$10.5m payment in Guinea is “royally embarrassing” for Rio, but the news also points to asset sales by group CEO Jean-Sebastien Jacques, as Warburg Pincus looks for Rio deals
A butterfly flaps its wings and on the other side of the world, a mine changes hands.
In a brief statement last week, Rio Tinto reported the suspension of a senior executive, Alan Davies, after an internal investigation into payments in Guinea. According to leaked emails, Rio agreed to pay $10.5m to François Polge de Combret, a French banker close to Guinea's president, within days of Rio locking-up mining
rights to Simandou, a vast undeveloped iron ore deposit in Guinea's rainforested mountains.
The payments were for Combret's “very unique and unreplaceable services and closeness to the President”, one email by Davies said. “This is not a standard situation, and is indeed extremely unique... These services were of the most unique nature”. Combret would “not act as a friend of Rio Tinto” unless the payment was made, Davies warned.
The news is awkward for Rio, which has publicly accused several other companies of corruption in Guinea, pursuing competitors through the courts, without success. The leaked emails suggest that two of Rio's former CEOs, Sam Walsh and Tom Albanese, were both privy to the payment.
“Sam, I accept that this is a lot of money,” one email said. “May I please have your approval to agree a final fee with Francois”. Rather than block the payment, Walsh argued it should be
staggered. “Put your thinking cap on,” he said. “Worth giving this a try,” Albanese added.
The messages are “royally embarrassing” for Rio, bankers say, but the departure of Davies, whose contract was terminated after a board meeting this week, also signals a bigger shakeup at Rio's head office, putting several mines and an entire division, which Davies had been running, on the block for sale.
Few have ever emerged from Guinea's iron ore mountains with their reputations intact. Simandou is one of the world's richest iron ore deposits, with the potential to transform Guinea into one of the world's largest iron ore exporters. Instead, it has developed into a multi-billion dollar legal dispute, locking the deposit in an ownership tussle between Rio Tinto, Brazilian group Vale and BSGR, a private mining firm linked to diamond billionaire, Beny Steinmetz.
Rio has sued Vale, Vale has likened BSGR to