Rio Tinto Bogged Down In Legal Fights From African Ventures

Whenever there is bad news out of Africa for mining giant Rio Tinto, a powerful group of people gather in the boardroom of the company’s headquarters off St James Square in London.

If this week is any guide, the group made up of Rio chairman Jan du Plessis, non-executive ­directors John Varley and Simon Thompson, chief executive Jean-Sebastien Jacques and chief financial officer Chris Lynch have plenty to talk about.

When not keeping abreast of a US investigation into Rio’s disastrous venture into Mozambique, the group is tasked with keeping a close eye on developments in the scandal surrounding the company’s payment of $US10.5 million to a French consultant as it struggled to retain control of one of the world’s most lucrative iron ore ­deposits: Simandou, in ­Guinea.

Its members need to keep on top of inquiries by the British Serious Fraud Office, America’s ­Securities and Exchange Commission and Department of Justice and Australia’s federal police, which this week confirmed it had a full-scale investigation under way.

They will soon have to do without the services of du Plessis, who announced on Thursday he would quit Rio in favour of British Telecom the latest in a series of ­departures that will clear Rio’s senior ranks of anyone who was around when the payment was agreed in 2011.

Simandou’s rich red dirt is also responsible for a sea of red ink on Rio’s balance sheet, with a $US163m loss last year following a $US2 billion writedown in 2015.

One partner in Simandou, the International Finance Corporation, an arm of the World Bank, has also walked away from the deal, sending Rio and its other partner, Chinalco, a bill for $US194m to buy it out of its 4.6 per cent stake.

And for Rio’s bitter rival over Simandou, Israeli businessman Beny Steinmetz, du Plessis’s ­departure and the AFP investigation represents yet another step towards his vindication.

Steinmetz and his BSGR group have themselves been accused of bribery to get hold of part of ­Simandou, resulting in his arrest and release by Israeli police in January.

In 2014, Steinmetz associate Frederic Cilins was jailed for two years in the US after he was caught on an FBI wiretap attempting to convince the former Guinean president’s wife not to tell authorities about bribes she had allegedly received.

A spokesman for BSGR said du Plessis’ departure “has not come soon enough” and accused the chairman of being compromised in presiding over Rio’s conduct of the Simandou issue, including the approval of the filing of a racketeering case against BSGR and its Simandou joint venture partner, Vale, in New York.

“This is yet another casualty from the Simandou fallout BSG Resources looks forward to engaging with his replacement with regards to the legal dispute between both parties,” BSGR’s spokesman said.

The racketeering case was thrown out in November after Rio took too long to lodge it, but BSGR’s spokesman said the abortive proceedings “ultimately led to the disclosure of the illicit payments made to secure their (Rio’s) rights to their blocks in Simandou”.

BSGR believes a crucial email chain in which Rio executives discussed paying $US10.5m to Francois de Combret, a French banker and associate of Guinean President Alpha Conde, was turned up by lawyers during preparations for trial.

The emails were posted anonymously on a website in November, leading Rio to report itself to the Australian Securities & Investments Commission, Britain’s Serious Fraud Office and the SEC.

“The (AFP) criminal investigation is not a surprise — two senior people at Rio have lost their jobs, the previous CEO has had his ­bonuses and option payments suspended and the chairman has suddenly stepped down ahead of schedule with no clear succession plan announced. There is clearly some smoke here, let alone a blazing fire.”

It is not clear whether the US investigation into Steinmetz, spearheaded by the Department of Justice, is continuing. “Neither BSG Resources nor Beny Steinmetz have heard anything from the US regulators, ­including the DoJ, for a number of years,” BSGR’s spokesman said.

On top of the investigations by law enforcement bodies in Britain, the US, Australia and Israel, the stoush over Simandou has been keeping lawyers busy around the world. In Paris, the World Bank is hearing arbitration proceedings that BSGR has brought against Guinea, alleging a conspiracy to rig the country’s election, steal away ­Simandou and hand it over to Rio.

And in New York, Rio faces a shareholder class action that also targets former chief financial officer Guy Elliott and former CEOs Sam Walsh and Tom Albanese, alleging the mining giant’s stock price has suffered because of the payment to de Combret.

The fight for the Simandou tenement dates to the late 90s, when Rio obtained mining rights to the deposit. Despite its wealth, Simandou’s location, in Guinea’s mountainous east, makes it difficult to develop and by 2008 Rio had made no progress.

In a witness statement filed with the World Bank by BSGR, Guinea’s then mining minister, former investment banker Mahmoud Thiam, said that ­because of the lack of activity the government had decided to take half the tenement from Rio and put it out to tender, which BSGR won.

Others tell a different story. Last year, Mamadie Toure, the fourth wife of former Guinean president Lansana Conte, agreed to forfeit millions worth of property in Florida to the US government on the basis it was bought with the proceeds of crime namely, bribes paid by BGSR for the Simandou tenements. BSGR denies this and accuses South ­African business interests and ­secret service agents of conspiring to rig the Guinean election in 2010 to install Conde and transfer mining assets to friendly companies.

But whether or not BSGR bribed the Guinean government, its relationship with Thiam ­appears to have been cosy.

Thiam admitted BSGR occa­sionally paid for his travel ­including “two or three” flights on Steinmetz’s private jet but ­insisted this was “standard practice” and he often used his own money for travel rather than ­impose on the threadbare Guin­ean treasury.

BSGR closed the deal with Vale in April 2010, just ahead of the June election.

The new regime stripped BGSR of its Simandou rights because of the corruption allegations.

However, Rio kept its stake after paying the government $US700m a deal de Combret helped broker.

The $US10.5m of consultancy payments were discussed in emails by then Simandou iron ore boss Alan Davies, then iron ore boss Walsh and then CEO Albanese.

Davies, the only one of the trio still working for Rio in ­November, and legal chief Debra Valentine, had their contracts terminated ­because of subsequent investigations, although Rio is yet to say ­exactly what either did to deserve their treatment.

While Albanese has been ­apparently unaffected in his job as chief of Indian-controlled ­resources company Vedanta, Walsh has a cloud over his reputation as he embarks on an executive board career.

Rio finally threw Walsh a bone last week in its 2016 annual report, saying that unlike Davies and Valentine, the former chief would be entitled to his long-term bonuses after a two year wait — indicating no clear wrongdoing by Walsh has been uncovered.

Walsh, who has always denied any wrongdoing, appears determined to show that it is business as usual. In London on Thursday night, he gave the keynote speech at the annual dinner of the Chartered Institute of Procurement & Supply, where he is president.

It is believed he is yet to be served with a summons issued by the court in New York over the shareholder class action but ­reserves the right to defend himself. “I’m not going to speculate, we’ll just wait and see how this ­unfolds,” he said.

In Paris, de Combret has continued his silence.

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