Cables Shed Light on BHP Mining Deal

Both Prime Minister Hun Sen and the Australian Embassy in Phnom Penh played active roles in negotiating a multimillion dollar mining deal in 2006, which has since led authorities in the U.S. and Australia to investigate the world’s largest mining company for possible corruption in Cambodia, diplomatic cables released by the Australian government reveal.

After shutting down its Mondolkiri province bauxite exploration in 2009, Australia-based mining giant BHP Billiton said it had provided the U.S. Securities and Exchange Commis­sion (SEC) with evidence relating to “possible violations of applicable anticorruption laws” in its Cambodia project.

The Department of Foreign Affairs and Trade in Canberra on Monday published 54 pages of confidential missives between the embassy and the department related to BHP Billiton’s operations in Cambodia, dated between July 2006 and December 2009. The cables, which are heavily redacted in order to protect Australia’s international relations as well as commercially valuable information, were released publicly under Australia’s freedom of information act.

The U.S. investigation into BHP Billiton is still active, and in a report quoting the diplomatic cables on Monday, Australia’s Fairfax Media said the case was also still subject to an investigation by the Australian Federal Police (AFP).

In 2006, Prime Minister Hun Sen traveled to Australia to sign off on BHP Billiton’s 100,000-hectare mining exploration license. During the trip, Water Resources Minister Lim Kean Hor told the National Assembly that Mr. Hun Sen had phoned him to say that the company had agreed to give $2.5 million of “tea money,” a term widely understood to refer to a facilitation fee.

The money was later explained as going into a “Social Development Projects Fund” although it has never been disclosed where the fund is located and what the money was used for.

One cable from February 2009, marked “restricted,” is titled “Cambodia: Mining: Global Witness report on Cambodia’s extractive industries,” and discusses allegations in the London-based NGO’s damning “Country for Sale” report.

The Global Witness report highlighted the payments, totaling $3.5 million, made by BHP Billiton that did not show up on government accounts.

“The specific references to Australian companies are concerning, and we intend to follow up with BHP-Billiton to seek clarification of the company’s reported comments relating to its previous payments to the Cambodian government,” the embassy said in the cable.

“However, we remain confident that the major Australian companies operating in Cambodia adhere to ‘best practice’ standards in their financial, as well as environment and social, activities,” the cable adds.

It says then-Ambassador Margaret Adamson would use a planned visit to BHP Billiton’s exploration sites in Mondolkiri to “reiterate our expectation that Australian companies operate in accordance with all relevant Cambodian and Australian laws.”

The cables detail just how heavily involved the Australian Embassy in Phnom Penh was in orchestrating the deal itself. At one stage in 2006, BHP Billiton even asked diplomats at the embassy to arrange a meeting between the company and Mr. Hun Sen. That request was, however, seen as unusual by the em­bassy, according to the cables.

“We have not traditionally sought appointments on behalf of companies at such senior levels,” a cable written in July 2006 states.

“BHP [Billiton] believes that in order to go to the next level and close the deal, a senior level BHPB visit is needed and a call on Hun Sen,” the cable continues.

The department in Canberra advised the embassy not to arrange the meeting but to provide the company with a contact in the prime minister’s Cabinet, and for the head of mission to attend.

The embassy also contacted Canberra to push for then-Australian Prime Minister John How­ard to attend the signing of BHP Billiton’s deal with Hun Sen in Australia, which he did in October 2006.

“I think it would be ideal if the Prime Minister Howard was at signing ceremonies—particularly the BHP signing given the potential size of the project. As you know the Cambodians are very protocol status and like to match ‘like with like,’” Lisa Filipetto, then Australia’s ambassador to Cambodia, said in an email to Canberra in September 2006.

In the same way that the em­bas­sy was influential in helping BHP Bil­liton seal its deal with the Cambodian government, it also knew early on that BHP Billiton’s operation in Cambodia was coming to an end.

The cables explain the reason for BHP Billiton’s departure was down to a lack of proven minerals in the area as well as the firm’s decision to abandon an adjacent bauxite operation in Vietnam.

An embassy spokesman yesterday said questions on the mission’s involvement in the deal had been referred to Canberra and could not be immediately answered.

One cable notes that the five Australian mining companies operating in Cambodia at the time had “provided small-scale capacity building assistance to [the Min­istry of Industry, Mines and Ener­gy, or MIME] while seeking to avoid conflicts of interests.”

These companies included OZ Minerals, which also pulled out of a project in Mondolkiri province, where it was looking for gold, amid accusations that more than a million dollars was diverted to the relatives of MIME officials when the firm bought out its partner in 2009.

Following a report by the Or­ganization for Economic Cooperation and Development (OECD) in October, which criticized Australia’s enforcement of foreign bribery rules, the Australian Federal Police said it would look again at the OZ Minerals case.

The OECD report, although not naming specific companies, discussed cases thought to be BHP Billiton’s and OZ Minerals’ Cambodia projects, and said OECD examiners were “concerned that the AFP may have closed foreign bribery cases be­fore thoroughly investigating the allegations.”

A BHP Billiton spokeswoman in Melbourne, Eleanor Nichols, said the company could not comment on whether or not investigations by the SEC or the AFP were ongoing.

“BHP Billiton is fully committed to operating with integrity, and in line with our charter values. Our policies specifically prohibit engaging in bribery in any or all of its forms,” she added.

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