Faced with the prolonged failure of its controlling shareholder Jiang Zhaobai to fulfill agreed performance compensation obligations, Pengxin International Mining Co.,Ltd. (600490) has taken decisive action.
On November 14, the company disclosed that its board approved a proposal to resolve the performance compensation dispute through litigation. The unanimous 3-0 vote (with two non-independent directors abstaining due to conflicts of interest) authorizes legal proceedings to clarify both parties' rights and obligations.
The dispute stems from Jiang Zhaobai and Jiang Lei's failure to meet performance commitments for assets injected into the listed company, resulting in a staggering RMB 2.308 billion shortfall between actual and promised results. The Jiang brothers (Jiang Zhaobai as controlling shareholder and Jiang Lei as board director) have defaulted on compensating this massive performance gap.
Jiang Zhaobai, a 1963-born entrepreneur from Nantong's Tongzhou district, once led the prominent "Pengxin Group" with multiple listed companies under its umbrella. His personal wealth peaked at RMB 25.1 billion (ranked #43 on 2014 Hurun Rich List) when he was Nantong's richest person, though his fortune has since declined to RMB 10 billion in 2023 before disappearing from recent rankings.
The controversy originates from Pengxin's 2017 acquisition of Ningbo Tianhong Yihua Trading Co., Ltd. (Ningbo Tianhong) through issuing 220 million shares and paying RMB 400 million cash to the Jiang brothers. This deal granted indirect control of CAPM African Precious Metals and its core asset—the South African Oni Gold Mine.
Under their 2017 performance commitment agreement, Jiang Zhaobai and Jiang Lei guaranteed cumulative net profits of RMB 1.944 billion from 2018-2024. However, Ningbo Tianhong only achieved RMB 16.15 million in 2020 while reporting losses in six other years, accumulating RMB -364 million in net losses—falling RMB 2.308 billion short of targets.
Pengxin attributes the underperformance to delayed procurement of critical equipment for the Oni Gold Mine, which severely disrupted operations and postponed restart plans. In April 2024, the company calculated compensation obligations at 220 million shares plus RMB 414 million cash.
Concerns about fulfillment emerged early, as by March 31, the Jiang brothers held 221 million shares (83.6 million pledged) while their affiliates held 520 million fully pledged/frozen shares—levering insufficient unencumbered shares for compensation. Despite negotiations since June, no agreement was reached by November.
As of August 2024, the Jiang group collectively holds 741 million shares (33.47% stake), including 405 million pledged shares and 137 million restricted shares (108 million frozen).
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