Mining tycoon backs bid to turn milk into gold

A gold-mining tycoon known as China's Warren Buffett is one of several wealthy investors taking a punt on Natural Dairy succeeding in its plans to export huge quantities of New Zealand milk to China and Hong Kong.

According to Hong Kong Stock Exchange (HKSE) records, Chen Fashu spent HK$100 million ($17 million) buying shares in Natural Dairy just before Christmas.

One of China's biggest billionaires, Chen was this year named by Forbes magazine as the "King of Cash-in".

Like Jack Chen, Chen Fashu hails from the province of Fujian. He started out in the grocery business, but has made most of his fortune in gold mining.

Over the past year his company, New Huadu Industrial Group, has sold around half its shares in Zijin Mining, netting more than $1 billion.

Chen has reinvested much of the money in Shanghai's fledgling sharemarket, becoming the second-largest shareholder in China's largest pharmaceutical company, and the third-largest shareholder of the Tsingtao Brewery.

Zijin was originally owned by the Chinese government. It was floated on the Shanghai Stock Exchange in 2008, and in Hong Kong the following year.

The company has become China's top gold producer and owns mines in seven other countries, including South Africa, Peru and Myanmar. Last month it abandoned an A$470 million takeover bid for Australia's Indophil Resources because of a long delay in getting Chinese local government approval for the deal.

In October Chen announced plans to set up a philanthropic fund similar to the Gates Foundation, with around $2 billion worth of equities. It will be China's biggest private charity.

The foundation hopes to build around 2000 primary and intermediate schools in underdeveloped areas, supply scholarships for 100,000 college students from poor families, and provide employment training for another 200,000 students.

However the move was greeted with some scepticism in China, given that donations to charity can enjoy tax deductions or exemptions. Capital gains tax can be a grey area in Chinese law, and the Beijing-based Securities Daily reported that authorities were investigating Chen for tax fraud. Chen has denied the reports.

While Zijin has been a star of the Shanghai Stock Exchange, its shiny reputation took a hit this month, after a leak at one of its Chinese copper mines killed fish and fouled the drinking water for 60,000 people. It has admitted breaking rules and state media have questioned whether local officials ignored misconduct.

A Chinese analyst was quoted by Associated Press as saying the company was paying the price for cost-cutting. "Zijin Mining is like a selfish, gold-hungry crocodile. It takes no responsibility for the local people's life and health," Minda Liu told AP.

Two other Zijin shareholders, Ke Xiping and Liu Haiying, are also major shareholders in Natural Dairy. Like Chen, Ke is a billionaire who has recently sold many of his mining shares.

Records show that Ke, Liu, and Ke's company Xiamen Hengxing Group, invested HK$300 million on the same day as Chen.

Meanwhile, questions have also been raised about the conduct of another Natural Dairy shareholder.

On January 7 the company announced that its chairman, Kathy Chan, was resigning as an executive director to become a non-executive director "due to the need to concentrate on personal matters".

Four months earlier, an article in a Hong Kong newspaper alleged Chan's company, Anton Capital, which at that stage was a major shareholder in what was then known as China Jin Hui Mining, was being sued by another company over what it claimed were unauthorised share transactions worth HK$4.5 million. A Google translation of the original story refers to "forged signatures" and "trading without the consent [sic]". The plaintiff, it said, "has never had monies received".

China Jin Hui Mining confirmed the report was accurate, but said Chan had told them "such allegations are groundless and factually untrue", and she intended to "vigorously defend" them.

Chan is no longer on the board of Natural Dairy. But HKSE records appear to show Anton Capital continues to be a shareholder. She has also resigned as a director of Natural Dairy's subsidiaries, including its New Zealand subsidiary

Chan is believed to be a resident of Hong Kong, even though the residential address she gave on forms provided to the NZ Companies Office was Natural Dairy's registered office in the Quay Park development on the outskirts of Auckland's CBD.

Calls to Chan in Hong Kong were not returned, despite several promises from staff that she would call back.