93 / 135
HALF-YEAR REPORT 2016
Notes to the Consolidated Financial Statements
For the six months ended 30 June 2016
/ 91
31 Contingent liabilities and commitments
(continued)
(e) Outstanding litigation and disputes
(continued)
(i) The Hong Kong Securities and Futures Commission (the “SFC”) Investigation
(continued)
On 15 October 2014, the Secretary for the Financial Services and the Treasury said that the
Police’s investigation into the CITIC matters on aspects outside the subject matters of the
SFC’s actions are still ongoing.
In the absence of the findings of these proceedings and investigations being made available to
the Company and due to the inherent difficulties involved in attempting to predict the outcome
of such proceedings and investigations and in assessing the possible findings, the directors do
not have sufficient information to reasonably estimate the fair value of contingent liabilities (if
any) relating to such proceedings and investigations, the timing of the ultimate resolution of
those matters or what the eventual outcome may be. However, based on information currently
available, the directors are not aware of any matters arising from the above proceedings and
investigations that might have a material adverse financial impact on the consolidated financial
position or liquidity of the Group.
(ii) Mineralogy Disputes
The MRSLAs provide that royalties are payable to Mineralogy by each of Sino Iron and Korean
Steel on ore mined (Royalty Component A) and concentrate produced (Royalty Component B).
The MRSLAs also provide that, unless certain exceptions apply, a Minimum Production Royalty is
payable to Mineralogy by each of Sino Iron and Korean Steel where a minimum production level
was not achieved by a specified date.
Due to changes in the way in which seaborne-traded iron ore is priced, the Company considers
that it is no longer possible to calculate Royalty Component B. Mineralogy and its related
companies have commenced a number of proceedings against the Company, Sino Iron, Korean
Steel, Sino Iron Holdings Pty Ltd and certain officers of those companies containing or derived
from claims for Royalty Component B and/or the Minimum Production Royalty. A number of
those proceedings are described above in Note 3(b). To the extent those proceedings have not
been permanently stayed or dismissed, they are being vigorously contested by the Group. No
trial date has been set in the ongoing royalties proceedings.
In the circumstances, the Group does not consider that a reliable estimate can be made of
the amount of any potential liability arising from the royalties proceedings, and, therefore, no
provision has been recognised in the Accounts.
There are a number of disputes with Mineralogy. Refer to Note 3(b) for details.
(iii) CITIC Resources Holdings Limited (“CITIC Resources”) Litigation
(1) In August 2014,
山煤煤炭進出口有限公司
(Shanxi Coal Import & Export Co., Ltd.) (“Shanxi
Coal I/E”), a wholly-owned subsidiary of
山煤國際能源集團股份有限公司
(Shanxi Coal
International Energy Group Co., Ltd.) (“Shanxi Coal Int’l”), commenced a claim in
山西省
高級人民法院
(Shanxi High People’s Court) (the “Shanxi Court”) against, amongst others,
CITIC Australia Commodity Trading Pty Limited (“CACT”) (the “Claim A”). Shanxi Coal I/E is
claiming from CACT (i) the sum of US$89,755,000 (HK$700,089,000) plus interest for breach
of contract resulting from the alleged non-delivery of certain aluminium ingots by CACT to
Shanxi Coal I/E, and (ii) costs in respect of Claim A.