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Conclusive Proof that L&L International (LLEN) Does Not Own the Ping Yi Mine


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In a red flag alert issued to our premium members Friday, January 13th, 2012, we presented a Chinese SAIC filing and multiple website links showing that the Ping Yi Mine that allegedly represents 37% of LLEN’s production capacity is owned not by LLEN, but by an investment group of four Chinese nationals led by Mr. Hu Shiwei, and that this group is currently offering the mine for sale in China.

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Conclusive Proof that L&L International (LLEN) Does Not Own the Ping Yi Mine

  1. 1. Conclusive Proof that L&L International (LLEN)Does Not Own the Ping Yi MineIn a red flag alert issued to our premium members Friday, January 13th, 2012, we presenteda Chinese SAIC filing and multiple website links showing that the Ping Yi Mine that allegedlyrepresents 37% of LLEN’s production capacity is owned not by LLEN, but by an investmentgroup of four Chinese nationals led by Mr. Hu Shiwei, and that this group is currentlyoffering the mine for sale in China.(To visit the websites, click here)There appears to be some confusion on the part of certain LLEN investors as to whether theSAIC filing that we presented is up to date. There also seems to be some confusion as towhether the “Ping Yi Mine” referenced in the SAIC filing and on the “For Sale” websites isthe same “Ping Yi Mine” referenced in LLEN’s SEC filings. In what follows, we correct bothof these confusions.
  2. 2. Confusion 1: Date of the SAIC FilingOn January 13, 2012, we obtained the most current SAIC filing for the Ping Yi Mine from theGuizhou SAIC Office. The date of the SAIC file is on the right bottom of the SAIC file asfollows:Certain LLEN investors have noted the date “2008-08-20”, or August 20th, 2008, written atthe middle of the first page, left side……and concluded that this is the “as of” date of the SAIC filing, a date prior to LLEN’sNovember 2009 acquisition of the mine, which would mean that the document isoutdated. This conclusion is completely wrong, and reflects a total misunderstanding of theinformation contained in the filing.The reader will notice that there are two dates given in the SAIC filing. The first date,located halfway down the first page on the left side, “2000-08-02”, is the date that thePing Yi Mine was established.The second date, “2008-08-20” highlighted above, is the date that the businesslicense reflecting the last change in corporation information was issued orexamined. On that date, the Ping Yi Mine changed its official information from YidongVillage, Pingguan Town, Pan County to Yiche Village, Pingguan Town, Pan County andobtained its most recent business license. The SAIC filing is telling us that since that date,no material aspect of the business structure has changed.The number of this corporate change is shown on the second line of the following image. Aswe see, it is the second corporate change that has taken place since inception.
  3. 3. The fact that we see “2008-08-20” is noteworthy because if LLEN acquired the mine onNovember 1st of 2009, as they told us in the Ping Yi Acquisition Agreement filed March of2010, then the date should be “2009-11-01.” It is not.The owners of the mine posted a chopped image of the original business license on the “ForSale” website (the first image below). The reader will notice that this license shows thesame date, August 20th 2008, as on the SAIC filing. That is the date that the most recentversion of the business license, shown below and on the website, was issued.
  4. 4. In passing, we would point out that only the owners of the mine should have this originaldocument which can only be issued to the legitimate owners of the mine by theSAIC. The fact that it is posted on the website confirms the credibility of the offer. Equallyinteresting is that this business license names the executive partner, Hu Shiwei, which isas will soon discuss, a 30% partner in the Ping Yi Mine listed on our SAIC document.Another conclusive match that we would highlight, in passing, pertains to the businesslicense number on each document. If you squint, you will notice that these are the exactsame numbers. Again, this is not a coincidence.SAIC Filing pulled by Geoinvesting Original Business License Posted on Chinese “For Sale” WebsiteTo ensure that the our documentation is accurate and up to date, we called thesales agent listed on the website, Mr. Wu, and confirmed that the current majorityowner shown on our SAIC filing, Mr. Bao Guo Zhong, is in fact the majority owner, and thata minority owner shown as the legal representative on the filing, Mr. Hu Shiwei, is in fact aminority owner and the legal representative. We asked this individual whether LLENhas ever owned the Ping Yi mine. He answered no several times. He indicated thatthere was a negotiation of a potential acquisition with LLEN, but that the deal never closed.He stated that currently, the Ping Yi Mine is still owned by a group of individuals unrelatedto LLEN.
  5. 5. Confusion 2: Identity of the “Ping Yi Mine”Certain LLEN investors have cited different descriptions of the mines production capacityand reserve size, questioning whether we’ve identified the correct mine.Conducting a cursory comparison of LLEN’s SEC filings, our SAIC filing, and the websitesolicitations leaves no doubt that the “Ping Yi Mine” that the company claims to own is thesame “Ping Yi Mine” whose SAIC filing we pulled, and the same “Ping Yi Mine” that theinvestment group is currently trying to sell.LLEN states the name of the mine as Pan County Ping Yi Coal Mine (盘县平关镇平迤煤矿)(p.11, 10-K) and the location as Yiche Village, Ping Guan Town, Liu Panshui City, PanCounty, Guizhou Province (贵州省六盘水市盘县平关镇迤车村) (Ping Yi Acquisition Agreement aswell as the LLEN website shown below).This is the same name and location given in the SAIC filing that we provided, as well as thebusiness license posted on the “For Sale” website. SAIC Filing Business License
  6. 6. We cannot find any Chinese archives and registries that show any other mine inYiche village with even a remotely similar name to Ping Yi. We therefore conclude that thatLLEN and the Chinese investment group are referring to exactly the same “Ping Yi Mine.”For more conclusive proof, consider that LLEN discloses in its SEC filings an area for thePing Yi Mine that is the exact same value as the area stated on the mining permit given onone of the “For Sale” websites, as well as on all of the other web solicitations. (Note that themining permit is different from the business license and is the third image down).LLEN S-1 filing, p. 42 Mining Permit on “For Sale” WebsiteLLEN Website References at Additional SolicitationsClearly, we are talking about the same mine. Investors that wish to argue the pointshould ask themselves: what is the probability that there would be two mines with thesame name, located in the same village, in the same town, in the same province, in the
  7. 7. same country, with exactly the same area, to five significant figures, including the locationof the decimal place, 2.2694KM2? We believe the Real-world answer: zero.For yet more proof, consider that LLEN’s website states that Bao Guo Zhang was theoperator of the mine prior to LLEN’s acquisition.That name, Bao Guo Zhang (保国 张), when put into Chinese form (last name first), givesZhang Baoguo, the name of the majority 40% owner of Ping Yi listed on the SAIC filing.Consider also that LLEN claims that the scale of production of the mine was “150,000 tonper year based on current mine operating conditions,” which is the same number shownon the mining permit in the “For Sale” posting.LLEN Website SAIC Filing for Ping Yi MineLLEN 2011 10-K Page 11 Mining Permit on “For Sale” WebsiteNote that LLEN claims in the Ping Yi Acquisition Agreement that Bao Guo Zhang is the legalrepresentative of the mine. But the SAIC filing shows that he is only the majority owner,having paid in 20MM RMB out of the 50MM RMB registered capital (40% owner). The truelegal representative is actually listed as Hu Shiwei (30% owner). We suspect thatLLEN, when they put this acquisition story for investors, made the mistake of assuming thatthe majority owner of the mine would necessarily be the legal representative. Not the case.LLEN states that the mine has 150,000 tons of capacity and 13.506 million tons of reserves.The 150,000 ton number is seen on the mine permit above, so there is no discrepancythere.
  8. 8. The reserve estimates posted on the “For Sale” postings vary for proven, probable andpossible reserves.But nowhere do you find LLEN’s stated number of 13.506 million tons. LLEN claims to havegotten that number from the Guizhou Land Survey & Plan Institute report dated January2008. However, but since the results of reserve analyses tend to show significantvariability, we think that it is perfectly conceivable that the reserve number could haveincreased in subsequent analyses. Furthermore, the base date for the proven, probable andpossible reserves is at the end of Oct. 2010, which is almost three years later than the basedate mentioned by LLEN in its SEC files. Also, the sellers are trying to sell something, so itwould not surprise us if they are being generous.To eliminate any possible question that may exist about the accuracy of our on-the-ground investigative work, we will now provide conclusive proof that the Ping Yi Mine thatLLEN has claimed to fully own for over two years is currently up for sale in China by its trueowners. The following document from China Natural Resource News, dated May 5, 2010,seven months after LLEN claims to have purchased Ping Yi Mine, provides information onmines by permit number. This information shall be provided by the Natural ResourceBureau of Guizhou Province, a governmental agency.
  9. 9. It lists the permit number 5200000830765. Next to that number is Pan County PingguanPing Yi Mine, with the name of the 30% owner and legal representative, Hu Shiwei (胡士卫).For a closeup, see the following image:The reader will recognize this information from the mine permit on the “For Sale” website:
  10. 10. And also from the SAIC filing that we presented:Nowhere in the May 5, 2010 China Natural Resource News document do we see amention of L&L energy, KMC, Baoxing Economic and Trade Company, Dickson Lee, or anyrecognizable affiliate or hired spokesperson of LLEN listed in conjunction with the Ping YiMine, as should be the case if LLEN acquired the mine in November of 2009.In conclusion, we hope that what we have written here helps to resolve any confusion thatLLEN investors may have had regarding the timeliness and accuracy of our documentation,or the identity of the now famous “Ping Yi Mine.” Given our experiences in the China RTOspace, we fully expect LLEN management to conjure up convoluted explanations to vindicatethe company. At this point, we think investors have come to know better than to trust suchexplanations, especially in the face of strong on-the-ground evidence. In this case, webelieve that the evidence is overwhelming: the Ping Yi Mine is currently up for sale in China,and LLEN has never been its owner.Before closing, we wish to reiterate that we made ourselves fully available to LLEN’s CEODickson Lee to discuss these findings by phone, but he was unable to commit to a call. Wethink we know the reason why.Disclosure: Short LLEN
  11. 11. Exhibit 1 – Translated SAIC Filing for Ping Yi Mine, p. 1
  12. 12. Exhibit 2 – Translated SAIC Filing for Ping Yi Mine, p. 2
  13. 13. Exhibit 3 – Translated Business License for Ping Yi Mine
  14. 14. Exhibit 4 – Translated Mining Permit for Ping Yi Mine
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