The Simandou iron ore project continues to make headlines for accusations of corruption in the adjudication of mining licenses. A Rio Tinto executive, Alan Davies, is the latest shoe to drop. It was reported today that he has been suspended for his role in a bribery scheme that took place in 2011. The alleged fraudulent transaction happened thus during president Alpha Condé‘s first year in office following his inauguration in December 2010. The article below names the main companies involved then in the Simandou project. It does not, however, indicate who received the alleged $10.5m payment. But Mediapart.fr reveals that it was François de Combret, and adviser to president Conde, a former deputy secretary general of the Elysée Palace, and an ex-associate of Lazard Bank.
Rio Tinto (Australia), Vale (Brazil), BSG Resources and Chinalco (Hong-Kong) had each a stake in the Simandou. The first three have been either forced out or decided to withdraw from the project, leaving Chinalco as the only current investor.
Tierno S. Bah
Global mining giant Rio Tinto has been plunged into a bribery scandal after discovering multimillion-dollar payments to a contractor relating to a project in Guinea, West Africa.
The FTSE 100 company has suspended Alan Davies, the executive in charge of its energy and minerals division, with immediate effect, as it investigates payments of $10.5m made to a consultant in relation to its giant Simandou iron ore project.
Mr Davies allegedly had accountability for Simandou in 2011, when the transactions were apparently made.
Rio said it became aware of email correspondence relating to the payments in August this year. Yesterday it notified the authorities in the UK and the US and “is in the process of contacting the Australian authorities”.
Debra Valentine, the executive in charge of Rio’s legal and regulatory affairs, has also stepped down from her role. She had previously notified the company of her intention to retire in May next year.
“Rio Tinto intends to co-operate fully with any subsequent inquiries from all of the relevant authorities,” the company said. “Further comment at this time is therefore not appropriate.”
Mr Davies, who is also a non-executive director at Rolls-Royce, only took charge of Rio’s energy and mineral group in July, in a broader restructuring implemented by new chief executive Jean-Sebastian Jacques when he took on the top job.
One of Mr Jacques’ first major decisions was to cancel development of the long-gestating $20bn Simandou project after deciding that low iron ore prices made the mine nonviable. The decision outraged the Guinea government, which had been banking on Simandou to provide a much-needed boost; the mine had been tipped to double the size of the country’s economy.
Last month Rio sold its 46.6pc stake in Simandou to Chinalco, a mining company listed in Hong Kong, for up to $1.3bn.
Simandou has long been dogged with controversy. It is believed to be one of the biggest undeveloped high-grade iron ore deposits in the world, but its inland location makes building the infrastructure to tap it hugely expensive. Iron ore is the key ingredient in steel.
Rio bought the concession 15 years ago, but lost the rights to half the lode in 2008, when the Guinea government transferred them to BSG Resources, owned by Israeli billionaire Beny Steinmetz.
The deal raised eyebrows not just for the relatively small amount that BSGR had invested in Simandou, but for the fact that company was a specialist in diamond, rather than iron ore, mining. BSGR subsequently sold half its stake to Brazilian giant Vale for an initial $500m, but both companies were ejected from Simandou after a two-year inquiry in Guinea found that BSGR had used bribery to gain the rights to the mine.
In 2014, Rio sued BSGR and Vale in the US, alleging they had conspired to misappropriate Rio’s half of the deposit in 2008. The case — which included claims that BSGR had given Guinea’s minister of mines a diamond-encrusted Ferrari — was dismissed last year after the judge ruled it had fallen foul of the statute of limitations. Both BSG and Vale denied any wrongdoing.
Analysts at Investec said the announcement it was a “surprise” given that Mr Davies had been touted as a potential CEO prior to Mr Jacques’ appointment. “While we do not expect this to have any impact on operations, it does cast a negative cloud over a company that considers itself above any such indiscretions. That said the company appears to be addressing this firmly.”
Rio Tinto’s shares were up 5.5pc amid a general rally in the mining sector following Donald Trump‘s US election victory.