OZ Knew of Gold at M’kiri Site, Report Shows

Local investors say information withheld at time of 2009 sale

Up to a year before a transaction over a Mondolkiri province gold project, the Australian miner OZ Minerals had detailed data revealing the size of the resource, according to an internal OZ Min­er­als report.

The company is now facing legal action in Australia for al­legedly withholding this information to obtain a sale price at a fraction of the true value in buying out its partner in the Keo Seima district project in 2009.

Shin Ha Mining Co, a local concern whose shareholders are family members of government officials, is now claiming breach of contract and plans to enter preliminary settlement talks out of court.

Though never disclosed to the market, the 2009 sale for the exploration licenses was valued at $4.6 million, of which over $900,000 went to the family members of key officials at the Ministry of Industry Mines and Energy.

The ministry has denied all wrongdoing. Though OZ Miner­als has also denied any wrongdoing, the case raises questions about the business practices of a company on which many had pinned the hope that it would nascent mining sector here.

Just five months after the October 2009 purchase of Shin Ha’s 20-percent stake in the Okvau-Ochhung exploration areas, OZ Minerals announced a gold resource of 605,000 ounces.

At the time of the sale, such a quantity of refined gold would have had a value of $600 million.

Nicholas Steel, who has a 10 percent share in Shin Ha and received over $460,000 in the 2009 buyout, said in recent e-mails that OZ Minerals never informed Shin Ha shareholders of the status of the exploration activities at the site and that an informed decision on whether or not to sell was therefore impossible.

By selling for $4.6 million, he said, Shin Ha shareholders lost out on millions of dollars.

“None of this vital information was ever passed on to Shin Ha shareholders,” Mr Steel said. “Shin Ha shareholders had no idea of the advanced technical status of the project and hence could not possibly make an informed decision whether to sell or not.”

Mr Steel is seeking $1.5 million in compensation and damages from OZ Minerals.

OZ Minerals denied that it acted wrongly as part of the deal and that its joint venture with Shin Ha was never breached.

“Whenever OZ Minerals operates it does so to international business standards,” said Natalie Worley, a spokeswoman for OZ Minerals. “Commercial terms of transactions are aligned with those in the mining industry globally and the terms of the joint venture have been complied with at all times.”

But according to company project data from the Okvau site which was produced in September 2008, a year before the equity purchase from Shin Ha, but was never made public, OZ Minerals was already in possession of information that showed substantial mineral wealth at its exploration site.

The data, which described the project as “advanced,” show that OZ Minerals estimated then that there could be up to 857,000 ounces of gold in the area.

Mr Steel declined to comment on the payments made to the family members of government officials.

Wujin Park, who with his stepson Yang Shin had a controlling 65 percent share in Shin Ha, has not responded to requests for comment.

Under the joint venture agreement between OZ Minerals and Shin Ha signed in November 2006, OZ Minerals was contractually obliged to disclose all technical and confidential information on all of the company’s tenements. The agreement also states that both parties shall “act in good faith in relation to their join venture relationship” and should adhere to international business standards in ethical business conduct.

Perhaps making things even more complicated, if Shin Ha shareholders are to gain from their complaints that OZ Minerals underpaid them, even more money could end up in the pockets of the kin of Cambodia’s elite.

Government officials and Shin Ha e-mails indicate that three Shin Ha board members, who received over $900,000, were the mothers-in-law and the daughter of key officials from the Ministry of Industry, Mines and Energy.

These officials include Keo Rottanak, the current managing director of Electricite du Cambodge who was Cabinet director at the Ministry of Industry, Mines and Energy at the time of the OZ Mineral-Shin Ha joint venture in 2006; Sok Leng, director general of mineral resources at MIME; and Yos Monirath, a director at the same MIME department.

Minister Suy Sem said in May that no MIME official had received any payments and that the ministry had strictly observed the law.

Cambodian and Australian authorities have declined to confirm or deny the existence of any investigation.

KB Thuraisingham, a legal consultant advising Shin Ha, said last week that both parties were waiting for the lawyers to finalize their arguments and that they would proceed to try and reach an agreement out of court.

“Australian rules are very clear. Before you sue anyone you’ve got to try and go through conciliation,” he said.

 

Related Stories

Latest News