TORONTO (miningweekly.com) – TSX-listed Grande Cache Coal said on Thursday it had “no reason to believe” that a report alleging fraud at the Hong Kong-listed firm which agreed to buy it had merit.

Calgary-based Grande Cache added it was still working with acquirers Winsway Coking Coal and Japan's Marubeni Corporation on the C$1-billion in cash takeover set for completion in February.

The companies agreed to the friendly buyout in October, with the offer representing a 70% premium over the target firm’s closing share price on the TSX on October 28, the last trading day before the deal was announced.

Reuters reported on Thursday Winsway had dismissed the allegations in the Jonestown Research report, which alleged: "Winsway has material misstatements in its reported numbers that amount to securities fraud."

The company’s main business is importing Mongolian coal into China.

Grande Cache said in April it expects to sell between 2.2-million and 2.4-million tons of coal this year from its Alberta operations.

According to a presentation posted to the company's website, the firm aims to more than double output at its mines in western Alberta from 1.7-million tons in fiscal 2010 to a rate of 3.5-million tons yearly by the end of the 2013 financial year.

The company came out in support of Winsway in the midst of the allegations.

“Grande Cache Coal has no reason to believe that there is any merit to the allegations, made in a report recently issued by Jonestown Research, in respect of Winsway and has been assured by Winsway that the report is entirely without merit,” the firm said in a statement.

Chinese companies listed in North America have come under scrutiny over the past year, as short sellers have attacked some of them with reports alleging fraud, with the hope of profiting off the shares declining.

Canada-based Sino-Forest was one of the most prominent examples, shedding about 80% of its value before its stock was suspended from trading in September. The allegations short-seller Muddy Waters made against the company have not yet been proved.

Grande Cache fell as much as 11% on Thursday, before recovering to close 5.8% lower at C$9.35 a share.

In December the Alberta Securities Commission accused Grande Cache CEO Robert Stan, former CFO Anita Roncin, marketing and transportation VP Eugene Nagai, former GM Timothy Riordon, controller Kevin Wade and Stan’s wife Kathryn Stan of breaking Alberta’s securities laws by engaging in illegal insider trading in 2008.

The first hearing was scheduled to take place on December 5, with further hearings this year.
 

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