Narrative
Full Description
Project narrative
On November 3, 2006, Sinosteel and Samancor Corporation — a large chrome ore and ferrochrome enterprise registered in South Africa and wholly owned subsidiary of Samancor Chrome Limited — signed a joint venture agreement to produce 1.6 million tons of chrome ore and 310,000 tons of ferrochrome each year. Under the terms of the agreement, Sinosteel agreed to purchase a 50% ownership stake in Tubatse Chrome Minerals (Pty) Ltd — the owner and operator of a chrome and ferrochrome smelter in South Africa — from Samancor Corporation for $230 million. Two days later, on November 5, 2006, China Development Bank (CDB), Sinosteel and Samancor Corporation signed a tripartite cooperation agreement. CDB reportedly issued a loan to Sinosteel to facilitate its acquisition of the 50% equity stake in Tubatse Chrome Minerals (Pty) Ltd. On June 13, 2007, the joint venture shipped the first batch of ferrochrome to China. Tubatse Chrome Minerals (Pty) Ltd was legally incorporated as a joint venture in May 2007. By the end of June 2007, the joint venture had produced 43,000 tons of ferrochrome, of which 32,000 tons were shipped to China. However, this equity acquisition project was plagued by controversy. The transaction was allegedly facilitated by Samancor Corporation directors as well as two board members from Kermas BVI. Emails provided by a whistleblower suggest that they had been closely cooperating on what they termed ‘solutions for the Sinosteel transaction payment.’ The widely-reported price of the acquisition was $230 million, but ultimately Sinosteel paid $225 million. Instead of $225 million going to Samancor Corporation directly, the annual financial statements of Samancor Corporation reveal that it had received only $100 million — less than half of what it was owed. The two implicated board members from Kermas BVI allegedly arranged for Sinosteel to transfer the remaining $125 million to a Nedbank account in London belonging to Kermas BVI. The success of the deal was confirmed in an email from Nedbank Capital announcing ‘that Nedbank London has received $125 million on the account for Kermas [BVI].’ Then, in September 2022, Sinosteel acquired a 100% ownership stake in Samancor Chrome Limited for an undisclosed price.
Staff comments
1. The Chinese project title is 中钢集团南非萨曼科铬矿收购项目 or 南非萨曼可铬矿项目. 2. Sinosteel is a Chinese state-owned enterprise engaged in developing and processing of metallurgical mineral resources, trading and logistics of metallurgical raw materials and products, and related engineering technical service and equipment manufacture. 3. South Africa-based Samancor Chrome is one of the largest ferrochrome producers in the world. 4. On June 1, 2005, Kermas South Africa (Pty) Ltd ("Kermas SA") acquired 100% of the shares in Samancor Chrome Limited. The transaction was approved by the South African Commission Tribunal, and the acquisition was made possible by a $165 million loan that International Minerals Resources AG -- company legally incorporated in Switzerland -- provided to the main shareholder of Kermas SA: Kermas Limited, a company incorporated in the British Virgin Islands with registration number 504889 ("Kermas BVI"). 5. The face value of the CDB loan is unknown. For the time being, AidData assumes that it was equivalent to 70% ($157.5 million) of the cost of the acquisition ($225 million). 6. The precise acquisition date is unknown. AidData has estimated November 5, 2006, the issue date of the loan, as the completion date.