http://www.scmp.com/print/comment/insight-opinion/article/1845429/citic-pacific-transparency-falling-short-sino-iron-project

Citic transparency falls short as Sino Iron swept under the rug

PUBLISHED : Friday, 31 July, 2015, 3:30pm

Shirley YamShirley.yam@scmp.com

Transparency is lost as acquisition of parent eradicates mandatory disclosure requirements relating to stalled Australian mining project

It has been a year since Citic Pacific’s acquisition of its parent Citic Group,  which was billed as the “pioneer” move in  China’s new round of state enterprise reform. So far Citic has announced  reforms in a helicopter subsidiary to allow the hiring of a career manager instead of a party cadre as its chief %executive. This baby step, however, cannot compensate for the significant drop in its transparency following the acquisition. The new black box is called Sino Iron –  a West Australian iron ore mining project  that no one has  any idea  when fully fledged commercial operations will  begin. Thanks to  falling mineral prices and poor  xecution, the project has become a money pit for investor Citic; a shame for  state-owned construction company Metallurgical Corp of China  (MCC); and a political embarrassment to the country. Analysts considered it a key mover in Citic’s value. Yet, there is now little to monitor. A comparison of Citic’s annual reports for the past two years is telling.  In the 2013 report, chairman Chang Zhenming   devoted four-fifths of his report to detailing lessons learned; turn-around efforts and  the project’s bright future.  In the latest report, Chang gave it only one line.

“We have made disclosures above and beyond mandatory requirements … the Sino Iron impairment was another example. It is important that our stakeholders, including minority investors and the public, feel that the lines of communication are always open with the company,” he said.

The truth is the HK$19.5 billion provision made is the only disclosure relating to the project’s financials in the 312-page report. Continue reading →