In buying out its partner in a Mondolkiri province gold mine in 2009, the Australian company OZ Minerals paid hundreds of thousands of dollars to people who are reportedly the family members of government officials, according to a company memorandum. The deal occurred just five months before the company announced an initial resource discovery of 605,000 ounces of gold at the mine. However, the company said in January that subsequent results had been “disappointing.”
Both OZ Minerals and the Ministry of Industry, Mines and Energy last week categorically denied any wrongdoing, with Minister Suy Sem asserting that no ministry officials had received any payments and that the ministry had strictly observed the law.
“Wherever we operate, we act in accordance with local regulations and with international standards. We deny any allegations of inappropriate business practices,” said Natalie Worley, a spokeswoman for OZ Minerals. She did not answer detailed questions.
The disclosure follows last year’s announcement that another Australian company, BHP Billiton, the world’s largest miner, was under investigation by US authorities for potential bribery over a canceled mining project.
Australian newspapers said at the time that the investigation concerned an abandoned project in Cambodia, where BHP had been exploring for bauxite until 2009. BHP said last week that it continued to cooperate with US authorities in the investigation. But BHP has not said which government may have been involved. Officials here have denied any wrongdoing.
The OZ Minerals payments stem from activities in Cambodia prior to the creation of OZ Minerals in a 2008 merger between Oxiana Ltd and Zinifex Ltd, a zinc producer.
Oxiana in 2006 entered into a joint venture with Shin Ha Mining Co, a local firm that held permission to collect geological data at a prospective location in Mondolkiri’s Keo Seima district.
The company was founded in 2005 by the South Korean investor Wujin Park and named after Mr Park’s stepson Yang Shin, who was given a controlling share in the company.
Prior to concluding the joint venture agreement with Oxiana in 2006, Shin Ha added four women to the board, three of whom were reportedly related to ministry officials.
As exploration progressed in October 2009, Oxiana, then known internationally by its current name, OZ Minerals, bought Shin Ha’s 20 percent stake in the project for $4.6 million, according to a memorandum of agreement.
As a result, a total of $1.15 million was paid to the four women shareholders who had been added to the Shin Ha board in 2006, with $923,077 going to the women with reported ties to the Ministry of Industry, Mines and Energy, also known as MIME.
Sok Sunnary, identified by ministry officials as well as by an internal Shin Ha e-mail as the mother-in-law of Keo Rottanak, the current managing director of Electricite du Cambodge, held 10 percent of Shin Ha’s shares and received $461,539, according to the agreement. Mr Rottanak was MIME’s Cabinet director in 2006, the time of the joint venture.
Sar Sa Um and Sok Sovanchivy, each holding 5 percent of Shin Ha, both received payouts of $230,769. A woman answering the door at Ms Sovanchivy’s address in Tuol Kok district said last week that Ms Sovanchivy was the daughter of Sok Leng, who is director general of MIME’s general department of mineral resources.
The relationship between the two was also confirmed by MIME officials who spoke on condition of anonymity and by the internal Shin Ha e-mail.
Ms Sa Um is identified in the company e-mail as the mother-in-law of Yos Monirath, a director at the same MIME department.
According to the memorandum of agreement with OZ Minerals, the sale required Shin Ha to provide OZ Minerals with new exploration licenses “signed by the Cambodian Minister for Mines and Energy.”
Attempts to reach Mr Rottanak, Mr Leng and Mr Monirath were unsuccessful. It is unconstitutional for government officials to be involved in business and officials have since this year been required to declare their assets. But the disclosure rules do not extend to the assets of officials’ relatives.
In a letter last week, Mr Sem, the minister of industry, mines and energy, said MIME had acted “strictly within the framework of the law.”
Mr Sem acknowledged that four Cambodians had been added to Shin Ha’s board in 2006, but said they did not work for MIME.
“As per documentary record at the Ministry of Commerce, none of these shareholders is an official of MIME,” he wrote.
Mr Sem also said the transfer of equity between OZ Minerals and Shin Ha was expressly permitted under Cambodia’s mining law.
“This is a standard procedure as a matter of formality that is regularly performed by MIME for all mining companies in general. In this formality there is no payment that needs to be made to me personally as minister or MIME,” he wrote.
“In this particular case of Shin Ha Mining Co Ltd and Oxiana (Cambodia) Ltd requesting our approval of transfer of interests within the project company, no payment was made to me and to MIME.”
One Shin Ha board member said last week that she acted as a mere stand-in for her husband.
Sam Davin, the fourth Cambodian woman added to Shin Ha’s board in 2006, said last week that she in fact had no role in the company, even though she was listed a recipient of $230,769.
These were the affairs of her husband, Tieng Virakratha, she said.
“I named myself instead of my husband. He just named me to represent him, and I did not know anything,” she said. “I never saw any money from this.”
Ms Davin’s husband, Mr Virakratha, who said he worked as a “liaison” for Southern Gold, another Australian mining company active in Cambodia, claimed in interviews last week that he had used shares in Shin Ha to repay personal debts.
Mr Virakratha said he had suffered malaria, hepatitis C and cirrhosis of the liver, requiring expensive medical treatments in Vietnam.
By 2006, he said, he owed about $46,000 to Mr Leng and Mr Monirath of MIME and repaid them with shares in Shin Ha.
“That’s why they accept to receive the shares because they get the money back,” Mr Virakratha said in an interview on Thursday. “I take from Sok Leng and Monirath. Sok Leng and Monirath, they take from who, I don’t know.”
Mr Virakratha also said that “Sok Leng said he also took from Rottanak,” a reference to Mr Rottanak, currently of the state electricity company, whose mother-in-law, Ms Sunnary, received over $460,000 from OZ Minerals.
Mr Virakratha described the ministry as a conscientious body working to develop Cambodia’s economy and said he did not believe that the OZ Minerals payments were in any way illicit.
He could not explain why he and the other four shareholders had used relatives’ names and not their own.
“So, like I told you, I paid debt. Whatever they like to give to whom, I don’t care. They are paid pack, they cleared my debt. That’s all,” said Mr Virakratha.
OZ Minerals has long projected a squeaky clean image, and its presence in Cambodia was seen locally as a vote of confidence in the potential for responsibly developing Cambodia’s natural resources.
Richard Stanger, president of the Cambodian Association of Mining and Exploration Companies and managing director of Liberty Mining International, said he was unfamiliar with contents of Shin Ha’s transaction with OZ Minerals.
But he said making payments to officials’ families was not standard practice.
“It is certainly not normal,” he said.
Shin Ha’s board is now considering legal action against OZ Minerals for allegedly withholding mining data from the Okvau-Ochhung explorations in Mondolkiri before buying Shin Ha out of the operation, according to KB Thuraisingham, a legal consultant advising Shin Ha.
“It’s nondisclosure,” said Mr Thuraisingham, adding that he had referred his clients to the Australian law firm Slater & Gordon, which settled a class action lawsuit this month against OZ Minerals over its alleged failure to inform shareholders of company debt.
Van Moulis, a lawyer at Slater & Gordon in Sydney, said last week that he had been given “instructions to investigate” possible nondisclosure in the Shin Ha deal.
Mr Thuraisingham said last week that he was unaware of any connection between Shin Ha and MIME, and Mr Moulis declined to comment.
Cambodia has been beset by claims of corruption across its government and society and has ranked near the bottom of Transparency International’s Corruption Perceptions Index for five years.
In a 2009 report, Global Witness said Cambodia’s regulation of the extractive industries suffered from “a total lack of transparency in the ownership of companies with the responsibility to handle public assets and the destination of payments made to secure these concessions.”
In a response to questions last week, George Boden, a Global Witness campaigner, said the Shin Ha transaction with OZ Minerals underscored “the urgent need for greater transparency and rule of law.”
“This deal appears to fit the historical pattern of elite capture of Cambodia’s natural resources,” he said in an e-mail. “Now, this deal is public, OZ Minerals, alongside Australia and Cambodia, must investigate whether the deal was legitimate, or whether it was a means to transfer funds back to Cambodia’s political elite.”
While the net value of Australian investments in other countries in 2009 rose 7 percent, or AU$74 billion (about seven times the size of the entire Cambodian economy that year), Australia has yet to prosecute a single case of foreign bribery, making it a laggard among OECD member nations.
A spokeswoman for the Australian Federal Police said Monday that, since an Australian law penalizing foreign bribery entered into force in 1999, her agency had received a total of 22 referrals relating to such allegations.
Sixteen of these matters are now closed, either due to a lack of supporting evidence or because the allegations dated from before the laws were in force, she said.
“As the remaining six are ongoing, it would not be appropriate to comment further,” the spokeswoman said in an e-mail.
(Additional reporting by Simon Marks)