Monday, June 27, 2011

Chinese arms maker’s copper mine deal raises queries over Canadian stake

Sunday, 27 June 2010 12:34 Thomas Maung Shwe

Chiang Mai (Mizzima) – One of China’s biggest arms makers signed a contract with a Burmese junta-controlled entity this month involving “co-operation” in a Monywa copper mine, raising serious questions over the status of Canadian miner Ivanhoe’s holdings in the town northwest of Mandalay and whether Burma sanctions have been violated.

Defence contractor China North Industries Corporation (Norinco), one of the Chinese military’s biggest suppliers, disclosed in a press release that in the first week of this month its chairman, Zhang Guoqing, had signed the “Monywa Copper Mine Project Co-operation Contract” with Major-General Win Than of the Union of Myanmar Economic Holdings Limited, a major revenue generator for the Burmese military regime.

While Norinco kept from view any financial details, it did say the agreement was signed in the presence of Chinese Premier Wen Jiabao and Burmese Prime Minister Thein Sein during the former’s two-day tour of Burma. The firm makes a wide range of weapons and has long been the subject of intense western scrutiny for its activities. The Bush administration alleged that Norinco exported missile technology to Iran and took steps to penalise the firm in 2003 and 2005.

Norinco’s Burmese copper play was strongly criticised by pro-democracy rights group Canadian Friends of Burma (CFOB), who termed the deal the “arms-for-copper” affair. The Ottawa-based advocacy group on Thursday called for Canadian authorities to launch an independent investigation to assess the present ownership status of the Monywa mine’s operator, Myanmar Ivanhoe Copper Capital Company Limited (MICCL).

MICCL was created as a 50/50 joint venture between Canada’s Ivanhoe Mines and a Burmese state-controlled firm, Mining Enterprise No. 1. MICCL has operated Monywa, Burma’s largest mine, since production began in 1999.

In a move critics said was a blatant attempt to hide the firm’s Burmese operations, Ivanhoe Mines reported in February 2007 that it had “sold” its 50 per cent stake in MICCL to an “independent third-party trust” in exchange for a guarantee that Ivanhoe would receive payment when the trust sold its stake.

Following the September 2007 “saffron revolution”, in which scores of protesting monks and citizens were killed by junta soldiers in Rangoon, Ivanhoe and the Monywa mine made headlines when Andy Hoffman of Canadian national newspaper, The Globe and Mail, reported that despite Ivanhoe’s claims it had pulled out of Burma its financial filings showed it was still receiving profits from its 50 per cent stake in MICCL, held by the allegedly “independent trust”.

Ivanhoe claimed in October 2007 that it had determined it was “prudent to record a $134.3 million write-down” in the value of their 50 per cent stake, thereby reducing its value to nothing, in what the Canadian Friends of Burma said was a clever ploy to avoid revealing any details about the Monywa mine in its regulatory filings.

State-controlled The Myanmar Times quoted MICCL’s general manager Glenn Ford as saying last year that Monywa was in fact “one of the lowest-cost production mines in the world”, despite Ivanhoe’s claim that the mine was worth nothing.

Ivanhoe denies ‘trust’ has sold stake in Monywa

When asked to comment on the current status of the Monywa mine, Ivanhoe spokesman Bob Williamson told Mizzima on Wednesday that the “independent trust” had not sold the 50 per cent stake to anyone. Since the trust’s creation, Ivanhoe has refused to reveal any of the individuals or firms who oversee the entity, offering only that they were not employees of Ivanhoe Mines.

Ivanhoe had said when the trust was created that the stake in MICCL would not be sold by the trust to anyone it termed “excluded persons” – employees or directors of both Ivanhoe Mines and Rio Tinto, the British-Australian firm that controls a sizable minority stake in Ivanhoe. It also said “residents or entities controlled by citizens or residents of Myanmar (Burma) or the United States” would also be barred from buying the stake.

Source tells Mizzima sale of Ivanhoe’s stake completed last year

Contrary to that claim, however, a source in Burma’s business community told Mizzima that the “independent trust” completed the sale of its 50 per cent stake late last year to cronies of the Burmese junta who have ties to Chinese business interests.

The alleged secret sale came as no surprise to CFOB executive director Tin Maung Htoo, who believed “from the very beginning Ivanhoe has been totally dishonest about its operations in Burma and this so-called ‘independent trust’ charade gives Ivanhoe chairman Robert Friedland ample opportunity to keep the mine for himself or sell to it the regime’s cronies or do whatever he wants”.

Were Ivanhoe’s stake in MICCL to have been bought by cronies of the Burmese regime, this would violate US and EU sanctions. In January last year, MICCL was added to the US Treasury Department’s Office of Foreign Assets Control (OFAC) list of banned entities, an action that Ivanhoe failed to mention in any of its subsequent statements or filings that discuss the “independent trust”. Ivanhoe also failed to tell its shareholders that the European Union had added MICCL to its Burma sanctions list in November 2007.

Ivanhoe’s Burmese venture refuses comment

When Mizzima called MICCL’s Rangoon office yesterday and asked who now owned Ivanhoe’s 50 per cent stake in the joint venture, an staff member refused to answer. Requests to speak to the company’s Monywa general manger Glenn Ford or even learn his nationality was also declined.

While Glenn Ford was unavailable for comment, a Google search for his name and “Ivanhoe” revealed an interesting posting in March last year by a “Glenn Ford” on Australian business news commentary website, Business Spectator. It said Norinco had teamed up with China’s massive Chinalco to aim for Ivanhoe’s Burmese holdings. The posting made in reference to the proposed purchase of Rio Tinto by Chinalco stated “Now Chinalco, in partnership with Chinese state-owned arms dealer Norinco, is buying the whole copper deposit of Ivanhoe and the Myanmar government.” Glenn Ford of MICCL could not be reached to confirm if this had been his posting.

Tin Maung Htoo believed the MICCL general manager had indeed posted the statement. “How many people named Glenn Ford are there around posting intimate details of Norinco’s Burmese operations; Norinco’s own statement about their Monywa copper deal would suggest that this post was genuine.”

Concerns that Chinalco had purchased the stake were also raised last year by CFOB. Citing SEC filings from February 2008 by China Resources Limited, a small start-up firm whose chief financial officer Gerald Nugewela was a former MICCL employee, CFOB alleged Chinalco had bought the stake in possible violation of US sanctions directed against MICCL. In a widely distributed press release, CFOB quoted the following text from Nugawela’s career summary, included in at least seven separate SEC filings:

“From 2005 to January 2007, Mr. Nugawela was employed by Ivanhoe Mines as Commercial Manager of Myanmar Ivanhoe Copper Co. Ltd. At Ivanhoe, Mr. Nugawela was responsible for managing treasury operations, accounting, supply and contracts administration, output agreements, business analysis and planning. Mr. Nugawela was instrumental in arranging the sale of the company to Chinese Aluminum Company [Aluminum Corporation of China or Chinalco]. He prepared the valuation model and met with prospective purchasers in their due-diligence investigation of the company.”

In a tersely worded “open letter” addressed to CFOB that accused the NGO of running a disinformation campaign, Ivanhoe chief executive John Macken, while acknowledging that Nugawela had indeed worked at MICCL, denied that he had been employed by Ivanhoe Mines as Nugawela had stated. He also denied that Nugawela had brokered the sale, claiming that “neither Ivanhoe Mines nor MICCL has been sold, or ever offered for sale, to anybody”.

Several lines later, Macken, in an apparent contradiction of his earlier claim, stated the independent trust was indeed trying to sell the MICCL stake, writing that the trust was “endeavouring to negotiate its sale to potential buyers”.

Local villagers report pollution, high security around mine site

For many years reports from villagers living in the vicinity of the mine are that neighbouring farmland has become too acidic to grow crops because of chemicals used in the mining process, driving many farmers into extreme poverty. Villagers also say that the Burmese regime has long maintained a heavy security presence in the area. The Irrawaddy magazine reported on Thursday that since Ivanhoe’s apparent departure “Chinese workers and engineers” have been busy working in the area.

Extreme poverty means they cannot meet the basic needs for food, water, shelter, sanitation and health care. The World Bank defines extreme poverty as living on less than US$1.25 per day.

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