of internal reforms and adjustments. On one hand, it strengthens financial management and internal controls to prevent similar unfair transactions from happening again. On the other hand, it optimizes its business structure, enhances core competitiveness, and ensures the company's steady and sustainable development in the fierce market competition.

Since the disclosure of the incident on August 14th, the stock price of South Manganese Industry has risen by 93.5%, and it is unknown which party is collecting chips in the secondary market.

However, this battle for control is not a one-time event, and the game between the two sides may be a protracted one.