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Was Ivanhoe's Burmese mine sold to China? Sale possible violation of sanctions

Canadian Friends of Burma
March 31, 2008

Ottawa − The Canadian Friends of Burma (CFOB) has learned that documents filed with the US Securities and Exchange Commission (SEC) in December 2007 by China Resources Ltd. state that the firm's CFO Gerald Nugawela, a former Ivanhoe Mines employee, was “instrumental in arranging the sale” of Myanmar Ivanhoe Copper Co. Ltd (MICCL) to the China-based Chinese Aluminum Company. MICCL was the joint 50/50 joint venture between Robert Friedland's Ivanhoe Mines and the Burmese military regime. China Resources SEC filings sharply contradict Ivanhoe's public statements about MICCL.

In February 2007, Ivanhoe Mines announced that it had “sold” its 50% stake in MICCL operator of Burma's largest mine to an “independent third party trust” in return for a guarantee that when the trust sells the stake Ivanhoe will then be paid. Later that year Ivanhoe, citing a lack of knowledge about what was occurring at MICCL's Monywa copper mine, claimed that it was “prudent to record a $134.3 million write-down” in the value of their 50% holding in the Burmese joint venture thus reducing its value to zero.
Just days before President Bush left office in January the US Treasury Department's Office of Foreign Assets Control (OFAC) added MICCL to the US government's Burma sanctions list. Ivanhoe has so far declined to comment on this major development, preferring to leave shareholders in the dark about it.

Question about MICCL proceeds and sanctions
If MICCL was indeed sold in a deal arranged by Mr Nugawela, it raises several troubling questions about Ivanhoe's $134.3 million write down in the value of its stake in MICCL. Did Ivanhoe in fact receive any funds for its 50% stake in MICCL? If Ivanhoe didn't receive funds then who did? Was this back door deal arranged in order to skirt American and Canadian trade sanctions with Burma?

The fact that Nugawela arranged the deal also raises serious concerns about the credibility of the so-called “blind trust”. The China Resources LTD filings state that from“2005 to January 2007, Mr. Nugawela was employed by Ivanhoe Mines as Commercial Manager of Myanmar Ivanhoe Copper Co. Ltd.” This and other details about MICCL were again included in four subsequent China Resources LTD filings with the SEC. If Mr. Nugawela was indeed “instrumental” in the sale of MICCL as the SEC filings state, he almost certainly was a member of the “blind trust”. The possibility that the “blind trust” contained an individual who only one month before its creation was working for Ivanhoe may explain why Ivanhoe flatly refused to disclose who part of the “blind trust” was.

CFOB Executive Director Tin Maung Htoo is deeply troubled by Ivanhoe's unwillingness to disclose details regarding the firm’s Burmese ties. According to Tin Maung Htoo “for more than 2 years Ivanhoe was hiding behind this so called 'blind trust' and now we have strong evidence that this was just a facade. Ivanhoe must be forced to disclose everything.”

In October 2006 the UK-Australian mining giant Rio Tinto bought a 9.95% stake in Ivanhoe Mines. Ivanhoe's “blind trust” was something Rio Tinto heralded at its AGM in a desperate attempt to deflect criticism. The Ivanhoe-Rio Tinto deal enabled the two infamous firms to join forces to develop a massive copper and gold project in Mongolia, where unhappy locals have already burned Ivanhoe's controversial chairman Robert Friedland in effigy.

CFOB Urges Pension Plans to wake up about Ivanhoe
CFOB board member Kevin McLeod is deeply frustrated that Ivanhoe's major shareholders haven't been more diligent in following up on Ivanhoe's Burmese shell game. McLeod adds “for several years we have been urging the big pension plans to use their large holdings in Ivanhoe to force the firm to come clean on its activities in Burma. The CPP and the Caisse de don't seem to be very interested in getting to the bottom of this fiasco, Ivanhoe's AGM is coming up in May and so far we have seen no indication from either pension plans that they are prepared to hold Ivanhoe's feet to the fire.” The latest figures show that the CPP has a 1% stake in Ivanhoe while Quebec's equivalent the Caisse de dépôt has a massive 8% stake.

Quebcois furious over Caisse's massive investment in Ivanhoe
Many Quebecers that CFOB is in contact with are incensed to learn that the Caisse owns a massive 8% chunk in the notorious mining firm. It should be noted that that the Caisse lost nearly C$20 million when it invested heavily in Friedland's disastrous mining firm Galactic Resources in the late 1980's (“Caisse loses $20 million” The Gazette. Oct 6, 1993). Friedland personally paid a record US 27.5 million dollar fine to the US government for his role in Galactic's toxic Summitville mine which killed all aquatic life in a nearby river for at least 17 miles. US taxpayers have spent more than $200 million to clean up the Colorado mine called by many the costliest environmental mining disaster in US history.

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Media contact: Kevin McLeod at 613-746-4963, or Tin Maung Htoo at 613-297-6835

The Canadian Friends of Burma (CFOB) is federally incorporated, national non-governmental organization working for democracy and human rights in Burma since 1991. Contact: Suite 206, 145 Spruce St., Ottawa, K1R 6P1; Tel: 613.237.8056; Email: cfob@cfob.org; Web: www.cfob.org