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Tuesday, 19 April 2016

Corruption probe digs deeper into OZ Minerals deal

A young man holds a nugget of gold and quartz at a Mondulkiri mining area in 2011. Don Weinland
A young man holds a nugget of gold and quartz at a Mondulkiri mining area in 2011. Don Weinland

Corruption probe digs deeper into OZ Minerals deal
Tue, 19 April 2016 ppp
Kali Kotoski

Australian authorities have expanded the scope of an ongoing investigation into Australian mining firm OZ Minerals over claims it engaged in bribery in Cambodia in 2009, the firm said in its latest annual report.

The ASX-listed miner said the Australian Federal Police (AFP) was taking a closer look at its former Cambodian operations as part of an investigation into the 2009 buyout of a partner in the company’s former joint venture gold exploration project in Mondulkiri province.

“Since the end of the financial year, the Company has been advised by the AFP that the scope of the AFP’s investigation is being extended to OZ Minerals’ former Cambodian operations generally. The AFP is continuing its investigation and OZ Minerals is continuing to cooperate with the AFP,” the annual report released April 15 said.

The Australian mining company first came under scrutiny in 2011 when local media reports alleged it paid more than $1 million to three board members of local firm Shin Ha Mining Co who had highly placed relatives in the Ministry of Mines and Energy.

The AFP opened an investigation into the case in 2011 but subsequently dropped the case after investigators found insufficient evidence of criminal wrongdoing.

However, the case was reopened in January 2013 after the Organisation for Economic Co-operation and Development (OECD) criticised the lack of action on the case.

OZ Minerals said in its annual report that Australian authorities informed the company in September 2014 that they had reopened the case, and the AFP announced earlier this year that it was expanding the scope of the investigation.

Contacted yesterday, an AFP media spokesperson declined to provide details about the ongoing investigation.

In its annual report, OZ Minerals said it did not account for any potential repercussions from the bribing allegations in its financial results, concluding that “it is not probable that a present obligation exists and, accordingly, no provision has been recognised in the balance sheet at 31 December 2015”.

Bribery allegations have persisted well after OZ Minerals sold its Okvau project to another Australian firm, Renaissance Minerals, in February 2012 for $18 million.

Despite the sale, OZ Minerals has retained stock options for the project, which the most recent pre-feasibility studies undertaken by Renaissance Minerals show could produce 91,500 ounces of gold per year at an expected eight-year mine life.

In August of last year, OZ Minerals and Renaissance Minerals agreed to extinguish the two milestone payments that totalled $17.3 million owed by Renaissance in exchange for OZ Minerals receiving a 1.5 per cent gross smelter royalty over future production from both the Okvau and O’Chhung mining projects. Total royalty payments would be capped at $17.3 million, according to the agreement.

Renaissance Minerals has continued to push ahead with the Okvau gold project and recently signed on with Australia’s Emerald Resources, which stands to earn 51 per cent interest in the project. In return, Emerald will bankroll a two-year exploration program worth $3 million.

Renaissance Minerals managing director Justin Tremain could not be reached for comment yesterday, while a representative of the firm’s Cambodia office declined to discuss the AFP investigation.

However, Richard Stanger, president of the Cambodian Association for Mining and Exploration Companies (CAMEC), said the widening bribery probe was unlikely to have an impact on Renaissance’s shareholders or operations.

“This investigation has been going on for a long time,” he said, adding that formal charges had yet to be filed.

“I don’t see any impact on shareholder’s decisions or the [future] prospects of the [gold deposit].”

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