MAC: Mines and Communities

Further Dirty Mining Deals alleged in Burma

Published by MAC on 2011-07-04
Source: Democratic Voice of Burma (2011-07-02)

Rio Tinto implicated in arms transaction

Rio Tinto's stake in Ivanhoe Mines now stands at 46.5% following the UK-Australia mega-miner's payment of an additional half a million dollars to exercise an "ahead-of-time" share purchase warrant in the Canadian company.

The move prompts further speculation that Rio Tinto will soon try taking-over Ivanhoe, lock, stock and barrels. (It can increase its holding to 49% in January 2012).

Rio Tinto signed its original cooperation agreement with Ivanhoe in 2007 when Robert Friedland's outfit was reaping major profits from its sanctions-breaking Monywa copper mine in Burma.

It's highly unlikely that Rio Tinto itself intended moving into that beleaguered country. Rather, it wanted prime access to Ivanhoe's massive Oyu Tolgoi copper-gold deposits in Mongolia - potentially the richest of their kind anywhere on earth.

As we have pointed out on several occasions in the past five years Rio Tinto promised that, before acquiring more than an inital 9.95% stake in Ivanhoe, the latter would sell all its interests in Burma. See: London Calling on Rio Tinto's latest fall from grace

Ivanhoe would do this through the specially-established Canada-registered Monywa Trust.

However, both companies have since been unforthcoming (to say the least) as to whether  any sale has since taken place - and if so, to whom.

Arms and the man

As pointed out by Canadian Friends of Burma (CFOB) last year, evidence then available suggested the Monywa mine stake was about to be sold to a Chinese arms' company, Norinco.

This company is itself on the EU and US sanctions list against companies trading with the Burmese military junta. See: The road for Rio leads through some distinctly murky waters

Last week, the CFOB provided further evidence that this is indeed what happened.

At Rio Tinto's 2011 Annual General Meeting, CEO Tom Albanese refused answering any questions relating to the company's responsibility for managing the Trust.

He claimed that, since the Trust was administered under Canadian law, what it did was none of Rio Tinto's concern.

One wonders, however, if this deplorable and studied ignorance is shared by Vicky Bowman, recently appointed  Rio Tinto's "Global Practice Leader" (sic).

Between December 2002 and July 2006 - just before Rio Tinto brokered its highly dubious partnership  with Ivanhoe - Ms Bowman was none other than the UK government's Ambassador to Burma.

[Comment by Nostromo Research. Views expressed in this column do not necessarily represent those of any other party, including the editorial board of MAC. Reproduction is welcomed, provided full acknowledgment is given to source].

Canadian assets 'sold to China weapons firm'

By Francis Wade

Democratic Voice of Burma

23 June 2011

Assets belonging to Canadian mining giant Ivanhoe Mines may have been transferred to a Chinese weapons manufacturer following its takeover last year of a copper mine in northern Burma, campaigners say.

If validated, the move could be in violation of both US and Canadian sanctions on Burma, said Tin Maung Htoo, executive director of Canadian Friends of Burma (CFOB). The group has closely monitored the takeover of the Monywa copper mine last year by Norinco, one of China's biggest arms companies that is known to have supplied heavy weaponry to the Burmese army.

Monywa is Burma's biggest mine, located in the country's northern Sagaing division. Until February 2007, it had been run by the Myanmar Ivanhoe Copper Company Limited (MICCL), of which Ivanhoe Mines held a 50 percent stake that it claimed was transferred to a body known as The Monywa Trust, a blind trust, after the pull out.

Ivanhoe said in reply to a query from CFOB that it had "disposed" of its 50 percent stake, and that The Monywa Trust was still looking for buyers. It stated that it no longer has any involvement in the project.

What really became of these assets is questioned by CFOB, which is suspicious of the secrecy surrounding the trust, and which fears they may been transferred to Norinco via the blacklisted Union of Myanmar Economic Holdings (UMEH). The UMEH is controlled by the Burmese military and covers the mining rights for three of the Monywa deposits.

"If indeed the blacklisted entity UMEH obtained Ivanhoe's stake in Monywa and resold it to Norinco, this would violate both Canadian and US sanctions," said Tin Maung Htoo in a statement on Tuesday. "Ivanhoe must be punished financially for any illegality that may have happened."

Norinco and MICCL are also the target of international sanctions - both the EU and US have blacklisted MICCL, with the EU citing its "key financial backing" of the then ruling junta, while Norinco was placed under US sanctions in 2003 for selling missiles to Iran.

Controversy followed the announcement in June last year that Norinco would be taking over the Monywa project. Weeks before the contract was agreed, senior Burmese officials travelled to China to inspect shipments of howitzer cannons that were then transported to Burma via sea-routes.

It appeared to corroborate allegations by campaign groups such as CFOB that the copper deal was sweetened by arms sales to Burma. Financial details of the Monywa deal have been vague, but at its peak the mine had been producing some 39,000 tonnes of copper per year, and was among Burma's most profitable assets.


Transfer of Ivanhoe's Burmese assets to weapons firm must be probed

Canadian Friends of Burma (CFOB) Press Release

20 June 2011

Ottawa - Information recently disclosed by Burma's state-controlled media substantiates CFOB's previously stated concerns that Vancouver-based Ivanhoe Mine's Burmese assets were transferred to the Chinese weapons firm Norinco via a businessman connected to the Burmese regime.

The mouthpiece of Burma's military regime The New Light of Myanmar reported April 5 that Norinco reached a "Production Sharing Contract" with the partially state owned Union of Myanmar Economic Holdings Ltd (UMEH) that covers the mining rights for three deposits located at the Monywa copper mine. All three deposits Sabetaung, Sabetaung South and Kyisintaung were developed jointly as the S&K mine by Ivanhoe's joint venture with the Burmese regime Myanmar Ivanhoe Copper Company Limited (MICCL).

CFOB is deeply disturbed by reports of Norinco's involvement in the Monywa mine. We urge both Canadian and US authorities to immediately investigate the present status of Ivanhoe's Burmese assets and take punitive action against Ivanhoe if sanctions have been violated.

CFOB's Executive Director Tin Maung Htoo believes the Canadian public has a right to know what has occurred with Ivanhoe's Burmese investments. "If indeed the black listed entity UMEH obtained Ivanhoe's stake in Monywa and resold it to Norinco, this would violate both Canadian and US sanctions," says Tin Maung Htoo. "Ivanhoe must be punished financially for any illegality that may have happened" he adds.

Ivanhoe owned a 50% operating interest in the MICCL joint venture from its creation in 1996 until February 2007 when Ivanhoe transferred its stake in MICCL to an "independent third party trust" called the Monywa Trust.

In December 2007 Ivanhoe, citing a lack of knowledge about what was occurring at MICCL's Monywa copper mine, claimed that it was "prudent to record a $134.3 million write-down" in the value of their 50% holding in the Burmese joint venture thus reducing its value to zero.

Serious questions remain as to the validity of Ivanhoe's decision to write down the value of its investment in MICCL in particularly because Monywa still had large amounts of copper to mine. According to Ivanhoe's regulatory filings, beginning in 1998 when commercial operations began at the Monywa mine MICCL received a 20 year lease for the rights to mine the three deposits that made up the S&K mine.

In June 2009 Burma's state backed Myanmar Times reported that MICCL managing director Glenn Ford said that the Monywa copper project was up and running and "one of the lowest-cost production mines in the world".

How a mine that is officially valued at zero by Ivanhoe's accountants could still continue to produce highly valued copper remains a question that Ivanhoe refuses to explain. In Ivanhoe's Annual Information form filed with Canadian authorities and dated March 2008 Ivanhoe explained their decision to reduce the value of their Burmese assets with the following "it was determined that IVN's non-involvement in the Monywa Copper Project operations since it was transferred to the Monywa Trust, the lack of knowledge of the project's current activities and the fact that no sale had been achieved in almost a year since the asset was transferred to the Monywa Trust, indicated that the carrying value of the investment is impaired."

In CFOB's opinion Ivanhoe's justification for reducing the value of the Monywa assets are extremely dubious. While Ivanhoe claimed to be in the dark about MICCL's activities, the fact that the firm's Executive Vice-President, Exploration Douglas Kirwin remained a director at MICCL after Ivanhoe's transfer its stake to the trust should have given Ivanhoe a direct source of information about MICCL's operations. Oddly enough Ivanhoe ignored Kirwin's continued role with MICCL failing to mention it in any subsequent financial reports or corporate filings.

According to the MICCL website Kirwin is still a member of the MICCL board of directors, representing Bagan Copper Holdings, the entity formerly known as Ivanhoe Myanmar Holdings Limited, (the British Virgin Islands Holding firm that held Ivanhoe's stake in MICCL). Since Ivanhoe's transfer of the firm's Burmese assets in 2007 Kirwin continued to travel to Burma and according to the New Light of Myanmar in September 2009 and September 2010 gave presentations to the Myanmar Geosciences Society.

At both of Kirwin's presentations he was accompanied by his fellow MICCL board member Dr. Andrew Mitchell who worked as a senior geologist for Ivanhoe in Burma. Mitchell was described in a New Light of Myanmar published last September as still being a representative of Ivanhoe Myanmar Holding Ltd (IMHL).

It was Mitchell who ordered his driver in December 2003 to drive to Aung San Suu Kyi's house. Mitchell apparently thought that being an employee of a foreign company meant he could drive anywhere. When they approached Aung San Suu Kyi's house they were stopped. His driver was jailed by the Burmese regime for an lengthy sentence for the absurd charge of forcing Mitchell to drive to Suu Kyi's house while being on drugs. See previous CFOB press release http://www.cfob.org/news/KoAyelwinAndIvanhoe.html

Monywa area's Environmental Degradation caused by Ivanhoe's operations
Since large scale heap leaching first began at the Monywa site in 1998 local farmers in the area of the mine have been increasingly unable to grow crops on their land because of higher level of acidity in their soil. CFOB believes that toxic runoff from one of the world's largest heap leach operations has destroyed the farmer's land and is the cause of the lower PH level.

Australian researchers who studied the three leach pads used at Monywa found that they were some of the most acidic heap leach operations in the world. In the words of the Australian team "The heap solution chemistry is extremely acidic, with a solution pH of usually less than 1.5 and in some cases less than 1.0." The researchers speculated that high acidity was caused by the pyrite content of the ore. (see J.J Plumb et al 2007)

According to a second paper published by two of the same researchers unlike the Monywa mine "Most heap bioleaching operations treating low grade ore operate with a solution pH between 1.5 and 2.5". (see J.J Plumb et al 2008)

Ivanhoe has repeatedly claimed that environmental degradation in the Monywa mine area is a result of previous operations at the site which took place between 1983 and the early 1990's by the Burmese regime initially with the support of Bor Copper Institute of Yugoslavia. The Yugoslav-Burmese copper project was relatively small compared to the MICCL operations which are much larger and involve the use of acid generating heap leach system.

While previous operations at Monywa certainly caused damage to the environment its clear the higher acidity in nearby farm land did not become an issue until after Ivanhoe and MICCL became involved at the mine site.

Prior to launching his partnership with Burma's killer generals Ivanhoe Chairman Robert Friedland was CEO of another Vancouver based mining firm Galactic Resources. Galactic ran a disastrous gold mine in the San Juan Mountains of Colorado called Summitville. Thousands of liters of toxic mining waste leaked from the mine into a nearby river killing all aquatic life downstream for at least 17 miles, earning Friedland the nickname Toxic Bob.

Friedland and his colleagues at Galatic blamed previous mining operations at the mine site for the environmental problems. The US Environmental Protection Agency and the State of Colorado disagreed with Friedland's alibi and took him to court.

In December 2000 after nearly a decade long legal fight with US government authorities, Friedland agreed to personally pay US $27.5 million towards the clean up of the mine, the largest such fine in US history. To date US taxpayers have spent more than $200 million to clean up Summitville, called by many the costliest environmental mining disaster in US history.

Friedland pal from Summitville "responsible" for Burma open pit/heap leach
James Currie, who worked in Burma for Ivanhoe Mines for three years previously served as Technical Services Manager for Friedland's notorious Galactic Resources in 1990 when the firm's main property the Summitville mine was leaking large amounts of cyanide laced toxic fluid into local rivers on a daily basis.

According to Currie's professional career history contained in an SEC filing for a different firm where he was recently employed "As Operations Manager for Ivanhoe, Mr. Currie was responsible for Ivanhoe's copper operations in Myanmar including an open pit, heap leach SX/EW mine." In addition to his involvement with the open pit leach pad, Currie served as board member of MICCL from August 1999 to October 2002. (Please see Highwood Resources LTD 6-K filing with SEC November 12, 2002)

No doubt Currie, Friedland and their fellow colleagues at Ivanhoe were pleased that in Burma there isn't an Environmental Protection Agency to follow up on what they were doing.

Notes:
J.J. Plumb, R.B. Hawkes, and P.D. Franzmann, 2007 "The microbiology of moderately thermophilic and transiently thermophilic ore heaps", in Biomining, D.E.Rawlings and D.B. Johnson, eds., Springer, Berlin, pp. 217-235.

J.J. Plumb, R. Muddle, P.D. Franzmann, 2008 "Effect of pH on rates of iron and sulfur oxidation by bioleaching organisms" Minerals Engineering 21 pp. 76-82.

Highwood Resources LTD 6-K filing with SEC November 12, 2002

The Canadian Friends of Burma (CFOB) is federally incorporated, national non-governmental organization working for democracy and human rights in Burma. Contact: Suite 206, 145 Spruce St., Ottawa, K1R 6P1; Tel: 613.237.8056; Email: cfob@cfob.org; Web: www.cfob.org

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