MAC: Mines and Communities

London Calling on Rio Tinto and its corrupt elite

Published by MAC on 2016-11-25
Source: Bloomberg, The Australian,

Two executives sacked - will other heads roll?

Would you believe  that the world's second most powerful mining company is guilty of paying massive bribes to a French government, in order to pave its way to grabbing probably the world's richest unexploited lode of iron ore?

Read on - and decide for yourself

Rio Tinto has spent most of this year endeavouring to re-shape itself as a sleek predator in today's fiercely competitive mining jungles, starting with the appointment of suave Jean-Sebastien Jacques as its new CEO.

But now there's compelling evidence the company paid out $US10.5 million in 2011, to secure Guinea's Simandou deposits. Of course, the Rio Tinto board - including M. Jacques -  claims to know nothing about the transaction, and is vigorously trying to prove it.

So far, it's sacked two senior executives as a demonstration it will stop at nothing to clean out some hidden Augean stables. Alan Davies, former head of Energy and Minerals, shares the order of the boot with Debra Valentine who was responsible for managing Rio Tinto's "legal and regulatory affairs" (sic).

Diamond geezer

While we know little about Ms. Valentine, our observation of Mr. Davies' performance at this year's Rio Tinto AGM didn't mark him out as particularly diligent when it came to justifying the company's Bunder diamond exploration project in India.

He claimed that answers had been given to several key questions about the venture which were made in a critical 2013 report by Nostromo Research (See: Rio Tinto: what it says and what it really does in India). But none of this had happened.

Now that Davies has been forced to quit Rio Tinto -  which itself abandoned the Indian project  earlier this year - we'll probably never have any answers. (See: Rio Tinto 2016 AGM report).

More important, some other corporate top dogs currently don't seem to feature much on Rio Tinto's transparency radar. They include Rio Tinto's former CEO, Sam Walsh, and his predecessor Tom Albanese (who also went the same way as Alan Davies in 1913 - for failure to balance the books, rather than for cooking them).

We won't rehearse here the thoroughly disreputable part that Albanese played at Rio Tinto, when he brokered an alliance with Ivanhoe mines which gained the company a pre-eminent role in the dishonourable penetration of Burma. (You can follow the story here: Amnesty calls for Buma disclosure; Outrage at dirty Burma mining deal).

Except to note that an undertaking, made by Rio's chair and CEO in 2015 to search out documentation related to this unholy alliance with the Canadian company, seems to have been completely ignored. (See: Rio Tinto AGM 2015 - behind closed doors).

Gunga Din?

According to a Bloomberg report (below), the investigation should also include Steven Din for allegedly offering a bribe in 2010 to the then-Guinean mining minister, in order to grease  Rio Tinto's acquisition of that part of the Simandou concession then controlled by the notorious Swiss speculator, Beny Steinmetz, and later sold to the world's biggest iron ore exporter, Vale of Brazil.

Notable about this is that Rio Tinto - for which Din headed-up its Guinean operations - soon chased both Steinmetz and Vale with some spiky lawsuits, alleging they were guilty of their own brand of corruption in the country. (See: Rio Tinto sues Vale)

As for the redoubtable Steven Din - he's now the CEO of Konkola Copper Mines in Zambia, a subsidiary of Vedanta Resources plc, of which Tom Albanese became the CEO two years back. Need we remind our faithful readers of this British outfit's shameful and shabby record across three continents - not least in Zambia itself? (See: Zambian villagers take case against Vedanta in London)

(We wonder in passing, why some former Rio Tinto executives are attracted to joining a rival mining camp, with an even more shocking record of dirty dealings).

Mr. Jaques has told his staff that it may take many years to get to the bottom of  the "Grand Simandou Scam".

However long the task,  Rio Tinto cannot ignore further revelations of what its employees get up to anywhere in the world, when their masters apparently take their eyes off the moving balls of cash.

After all, the company has been that way before, but didn't seem to have learned the lesson. (See: Calling raises awkward questions over Chinese arrest).

[London Calling is published by Nostromo Research. Opinions expressed in this column do not necessarily reflect those of any other person or group. Reproduction is welcomed under a Creative Commons Licence]

Sacked mining executive Alan Davies blames it on Rio Tinto

Barry Fitzgerald

The Australian -

November 18, 2016

Senior Rio Tinto executive Alan Davies has declared war on the company over his sacking from his $3.5 million-a-year job, in the latest instalment of the mining giant’s festering Simandou iron ore corruption scandal in Guinea.

The dumped London-based chief executive of its energy and minerals unit, a Rio man for close to 20 years and a former Brisbane accountant and lawyer, is seething that the company has made “no effort to abide by due process’’ in sacking him after suspending him from duties last week.

Rio has also sacked its legal and regulatory affairs group executive Debra Valentine. The $4.65m-a-year US executive was also stood down last week after explosive emails became public on Rio’s payment of $US10.5m to French consultant Francois de Combret in 2011. The payment was for services in helping Rio secure ownership of its Simandou iron ore riches when it was in doubt with the Guinean government.

The payment followed an earlier $US700m “settlement’’ with the Guinean government that ­secured Rio’s interest.

Rio said yesterday its executives had “failed to maintain the standards expected of them under our global code of conduct’’.

The Guinea government said at the weekend that it did not know Mr de Combret had worked on Rio’s behalf.

The leaking of the emails last week prompted Rio to reveal that it had been investigating the 2011 payment since August with the ­assistance of external experts, and what it found was serious enough to report to foreign anti-corrupt­ion authorities in the US, Britain and Australia.

Rio has also stripped Mr ­Davies and Ms Valentine of any short-term incentive plan awards for this year and will cancel all ­unvested incentive plan awards from previous years. The personal cost would run into millions of ­dollars.

Rio has refused to disclose what information prompted the suspension of Mr Davies and Ms Valentine, and now their sackings.

In the leaked emails, two former chief executives, American Tom Albanese and Australia’s Sam Walsh, discuss the $US10.5m payment after Mr Davies, who was responsible for Simandou at the time, requests clearance to proceed.

They have not been mentioned in Rio statements on the suspension or sacking of Mr Davies and Ms Valentine.

Mr Albanese now leads India’s Vedanta Resources.

Perth-based Mr Walsh retired from Rio earlier this year.

Mr Albanese turned down an opportunity to comment at a ­Vedanta press conference earlier this week.

Mr Walsh is due to make a keynote speech to the CPA Congress in Perth next Tuesday, on the subject of leadership in a complex world.

He was replaced by Frenchman Jean-Sebastien Jacques in January after a shootout for the top job with Mr Davies, and the since-departed Andrew Harding.

On Monday, a “shell-shocked’’ Mr Jacques presented the full board, led by chairman South ­African Jan du Plessis since 2009, with the as-yet-undisclosed findings of Rio’s investigation into the 2011 payment.

In announcing the termination of Mr Davies and Ms Valentine (she had previously intended to leave the company), Rio said that the action “does not prejudge the course of any external inquiries into this matter’’.

“However, the board concluded that the executives failed to maintain the standards expected of them under our global code of conduct,’’ Rio said. Mr Davies hit back hard through a media statement issued by a London advisory firm, saying he had been “left with no option but to take the strongest possible legal action in response”.

“I have not been privy to Rio Tinto’s internal investigation ­report, nor have I had any evidence of the reasons for my termin­ation of my employment given. There are no grounds for the termination of my employment,’’ Mr Davies said.

“Rio Tinto has made no effort to abide by due process or to ­respect my rights as an employee and it has given me no opportunity to answer any allegations.

“This treatment of me and my past and recent colleagues is totally at variance with the values and behaviours of the company to which I have devoted my professional life.”

The emails that led to the investigation into the $US10.5m payment to Mr de Combret had Mr Davies saying in a message to Mr Walsh, as Rio’s iron ore boss at the time, that the well-placed fixer had provided “very unique and un­replaceable services and closeness to the President” of Guinea.

In the email exchange, Mr ­Davies said Mr de Combret’s closeness to President Alpha Conde had significantly improved the outcome of the deal. “He vouched for our integrity when it was needed and helped bring us together when things were looking extremely difficult,” Mr Davies said.

Heads roll at Rio Tinto over Simandou probe — Davies, Valentine fired

Fired energy and minerals boss Alan Davies vowed to take the "strongest possible legal action" against Rio

Cecilia Jamasmie

17 October 2016

Rio Tinto’s (ASX, LON:RIO) recently launched probe into a payment made to an external consultant over the Simandou iron ore project in Guinea, just turned nasty, with the company firing two of the executives involved in the case and one of them threatening with legal actions.

The world’s second largest mining company said Thursday it had terminated the contract of Alan Davies, chief executive of its energy and minerals unit, as well as Debra Valentine’s, the Rio executive in charge of legal and regulatory matters as a result of the internal investigation.

Both have also been stripped of any short-term incentive plan awards for this year and Rio said it will cancel all ­unvested incentive plan awards from previous years. The personal cost would run into millions of ­dollars.

Fired energy and minerals boss Alan Davies has vowed to take the "strongest possible legal action" against Rio. (Image from archives)

Davies, who was suspended on Nov. 9 over the $10.5 million payment to a consultant in 2011 for assisting in negotiations with Guinea’s government on the Simandou project, said Thursday Rio Tinto had no grounds to fire him and that he will take the company to court.

“I have not been privy to Rio Tinto’s internal investigation report, nor have I had any evidence of the reasons for my termination of my employment given,” Davies said in an e-mailed statement.

He added that the company has not respected his rights as an employee, nor given him an opportunity to answer any allegations.

Davies was in charge of the iron ore project in 2011, when the payments were made and also the same year that Rio signed a major agreement with the Government of Guinea, which secured the firm's mining title.

While the miner did not disclose what information prompted the suspension and the sacking of Davies and Valentine, people familiar with the matter told Financial Times on Wednesday that Rio Tinto has known about the 2011 emails referring to the dubious payment for over a year, and not just since August, as it claimed last week when revealing the probe.

The company announced in October it was fully exiting the project by selling its stake to partner Chinalco for up to $1.3 billion, with payments to begin with commercial production.

Davies, a 20-year veteran at Rio and member of the executive committee, was only promoted to the top role in the energy and minerals division in June this year, after a shake-up of the firm’s operations.

He was also a member of Rio Tinto’s ethics committee and will be replaced by Bold Baatar, the current managing director of Marine and vice president Iron Ore Sales and Marketing.

Rio chief reassures ‘shell-shocked’ staff

Matt Chambers

The Australian -

November 15, 2016

Rio Tinto managing director Jean-Sebastien Jacques has told “shell-shocked” staff that he called an investigation the day he found out about potential issues relating to a leaked email exchange between his predecessors Sam Walsh and Tom Albanese over a $US10.5 million payment to a consultant working on the Simandou iron ore project in Guinea.

In his first comments since Rio first made an announcement on the emails, the new Rio chief said company systems and controls had been strengthened since the 2011 payment was made and that Rio’s culture and values were “fundamentally strong”.

In the email to staff on Sunday, Mr Jacques warned that investigations could last several years.

The company last week reported itself to anti-corruption agencies in the US, Britain and Australia after the release of the emails sparked an internal review.

“I am fully aware that this week’s announcement regarding Simandou came a surprise and many people across Rio Tinto are still shell-shocked,” Mr Jacques, who replaced Mr Walsh in July, said in the email.

“We are facing a very challenging situation where the Rio Tinto organisation would like to better understand what has happened, and at the same time we are ­constrained in what we can share due to the fact the matter is with the US, British and Australian agencies.”

The six-week investigation after the emails were made public on a filesharing website on August 29 has resulted in the standing down of two executive committee members: minerals and energy chief Alan Davies, who has been suspended, and legal head Debra Valentine, who has left six months earlier than her planned retirement.

It also clouded the reputations of Mr Walsh and Mr Albanese and will subject Rio to intense scrutiny from the US Justice Department and Securities and Exchange Commission and the British Serious Fraud Office and the possibility of hundreds of millions of dollars in fines.

“We did review where we are with the ExCo (executive committee) team on Thursday and we are committed to making sure we are not in the same situation again,” Mr Jacques said.

“As you know, over the past five years we have done a lot to strengthen our systems and ­controls.”

The Rio board, which is still chaired by Jan du Plessis, as it was in 2011, was due to meet last night to consider the future of Mr ­Davies.

The emails that led to the investigation discuss the payment of $US10.5m to French investment banker Francois Polge de Combret for advisory services in securing a deal with the Guinean government that let Rio keep its Simandou iron ore mining tenements for a payment to the government of $US700m and a stake in the project.

Sources say Rio followed board-approved procedure in appointing Mr de Combret, who Mr Davies in his email said had provided “very unique and unreplaceable services and closeness to the president” of Guinea, Alpha Conde, that had significantly improved the outcome.

In the email exchange, Mr ­Davies said Mr de Combret’s closeness to the president had significantly improved the outcome of the deal.

“He vouched for our integrity when it was needed and helped bring us together when things were looking extremely difficult,” Mr Davies said.

It is unclear exactly what the ­investigation has uncovered that led Rio to report itself to the authorities.

“The day I was made aware of a potential issue, we launched an investigation,” Mr Jacques said.

He added that the company was unable to share much information on the case now that regulators had been alerted.

Over the weekend, the Guinean government released an official statement saying it did not know Mr de Combret was working for Rio.

Rio Tinto Offered Bribe for Mine, Ex-Guinea Minister Says

Jesse Riseborough and Franz Wild

Bloomberg -

November 18, 2016

A Rio Tinto Group executive asked how big a bribe it would take to beat out a competitor for a hotly contested iron ore deposit in Guinea, the country’s former mining minister said, adding a new accusation of graft just days after the world’s second-biggest miner fired two of its top executives over a payment made in connection with the West African project.

Mahmoud Thiam, the former mining minister, said that the head of Rio Tinto’s Guinea operation, Steven Din, offered him a bribe in early 2010 in order to win back control of half of the undeveloped Simandou project, considered the world’s biggest untapped iron ore deposit. Din was attempting to regain control of the blocks from billionaire investor Beny Steinmetz’s BSG Resources Ltd., Thiam said in a Nov. 9 phone interview.

Thiam claims Din said he had the backing of senior Rio Tinto executives to make the offer. Din denies ever paying or offering a bribe. Rio Tinto declined to comment.

Rio Tinto is investigating a $10.5 million payment the company made in connection with the Simandou project to a French banking consultant who was a university friend of President Alpha Conde of Guinea. The probe, conducted by an external law firm, was started after a website published e-mails showing a Rio Tinto executive named Alan Davies discussing the payment with then-Chief Executive Officer Tom Albanese. Rio Tinto has since confirmed the authenticity of the e-mails, which aren’t related to the offer Thiam says he received. Albanese declined to comment.

Rio Tinto shares were 2.6 percent lower at 29.44 pounds at 10:10 a.m. in London.

In a written statement on Nov. 9, the company said that after looking at the law firm’s review, it decided to report its findings to the U.S. Justice Department, Securities and Exchange Commission, the U.K.’s Serious Fraud Office and Australia’s Securities and Investments Commission.

“Rio offered to pay me off,” Thiam said after Bloomberg News inquired about Rio Tinto’s disclosure of the banking consultant’s payment. “There is no possibility of doubt. They assumed that BSGR had paid me. He said, ‘Whatever BSGR offered to pay you, you know we are bigger, we can do better.’” BSGR has denied that it paid any bribes.

‘Operationally Focused’

Din on Nov. 10 denied making the offer, saying that his meetings with Thiam around that time were to give the minister an update about a pending merger. Din also said he was “very much operationally focused” and spent much of his time working with engineers at the exploration site.

“I refute anything like that,” Din, who is now chief executive officer of a copper firm in Zambia, said by phone. “Rio Tinto has an ethical standard. Irrespective of operating in certain countries those ethical standards are always upheld.”

In February 2010, around the time that Thiam said the meeting took place, Din met with the U.S. ambassador to Guinea to discuss the country’s mining industry, according to a diplomatic cable published by WikiLeaks. According to the ambassador’s memo, Din said that Thiam had benefited personally from promoting BSGR and another company, citing as evidence Thiam’s purchase of a $3 million property in New York. Thiam, a former vice president at UBS Group AG in New York, said in an interview that he became wealthy as a banker and paid for his properties himself.
Feuding Rivals

Rio Tinto’s internal inquiry re-ignites one of Africa’s most high-profile corruption sagas, which for years focused on BSGR’s alleged bribery to win Simandou from Rio Tinto. The eight-year feud between the two companies has also pitted Rio Tinto against the No. 1 iron ore producer, Vale SA, which was a BSGR partner on the Simandou project. To this day Guinea, one of the world’s poorest countries, is left yearning for a mine that could have dramatically expanded the nation’s economy.

BSGR is still the subject of investigations in the U.S., France, Switzerland and Guinea over allegations that the company paid bribes to win control of the Simandou project. In a racketeering case last year, Rio Tinto accused BSGR of paying Thiam a $200 million bribe to secure its rights to Simandou. Thiam denied the allegation, saying it was “borderline comical.” BSGR has consistently denied any wrongdoing. A New York judge dismissed the case, saying that Rio Tinto had waited too long to sue and had failed to identify a pattern of racketeering activity by the defendants.

Steinmetz said in an interview in London on Nov. 10 that Rio’s disclosure of its probe “vindicated” him. He denied ever having paid bribes and said years of government investigations, litigation and accusations against him and his company were part of a plot, in part by Rio Tinto, to oust BSGR from Simandou.

‘Powerful Forces’

“We have been fighting very powerful forces,” Steinmetz said. “This is a very big fight. We all knew justice would prevail. We knew all along that we were right. Our assets were wrongfully taken away, based on lies.”

Din said he left his role in Simandou in early 2011, before the alleged payments were made. Rio’s Davies, who was fired along with a legal executive this week, didn’t respond to several messages left on his mobile phone. Previously he has said he wasn’t privy to Rio’s internal report and wasn’t given a reason for his dismissal. “Rio Tinto has made no effort to abide by due process or to respect my rights as an employee and it has given me no opportunity to answer any allegations,” he said in an e-mailed statement.

The Guinea government on Nov. 11 said it had “no knowledge” in 2011 of whether or not the French banking consultant was acting on behalf of Rio Tinto. It said it would assist all investigations “that may be necessary to assist the relevant authorities with their mission.”

The Simandou controversy began in 2008, when Guinea’s longtime dictator, Lansana Conte, stripped Rio Tinto of half the project and gave that portion to BSGR. Weeks later, Conte died. Thiam, who served under a military junta that replaced Conte’s administration, said the decision to strip Rio Tinto of half the rights was lawful, because the miner had failed to develop it a decade after first acquiring exploration rights.

Thiam says he was offered the bribe as Rio Tinto lobbied the government to restore its rights, arguing that they had been dispossessed illegally. By his account, shortly before the offer he had told Rio Tinto that he would ensure that the company kept the rights to blocks 3 and 4 if it would agree in writing to accept its loss of blocks 1 and 2. Rio Tinto refused, he said.

New Administration

After a new government was elected, Rio Tinto ended up paying the government $700 million to confirm its rights to blocks 3 and 4, and to get the new administration to skip a review of all mining contracts to remove uncertainty.

“So they paid $700 million for something I was offering them for free,” Thiam said. “I’ve never seen such value destruction in my life for a publicly traded company.”

Meanwhile, BSGR sold a 51 percent stake in its Simandou blocks to Vale for $2.5 billion. In 2014, however, the new government under Conde, the current president, revoked the rights from BSGR and Vale, saying it found evidence of corruption in the awarding of its licenses.

Rio Tinto exited the Simandou project last month, handing control to partner Aluminum Corp. of China, also known as Chinalco. It will receive only a fee for its stake of $1.1 billion to $1.3 billion if the mine is developed. Two weeks earlier the International Finance Corp., a small partner in the mine, exercised an option allowing it to exit and recoup costs.

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