L & L Energy (NASDAQ:LLEN)

SEATTLE, May 4, 2012 /PRNewswire/ -- L & L Energy, Inc. (NASDAQ: LLEN) ("L&L"), a U.S.-based company with a five-year track record of profitable underground coal mining and distribution operations in China, has begun due diligence of targeted large-scale surface mines in Inner Mongolia, China for potential acquisition.

The eventual acquisition of surface mines and entry into long-term coal supply agreements in Inner Mongolia is expected to significantly expand and diversify L&L's existing underground coal operations from south China into a national presence. Mr. Jingcai Yang, a recently appointed director of L&L, is assisting the Company in sourcing suitable surface mines. Mr. Yang, the former Chief Engineer at Shenhua Group Corporation Ltd. and former Chairman & CEO of Shengdong Coal Corporation, is an expert in surface mining in China.

Dickson Lee, Chairman & CEO of L&L, stated, "We are now expanding our platform to target one million ton and larger surface mining operations in Inner Mongolia which will expand and diversify our mining portfolio. Our on-the-ground technical capabilities are in place, and we have built a strong team that includes Mr. Yang and Dr. Syd Peng, who bring industry connections in Inner Mongolia and U.S. mining technology, respectively, to our operations. "

To further strengthen shareholder value, L&L has reached an agreement to sell the underperforming Ping Yi mine, which is one of five L&L underground mines. Under the terms of the agreement, L&L sells Ping Yi back to its original owners, while securing an off-take agreement at a discounted price to take advantage of the mine's future production. The sale terms include, among others, a US $31 million sale price, payable in part as a prepayment on future coal purchased by L&L, and  future use of the mine's coal washing facility. L&L purchased the mine in 2009 for approximately US $4 million.

Lee also commented, "We are committed to enjoying the long term benefits of consolidation in the Guizhou Province. Selling the Ping Yi mine is a healthy move and will allow us to focus our energy on purchasing additional mines, including those in Inner Mongolia. As L&L has developed more resources over the years, a diversification into larger, surface mining in Inner Mongolia, as well as upgrading our existing mining portfolio will ensure diversified growth with a positive impact on company's bottom line."

GeoInvesting Stands by its Claims that L&L Energy does not Own the Ping Yi Mine: More Color Provided

We understand that some investors have attempted to discredit our research, observing differences between the mining permit number/address on the official Ping Ying Mine chopped business license and Mining Permit compared to web sites posting disclosing the sale of the Ping Yi Mine. Conclusions based on this observation are baseless.

The Mining Permit number issue in no way unsubstantiates our findings. Our research is based on a mountain of findings.

1. Our research was performed using the official Business License and Mining Permit posted by the owner. Website postings are secondary to our conclusions, except for the sale information itself.
2. We have obtained an official chopped SAIC filing of the Ping Yi Mine that clearly shows that LLEN does not own this mine.
3. Most importantly, the press release issued by LLEN on Jan 17, 2012 states that, "Regarding the sale notices mentioned by GeoInvesting in its article, the Company never authorized or prepared such sale notices. Accordingly, the Company does not know the source of such notices." In other words, it does not dispute that the Ping Yi Mine is for sale.
4. The only issue regarding the difference in addresses is that the owner refers to the older address of Ping Yi Mine (we will address below).
5. We note that outside of a possible typo or human error regarding the Mining Permit number, there are no discrepancies in our argument about the ownership of Ping Yi Mine.

We stand by our conclusion that LLEN does not and never did own the Ping Yi Mine. Investors who do not embrace this conclusion are grasping for strings and playing a dangerous game.

For more detail on the mining permit and issue about the address, please read the following explanation:

In this detailed sales post, the sale representative posted the map of Ping Yi Mine, the business license of Ping Yi Mine and the Mining Permit of the Ping Yi Mine (http://www.worldmr.net/Exhibition/ForeCastList/Info/2011-10-11/112458.shtml). The Mining Permit is as follows:

The first paragraph of the introduction of the Ping Yi Mine in the same sales post states:

Translated into English:

"Pingguan Ping yi Mine locates at Sandaogou, Pinguan town, Pan County. It is around 10 km away from Pingguan and there is a low level paved road links Pingguan to the Mine. It is around 25 km away from Hongguo twon and the transportation is very convenient. Based on the mine map in the mining permit issued by Natural Resource Bureau of Guizhou province (No. 5200000711358), eight coordinates defines the scale of the mine with the 2.2694 m2 and the exploration depth is 2250-2210 m."

Apparently, there are two discrepancies between the web sales posting of the Ping Yi Mine and the posted business license and mining permit of Ping Yi Mine.

"Sandaogou Pingguan Town" vs. "Yiche village, Pingguan Town" in the Business License

"No. 5200000711358" vs.

In the SAIC file, there is a corporate change page as follows:

This corporate change clearly explained that the Ping Yi Mine moved from Sandaogou to the current address, Yiche village. It is reasonable to believe that when the owners wrote the sale posting, they made a mistake and used the old address on the sale post.

When the owners wrote the sale posting, they used the Mining Permit number "No. 5200000711358", rather than the , which Ping Yi Mine obtained on Aug. 2008 and is disclosed in the official mining permit in the same sale posting. There are several reasons for this mistake:

1. A typo
2. Before Aug. 2008, Ping Yi Mine had another Mining Permit, which may have carried the number "No. 5200000711358".

This does not debunk our finding that LLEN does not own Ping Yi Mine, which is clearly shown in the SAIC file.

Recordings and Transcripts Provide Conclusive Proof that L & L Int (LLEN) Never Purchased the Ping Yi Mine

Over the past few days, we have presented indisputable evidence that L&L Energy (LLEN: NASDAQ) has materially misled its investors and the SEC. For two years now, LLEN has unambiguously claimed to be a 100% owner of the Ping Yi mine, which allegedly provides almost 40% of its claimed capacity. As we explained in

our full report

After the report, some investors have stated that the SAIC file we pulled on Jan 13, 2012 showing that LLEN does not own the Ping Yi Mine is not the most up to date SAIC filing. They have also disputed what the sales agent of the mine, Mr. Wu, said.

We will now present the most compelling piece of evidence that we have, the recordings and transcripts. The conversations that you are about to read will make it crystal clear what actually happened in this story and that LLEN does not own the Ping Yi Mine.

The first conversation is a new conversation with Mr. Zhao Weijun (赵维君), the vice director of Company Registry of Guizhou SAIC Office on Jan 19. 2012 (Beijing Time). Mr. Zhao Weijun clearly explained what the examination date (核准日期) means and confirmed that there shall be no corporate change after the examination date shown on the SAIC file.

• Jan 19, 2012 Conversation with Mr. Zhao Weijun, Vice Director of the Guizhou SAIC office, proving we have the most current SAIC filing - Full Recording and Transcript

On multiple occasions in December, 2011 and January 2012, we contacted the sales representative for the Ping Yi Mine, Mr. Wu. Mr. Wu confirmed that the mine was up for sale by an investment group (four individuals) with no discernible ties to LLEN. When we asked him whether LLEN owned the mine, he answered an insistent no, and doubted that LLEN was even financially strong enough to make such an acquisition. He also told us that LLEN had discussed an acquisition in 2009, but no deal had happened.

We recorded two conversations with Mr. Wu, sales representative of the Ping Yi Mine on Jan 11, 2012 and Jan 16, 2012: The first one is a conversation prior to our first alert on Jan 13, 2012 and the second one is after our alert.

1. Jan 11, 2012 Conversation with Mr. Wu, confirming LLEN does not own the Ping Yi Mine Full Recording and Transcript
2. Jan 16, 2012 Conversation with Mr. Wu, confirming again that LLEN does not own the Ping Yi Mine Full Recording and Transcript
   
   Conversation with Mr. Zhao Weijun regarding the different dates on the SAIC file.

Background:

There is a confusion regarding the date on the SAIC file below.

 There is a date of Aug. 20, 2008 as the examination date (核准日期) on the file we pulled on Jan 13, 2012. Some people regard that the file we pulled only explain the legal status of Ping Yi Mine up to Aug. 20, 2008. We already explained this issue as follows:

To clarify this issue, we called Mr. Zhao Weijun (赵维君), the vice director of Company Registry of Guizhou SAIC Office, which is in charge of the company registration of Guizhou province, picked up our call and confirmed our explanation. The key points of the conversation between our investigator and Mr. Zhao Weijun (赵维君) is as follows:

Geo: Here it is. This company is established on Aug. 2, 2000. There is an examination date (核准日期) which is Aug. 20, 2008. At the bottom of the file, there is a date, which is Jan 13, 2012. I want to know, what does the examination date (核准日期) mean? (是这样的，这个企业的成立日期是2000年8月2日。上面有一个核准日期是2008年8月20日。然后这个文件最底下是2012年1月13日。我想问你一下，那个核准日期是什么意思？)

Mr. Zhao: Examination date (核准日期), for example, if the company comes to our office to do the corporate change, such as business scope, and we exanimate the corporate change, that day shall be the examination date. There is only one establishment date, which shall not change at all. (核准日期，比方说，它今年来变更，我们核准以后，比方说它变更经营范围，我们核准以后，这就是核准日期。如果说成立日期，它只有一个，它不会变的。)

Mr. Zhao: To the examination date, if the company changes one item, such as company name, registered capital, there shall be an examination date for each change. (核准日期，如果说它有变更事项，比如说变更名称，变更注册资本，每变更一次，就有核准日期。)

Geo: Now, the examination date (核准日期) of the company is Aug. 20, 2008. We can say there is no any corporate change from Aug. 20, 2008 to now, right? (那现在就是说，这个公司的核准日期是2008年8月20日，那就是说2008年8月20日到今天，它没有做任何变更，对吧？)

Geo: thank you very much. How can I call you? (谢谢。那您怎么称呼？)

Mr. Zhao: My last name is Zhao. (免贵姓赵)

Geo: Are you vice director, Mr. Zhao? (赵副局长，对吧？)

Mr. Zhao: Yes. (是的。)

Geo: thank you so much. Vice Director Zhao. (谢谢你，赵副局长。)

Two conversations with Mr. Wu, the sales agent of Ping Yi Mine

After the GeoTeam found the sales post of Ping Yi Mine at the beginning of Dec. 2011, we contacted Mr. Wu on Dec 12, 2011 to talk about the possible acquisition of the Ping Yi Mine. Our GEO investigator pretended to be from an investment company from Beijing China. In our first talk, Mr. Wu confirmed that Ping Yi Mine was still for sale.

After that, we periodically contacted Mr. Wu regarding the acquisition of Ping Yi Mine and confirmed with him several times that the Ping Yi Mine was not acquired by Fuyuan County Baoxing Economic & Trade Co. Step by Step, GEO told Mr. Wu that it was LLEN that told us that Ping Yi Mine was acquired by Fuyuan County Baoxing Economic & Trade Co. for the consideration of around USD 4 million at the end of 2009. Mr. Wu denied this claim by LLEN. To build trust, the Geoteam told Mr. Wu that a group of people led by Mr. Zheng (郑总) from Beijing may visit Ping Yi Mine before the Chinese New Year.

On Jan 11, 2012 (Wed.) (Beijing Time), GEO called Mr. Wu again and made an excuse that the group of people cannot visit Ping Yi Mine as there are not available air tickets before the Chinese New Year. We recorded this call and confirmed relevant issues surrounding the ownership of Ping Yi Mine again with Mr. Wu. The key part of the conversation is as follows:

[...]

Geo: then. We will try to visit you before the Lantern Festival (Feb. 5, 2012). Is it ok?

Mr. Wu: OK. OK.

GEO: Additionally, we contacted Longteng Mining (龙腾矿业，LLEN's Chinese name) again. They told us that Baoxing Economic & Trade CO., Ltd. paid you tens of millions in RMB, or USD 4 million to purchase the mine at the end of 2009 or beginning of 2010. Did you have this deal or not?

Mr. Wu: No. No.

GEO: No? No for this deal?

Mr. Wu: the deal failed at last （最后没成啊）.

GEO: this deal failed at last, right?

Mr. Wu: Yes.

GEO: Oh. They said that, at that time, Baoxing did pay around USD 4 million, or RMB more than 20 million amount. It is to say that that deal failed at last?

Mr. Wu: Yes.

GEO: Oh. They said that, at that time, Baoxing did pay around USD 4 milion, or RMB more than 20 million. It is to say that that deal failed at last?

Mr. Wu: Yes.

GEO: OK. We are not clear about their stance. Whatever, we just disregard this [LLEN's stance].

Mr. Wu: Yes.

[...]

After we released our initial alert on Jan 13, 2012, we knew that some investors may call Mr. Wu during the long holiday weekend and that LLEN may also contact Mr. Wu regarding this issue. On Jan 16, 2012 (Monday) GEO's investigator called Mr. Wu to once again confirm the relevant issues surrounding the ownership of Ping Yi Mine. Mr. Wu confirmed again that Ping Yi Mine is still owned by four individuals and LLEN did not acquire the mine. He also said that LLEN did contact them to acquire Ping Yi Mine but that deal never went through. Mr. Wu also told us that several guys called him during the weekend with "private numbers" or "oversea numbers". Furthermore, Mr. Wu did not mention whether LLEN contacted him or not after we release this press release. The key part of this conversation is as follows:

[...]

Mr. Wu: Now, our biggest boss is Mr. Zhang, Zhang Baoguo. The mine is owned by individuals. (我们最大的老板姓张，张保国。我们现在是私有的。)

GEO: What? （现在是什么？）

Mr. Wu: owned by individuals. At the beginning, LLEN (龙腾矿业) did discuss this deal with us. At last we did not reach a final deal. （私有的。最初，龙腾矿业谈是谈过，但是最终没成交易。）

GEO: Oh.

Mr. Wu: LLEN did not pay money to us at all. （他们也没有付钱。）

GEO: signed a contract but not pay any money? So the claimed agreement is a void contract?

Mr. Wu: Yes.

GEO: Oh. The agreement on the hand of my boss is a void contract?

Mr. Wu: Yes. Even mentioned something called like Baoxing Group. （还说那个什么宝兴集团）

GEO: Yes. Baoxing Economic & Trade Company. Therefore, my boss complained about Mr. Zhang a lot and said he did not do a good job. As this is a big issue, we also pulled the SAIC file of Ping Yi Mine. Based on the SAIC file, we realized that Ping Yi Mine is owned by four individuals as a partnership. (the voice is disturbed) Hello?

Mr. Wu: I am listening.

GEO: This is owned by four individuals as a partnership, not owned by LLEN, right?

Mr. Wu: Yes.

Mr. Wu: Yes. Now, it is owned by four individuals and it is not sold to any other. （是的。现在是四个自然人所有的，没有卖给任何人。）

GEO: Yes. I read the SAIC file and it says that it is owned by four individuals.（是的，我知道，我看了工商档案，是说四个自然人。）

Mr. Wu: No such a thing (acquisition by LLEN) at all. （没有这个事情）

GEO: no such a thing (acquisition by LLEN) at all, right? （根本没有这个事情，对不对？）

Mr. Wu: There was this thing. But, there is no reached deal. （有是有过，但是最后没有成交。）

GEO: We know. If the deal is not done, we know what we can do. Then, I can report to Mr. Zheng, my boss, to arrange the following things and possible trip. After our arrangement, I will give you a call. Is that ok?

Mr. Wu: You already know the information of the mine, right?

GEO: Yes. This is the only thing in doubt. Even though I am already on my vacation, my boss still asked me to call you to confirm this.

Mr. Wu: There are several guys that called me in these days to enquire about this issue. There was no phone number reflected on my cell phone. Sometime, it reflects "private phone number" or "oversea phone number". （这两天有好几个人打电话给我，来问这个事情。他那个号码没有来电显示，还有就是显示为私人号码或者海外号码。）

GEO: Oh. Really?

Mr. Wu: they all called me for this issue. I thought they were from your company. （他们打电话都是问这个事情，我还以为是你们公司的人。） [...]

See our full report

Disclosure: Short LLEN

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You agree that you shall not republish or redistribute in any medium any information on the GeoInvesting website without our express written authorization. You acknowledge that GeoInvesting is not registered as an exchange, broker-dealer or investment advisor under any federal or state securities laws, and that GeoInvesting has not provided you with any individualized investment advice or information. Nothing in the website should be construed to be an offer or sale of any security. You should consult your financial advisor before making any investment decision or engaging in any securities transaction as investing in any securities mentioned in the website may or may not be suitable to you or for your particular circumstances. GeoInvesting, its affiliates, and the third party information providers providing content to the website may hold short positions, long positions or options in securities mentioned in the website and related documents and otherwise may effect purchase or sale transactions in such securities.

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We are offering conclusive proof that L & L International LLEN does not own the Ping Yi Mine:

• We offer evidence that undoubtedly proves that LLEN did not purchase the Ping Yi Mine as it has been repeatedly asserted in SEC filings.
• We offer evidence that undoubtedly proves that the Ping Yi Mine is for sale by an investment group with no discernible ties to LLEN.
• We reference multiple data points across several official Chinese and SEC filings that precisely match information on the SAIC filing we have pulled. We argue this identical match is conclusive proof that we have not misidentified the Ping Yi Mine.
• One of our pieces of evidence includes an official government document published in a public news periodical that supports our conclusion that LLEN does not own the Ping Yi Mine.
• We spoke to the person representing the investment group selling the Ping Yi mine who repeatedly denies that LLEN ever purchased the mine.
• Directly check the current basic information regarding the Ping Yi Mine yourself with only a click. The investor can directly go to the Guizhou Province SAIC Office http://old.gzaic.org.cn/service/index_qyinfo.html to check the current status of the Ping Yi Mine. After typing the full name of Ping Yi Mine and security code, you can see that the current legal representative is Mr. Hu Shiwei, who is not affiliated with LLEN, and the current business license number is 5200002932260.

As previously stated in our original report, and even more so after further due diligence, we believe that LLEN shares are not investable and pose an extreme risk to long investors.　

We also take note of LLEN's two press releases this morning:

In the face of on the record, detailed accusations from researchers responsible for discovering a series of massive governance frauds at the like of YUII and PUDA, a press release promising a looming 25% revenue increase via expanded sales and marketing joint agreements should be seen as an attempt to distract investors from the grave matters at hand.

Similarly, as we continue to demonstrate, there is a large amount of conclusive documentary evidence from official sources that LLEN utterly ignores. Instead, its management appears unconcerned that someone is advertising one of their key assets for sale. In sum, we are being asked to trust their legal team and Auditor, Kabani and Co, a firm that has been involved in many of the most dubious reverse merger audits. We respectfully decline to give them our trust.

These evasions and tactics should be abundantly familiar to the burned investors of dozens of Chinese reverse mergers and bodes ill for the value of their capital.

Any long or short LLEN investor should read every page of the following report thoroughly.

See all the evidence! (and comment on slide share)

Disclosure: Short LLEN

Sincerely,

The GeoTeam

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January 13, 2012

In recent months, things have been pretty bad for Chinese coal company L&L Energy (LLEN). There have been public allegations of fraud, mine shutdowns and falling profits. The only bright spot has been the company�s valuation, which has stayed quite high relative to the rest of the China RTO sector (~$100 million market cap). As bad as things seem for LLEN, it could get much worse. That�s because the GeoTeam recently uncovered evidence that appears to indicate that LLEN does not own and never acquired the Ping Yi Mine. LLEN claims in its SEC filings that it acquired the Ping Yi Mine in January of 2010 and that the mine contributed close to 40% of the company�s total coal production for the financial year ended on April 30, 2011.

• The SAIC file of the Ping Yi Mine shows that the Ping Yi Mine is currently held by a private investment group, rather than the LLEN subsidiary, Fuyuan County Baoxing Economic & Trade Co., Ltd., the company identified as the acquirer of the mine in SEC disclosures.
  
• In a truly mind-blowing development, this investment group has put the Ping Yi mine up for sale during the second half of 2011. There are multiple readily navigable web links in China that address the sale of the mine:
   
  • China Mining Industry Consulting Network, (see also, English translated page)
  • Global Mineral Resources Network, (see also, English translated page)
  • My Coal Network, (see also, English translated page)
    

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L & L Energy, Inc. (“L&L” or the “Company”) is filing this Amendment to Form 10-K (this “Form 10-K/A”) to amend that Form 10-K filed on July 28, 2010 corresponding to the annual report for the Company’s fiscal year ended on April 30, 2010 (the “Original 10-K”).  This Form 10-K/A amends the Original 10-K’s Part II, Items 6 and 8 to:

(i)                  (a) reclassify $3,729,784 recorded as “Intangible assets, net” in the Original 10-K as “Property, plant, equipment, and mine development, net” in this Form 10-K/A, (b) reclassify 557,202 recorded as “Current Assets – Prepaid and other current assets” in the Original 10-K as “Equity – Deferred stock compensation,” and (c) make conforming changes to “Working Capital,” “Total assets” and Total Shareholders” Equity under Item 6 – Selected Financial Date – Balance Sheets Data,”; and

(ii)                file herewith two updated reports issued by Kabani & Co. Inc., the Company’s independent auditing firm (the “Independent Auditing Firm”) to disclose the firm’s adverse opinion on the Company’s internal control over financial reporting as of April 30, 2010 (originally the Independent Auditing Firm issued a “disclaimer” opinion on the Company’s internal control over financial reporting).

Please note that some of the aforementioned reclassifications, adjustments, and additional disclosures contained herein have resulted from comments issued by the Securities and Exchange Commission of the United States (the “SEC”) during the review process related to filings made by the Company.  .  For clarification, the filing of this Form 10-K/A shall not be deemed any indication that the original Form 10-K, when filed, included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement therein not misleading.