Thread by @BaldingsWorld

So since the NYT has done a story on China Moly, a Congolese mine, and Hunter Biden I've been getting pinged a bunch and I think there is a key aspect that needs to be fleshed out. Hunter's firm really played no role here BUT (drum roll) that actually makes it worse 1/n

China Molybendum is the key Chinese player here is a major Chinese mining firm. They mine a variety of metals which are frequently found together like copper, tungsten, and cobalt. They are listed in HK and one of the largest globally in their category of preferred metals 2/n

Beijing had given China Moly and other Chinese firms marching orders about preferred sectors and investments. For China Moly that meant EV inputs like cobalt. Freeport McMoran a US company mining similar metal portfolio owned the Congolese mine producing copper and cobalt 3/n

At the time, metals prices has been depressed for some time so Freeport was looking to exit its position in the Congo. China Moly stepped up and made an offer where like most Chinese firms abroad they significantly over paid but they had state support so no biggie 4/n

Now mind you so far it is just Freeport, a major globally diversified miner and China Moly a very large but China heavy miner. China Moly has an enormous balance sheet and all the financial resources it needs at its disposal. No question the deal will get finalized 5/n

This is where things take a sharp left turn so to speak. 6/n

The Chinese investment firm in which Hunter was/is a 10% owner signs a deal to co-invest with China Moly in the Congolese mine with China Moly as the managing partner. In other words, BHR (the Hunter owned firm) is providing nothing but financial capital to the deal 7/n

Having a co-investor to provide financial capital is not unheard of so while a little strange why a small fund with no industrial expertise would co -invest with a massive SOE with enormous financial resources it is not crazy. How the deal was structured WAS crazy 8/n

Mind you BHR was backed by Tianjin SOE and the biggest SOE banks/investment firms in China but China Moly agreed to lend to BHR and or guarantee any losses suffered by BHR investors in the deal. Just so we are clear let me restate that part so everyone understands: 9/n

China Moly signed a deal with BHR to invest in the Congolese mine and: a) lend BHR the money to invest with BHR if they couldn't raise it on their own b) provide legal guarantees (important in China) to BHR investors. In other words, BHR was a completely worthless player 10/n

But wait it gets better. The deal between China Moly and BHR was structured as a mutual put/call option with guaranteed rate of return. That means BHR invested with China Moly in what was effectively a 2 year deal. At the end of two years, BHR could "put/sell" its stake 11/n

to China Moly at a guaranteed price and China Moly could "call/buy" the BHR stake at a guaranteed price. Why does this matter? This means it was basically a sham financial transaction that served no purpose other than to raise the cost of the overall mine purchase 12/n

to China Moly by increasing the cost of capital. Think of it this way: China Moly was using the same amount of capital to purchase the mine (direct purchase or lending it to BHR to invest back with China Moly), they incurred higher levels of risk by guaranteeing 13/n

outside investors losses, and raised the cost of capital to purchase the mine by raising the 2 year cost of capital. In short, this was a sham transaction designed to generate deal flow, fees, and profits for BHR. So then ask yourself, if BHR served no useful financial 14/n

Purpose to the deal of a Chinese SOE purchasing a Congolese mine, what was the purpose of a Hunter Biden backed firm being involved in the deal? I think we all know the answer to that. Done.