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| Rio Tinto - Mineral & Energy Giant |
Mining giant Rio Tinto has suspended a senior executive after an investigation found $US10.5 million was paid to a consultant providing "advisory services" on a project in the African nation of Guinea.
Key points:
- Rio energy and minerals chief executive Alan Davies suspended by company
- Mining giant became aware of emails from 2011 about consultancy payments related to a project in Guinea
- Rio sold its stake in the Simandou project to Chinalco last month
Rio Tinto said it used external counsel to investigate the matter, which has uncovered information that warrants it alerting authorities in United Kingdom, United States and it is "in the process" of contacting Australian authorities.
The company said it has suspended its energy and minerals chief executive Alan Davies, who had accountability for the Simandou project in 2011, effective immediately.
Rio Tinto has indicated that the $US10.5 million in payments occurred in 2011, which the company's records show was the same year it signed a major agreement with the Government of Guinea.
At the time Rio Tinto told shareholders the agreement "secures Rio Tinto's mining title in Guinea and paves the way for first shipment of iron ore by mid-2015."
The agreement also confirmed that a Rio Tinto subsidiary, Simfer, would pay the Government of Guinea $US700 million.
At the time, Rio Tinto praised the Government of Guinea for engaging "so constructively" with the company.
It also praised the Government's commitment to the Extractive Industries Transparency Initiative.
"Which aims to strengthen governance by improving transparency and accountability in the extractive sector," it said.
Rio Tinto said that in August this year it became aware of emails from 2011 related to "contractual payments" made to a consultant providing advisory services on the Simandou project.
Analysts at RBC Capital Markets said this is likely to be a reputational, not monetary, problem for Rio Tinto.
"Rather, this is a potentially negative public relations issue which Rio Tinto has managed to avoid whilst BHP has been dealing with the Samarco dam incident."
Simandou's chequered history
The Simandou project in the south of the country is one of the world's largest untapped iron ore deposits and has been embroiled in legal scandals for nearly a decade.
Rio Tinto has been exploring the area since the 1990s and had to fight to retain its rights to the asset in 2008, when the then Government stripped the company of some of its licence area, giving it to a minnow, BSG Resources, which then entered into a partnership with Rio's arch rival Vale.
Rio Tinto filed a racketeering suit in a New York District Court against Vale and BSG Resources, alleging they worked together to illegally take Rio Tinto's mining rights in Guinea.
The case was thrown out, in part because it came too long after the alleged misconduct.
However, in 2010 a new government in Guinea reviewed past mining contracts and concluded BSG Resources got the mining licence through bribery.
BSG was subsequently stripped of any rights to the resource.
Vale is understood to be suing BSG Resources for getting it to buy into a project that had been corruptly obtained.
Just last month, Rio Tinto agreed to sell its stake in Simandou to Chinese mining giant Chinalco, which will net up to $US1.3 billion.
Rio Tinto also said in its statement to the stock exchange that legal and regulatory affairs group executive Debra Valentine, having previously notified the company of her intention to retire in May 2017, has stepped down from her role.
The ABC is seeking comment from both staff members, however Rio Tinto responded that it would not facilitate contact.
Rio Tinto also declined to make further comment beyond its statement to the stock exchange.
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