Resources Reporter
Melbourne
OZ Minerals is under formal investigation over foreign bribery claims after the Australian Federal Police stepped up a two-year examination of a 2009 Cambodian gold exploration buyout of partners with reported ties to the mining ministry.
The AFP reopened the previously dismissed case in January 2013 after a dressing down from the Organisation for Economic Co-operation and Development for not enforcing foreign bribery laws stringently enough.
It now appears the AFP believes OZ may have a case to answer.
“The AFP advised OZ Minerals in September 2014 that it is now conducting an investigation of OZ Minerals’ 2009 acquisition of the remaining holding in the Okvau joint venture in Cambodia in relation to foreign bribery claims,” OZ revealed in its annual report this month.
OZ managing director Andrew Cole, who joined the miner from Rio Tinto in December, declined to comment on whether he thought there had been any wrongdoing or whether he was aware of the investigation when he accepted the top job.
The company has not taken a provision on the matter in its accounts and has previously denied allegations of inappropriate business practices. “OZ Minerals had concluded that it is not probable that a present obligation exists and, accordingly, no provision has been recognised,” the annual report said.
The AFP has confirmed to The Australian that the investigation is continuing. It is also still investigating BHP Billiton over a 2006 incident involving facilitation payments around a bauxite project in the same Cambodian province, Mondolkiri, that Okvau is in. That case, along with an investigation into hospitality provided by BHP at the 2008 Beijing Olympic Games, has been under investigation by the US Securities and Exchange Commission since 2010 and was another the AFP was taken to task over by the OECD for not investigating more thoroughly.
The Okvau buyout was completed in 2009 just after Chinese-controlled Minmetals bought all of OZ’s assets apart from the Prominent Hill copper and gold mine in South Australia and Cambodian and Thai exploration assets.
The terms of the buyout were never revealed by OZ, but a 2011 investigative report by the Cambodia Daily newspaper claimed OZ paid $US4.6 million to buy out its 20 per cent partner in the project, Shin Ha, on the condition that exploration licences signed by the mining minister were provided.
The report says three Shin Ha directors who received funds in direct proportion to their shareholdings had close connections with mining ministry officials, and another was the wife of a man who owed money to two of the other officials. The report does not say whether OZ had any knowledge of the relationship between the directors and the mining officials and does not allege any money was channelled to government officials beyond what the directors received as a result of their holding in Shin Ha.
The AFP took a look at the reports at the time but determined that there was nothing to investigate on OZ’s side of the transaction.
The matter may have rested there, had the OECD’s Working Group on Bribery not taken the AFP to task in a 2012 report on Australia’s implementation of the OECD anti-bribery convention. The OECD was scathing of the AFP for prosecuting just one of 28 referrals over the previous 13 years, and listed the OZ Minerals case (without specifically naming the company involved) as one that should have been investigated more thoroughly. In January 2013, the case was reopened by the AFP, which after 21 months of preliminary investigations has now stepped up into full investigation mode.
OZ did not announce the 2009 buyout or record it in its accounts, but it has never disputed the Cambodia Daily report that it bought out its partner. The only recognition of the purchase was that, from late 2009, it started referring to the project as 100 per cent-owned.
What sparked the interest of the OECD were the reports that $US923,077 from the deal reportedly went to the three female Cambodian directors who were related to mining ministry officials. The reports say the OZ deal was conditional on Shin Ha providing exploration licences for the project, which was then known as Mondolkiri.
The money that went to the directors was reportedly directly in line with their shareholdings in Shin Ha.
The OECD, in its 2012 report, said the close relations of the board members with public officials raised the prospect the officials were the ultimate beneficiaries of the buyout proceeds and that the AFP should have investigated more closely. “The AFP declined to open an investigation because it received information from the AFP’s overseas network that the transaction had been undertaken with due diligence and that all payments were made at the joint venture partner’s request,” the OECD said.
“The AFP did not inquire into key matters that could have corroborated the allegations, such as whether the board members were indeed related to foreign public officials, the due diligence conducted by the company was sound and the buyout proceeds were channelled to the board members.”
The Cambodia Daily report says Shin Ha was founded by a South Korean investor called Wujin Park. The four women were reportedly appointed to the board shortly before a 2006 joint venture agreement with OZ forerunner Oxiana was concluded.
In 2012, OZ sold the Okvau project, in the east of Cambodia, to Perth-based Renaissance Minerals in for $18m, shares and options in Renaissance (in which OZ retains a 12 per cent stake) and the promise of milestone payments if the ground is developed. The value of the ground implied in the 2009 buyout was $US23m.
Renaissance managing director Justin Tremain said the company was not being investigated by the AFP.
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