China Rare Earth Resources And Technology (00769) recently received a complaint letter and established an independent investigation committee.

China Rare Earth Resources And Technology (00769) announced that the board recently received a complaint letter from an employee claiming to be from a subsidiary company in mainland China. The letter alleges that the subsidiary company may have misappropriated assets, leading to accumulated debt and frequent visits from banks and suppliers. To verify these allegations, the company has appointed Chinese legal advisors to conduct due diligence on two Chinese subsidiary companies, Yixing Xinweili Cheng Refractory Materials Co., Ltd. and Yixing Xinweili Cheng Rare Earth Co., Ltd. The investigation revealed that (i) the subsidiary companies are involved in multiple lawsuits and enforcement cases; (ii) the amount of outstanding and unfulfilled debts exceeds the paid-up capital of the subsidiary companies; and (iii) the subsidiary companies have been included in China's list of judgment debtors and high-consumption restriction list. Furthermore, the board has recently learned that the legal representatives, Mr. Jiang Quanlong and Mr. Jiang Dawei, have raised objections, including questioning the validity of the company's acquisition of 1,600 kilograms of tungsten bars, completed and announced on June 16, 2025. As most board members believe that: (i) the acquisition and its completion were formally authorized by the board on May 28, 2025 (all five directors present at the meeting, including Mr. Jiang Quanlong and Mr. Jiang Dawei, unanimously agreed and approved the acquisition); (ii) Mr. Jiang Quanlong and Mr. Jiang Dawei also participated in the preparation work; and (iii) the completion was in accordance with the terms of the purchase agreement, further investigation of the complaint content should be conducted. In light of the above-mentioned issues, the board decided on July 4, 2025 to establish an independent investigation committee to (i) address the complaint letter and verify the allegations therein; (ii) conduct an independent investigation of the Group (including but not limited to the subsidiary companies and all related persons); (iii) review if there are any asset misappropriation behaviors within the Group; (iv) review the Group's internal controls and identify any compliance issues; (v) assess the impact on the Group's business operations, formulate action plans, and provide recommendations to the board; (vi) conduct an independent investigation into the validity of the acquisition; and (vii) address any other matters authorized by the board. Additionally, trading will continue to be suspended.