Sincap says not liable for any claims against disposed unit

CATALIST-LISTED commodity trader Sincap Group has obtained an undertaking from the buyer of Beijing Raffles Investment Advisory not to hold the company liable for any potential issues or liabilities that arise.

Sincap Group had announced in June a sale of its entire stake in subsidiary Beijing Raffles for S$10 million to Advanceleap Corporation.

On Friday, it said in a statement: "To the best of the company's knowledge, as at the time of completion of the sale of Beijing Raffles, the mine operations of Shandong Luneng were not in breach of any relevant safety standards which might lead to a closure of the mine or cessation of mining rights as alleged in the letter."

The letter it was referring to had come from the management and employees' union of Shandong Luneng, and had included claims that based on the directives of the National and Provincial City Safety Supervisory Department, Shandong Luneng has to complete the mine refilling project as soon as possible and will require 31 million yuan (S$6.3 million) to complete this project.

It also claimed that Shandong Luneng has historically been owing the employees social security insurance of an amount of 26.69 million yuan.

On Friday, Sincap said: "The company had investigated the claims in order to verify the allegations stated in the letter. Based on the management's enquiries with the relevant local regulatory authorities in the People's Republic of China, the management was not made aware of any such directive as mentioned in the letter, nor any outstanding social security insurance payment."

It added that the Shandong Luneng employees have been duly paid such social security insurances according to the statutory requirements under China laws.

"The company completed the sale of Beijing Raffles on Oct 12 , 2017, following which the company is no longer a shareholder of Beijing Raffles and no longer has any equity interest in Shandong Luneng.

"There is no longer any connection between the company and Beijing Raffles and/or any of its subsidiaries, including Shandong Luneng. Accordingly, having no further links to Shandong Luneng, the company is and will not be responsible for any claims against Shandong Luneng."

In a separate announcement, Sincap gave an update on the proceeds from the completion of the disposal of Beijing Raffles, saying that the net proceeds have been fully used to expand the business of its subsidiary, Orion Energy Resources.

The proceeds were loaned out to Orion to expand Orion's business through the securing of coal supplies for subsequent sale, as part and parcel of Orion's ongoing trading business.

"This is part of the group's expansion plan, as the additional cash from the proceeds will allow Orion to secure more coal supplies for subsequent sale, which will in turn generate higher revenue and greater profitability," it said.

"Having additional cash on hand is especially important as Orion currently does not have any bank facilities, hence its purchase and sale of coal are currently undertaken on cash terms."

This is in addition to an earlier capitalisation exercise carried out in May this year when the company and the other shareholders of Orion had injected S$15.5 million in new capital into Orion.

Sincap remains a 51 per cent shareholder of Orion based on the enlarged issued share capital of Orion after the new share issuance.