Transfer of Ivanhoe’s Burmese assets to weapons firm must be probed

By Canadian Friends of Burma • June 20, 2011

Information recently disclosed by Burma’s state-controlled media substantiates CFOB’s previously stated concerns that Vancouver-based Ivanhoe Mine’s Burmese assets were transferred to the Chinese weapons firm Norinco via a businessman connected to the Burmese regime.

The mouthpiece of Burma’s military regime The New Light of Myanmar reported April 5 that Norinco reached a “Production Sharing Contract” with the partially state owned Union of Myanmar Economic Holdings Ltd (UMEH) that covers the mining rights for three deposits located at the Monywa copper mine. All three deposits Sabetaung, Sabetaung South and Kyisintaung were developed jointly as the S&K mine by Ivanhoe’s joint venture with the Burmese regime Myanmar Ivanhoe Copper Company Limited (MICCL).

CFOB is deeply disturbed by reports of Norinco’s involvement in the Monywa mine. We urge both Canadian and US authorities to immediately investigate the present status of Ivanhoe’s Burmese assets and take punitive action against Ivanhoe if sanctions have been violated.

CFOB’s Executive Director Tin Maung Htoo believes the Canadian public has a right to know what has occurred with Ivanhoe’s Burmese investments. “If indeed the black listed entity UMEH obtained Ivanhoe’s stake in Monywa and resold it to Norinco, this would violate both Canadian and US sanctions,” says Tin Maung Htoo. “Ivanhoe must be punished financially for any illegality that may have happened” he adds.

Ivanhoe owned a 50% operating interest in the MICCL joint venture from its creation in 1996 until February 2007 when Ivanhoe transferred its stake in MICCL to an “independent third party trust” called the Monywa Trust.

In December 2007 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.

Serious questions remain as to the validity of Ivanhoe’s decision to write down the value of its investment in MICCL in particularly because Monywa still had large amounts of copper to mine. According to Ivanhoe’s regulatory filings, beginning in 1998 when commercial operations began at the Monywa mine MICCL received a 20 year lease for the rights to mine the three deposits that made up the S&K mine.

In June 2009 Burma’s state backed Myanmar Times reported that MICCL managing director Glenn Ford said that the Monywa copper project was up and running and “one of the lowest-cost production mines in the world”.

How a mine that is officially valued at zero by Ivanhoe’s accountants could still continue to produce highly valued copper remains a question that Ivanhoe refuses to explain. In Ivanhoe’s Annual Information form filed with Canadian authorities and dated March 2008 Ivanhoe explained their decision to reduce the value of their Burmese assets with the following “it was determined that IVN’s non-involvement in the Monywa Copper Project operations since it was transferred to the Monywa Trust, the lack of knowledge of the project’s current activities and the fact that no sale had been achieved in almost a year since the asset was transferred to the Monywa Trust, indicated that the carrying value of the investment is impaired.”

In CFOB’s opinion Ivanhoe’s justification for reducing the value of the Monywa assets are extremely dubious. While Ivanhoe claimed to be in the dark about MICCL’s activities, the fact that the firm’s Executive Vice-President, Exploration Douglas Kirwin remained a director at MICCL after Ivanhoe’s transfer its stake to the trust should have given Ivanhoe a direct source of information about MICCL’s operations. Oddly enough Ivanhoe ignored Kirwin’s continued role with MICCL failing to mention it in any subsequent financial reports or corporate filings.

According to the MICCL website Kirwin is still a member of the MICCL board of directors, representing Bagan Copper Holdings, the entity formerly known as Ivanhoe Myanmar Holdings Limited, (the British Virgin Islands Holding firm that held Ivanhoe’s stake in MICCL). Since Ivanhoe’s transfer of the firm’s Burmese assets in 2007 Kirwin continued to travel to Burma and according to the New Light of Myanmar in September 2009 and September 2010 gave presentations to the Myanmar Geosciences Society.

At both of Kirwin’s presentations he was accompanied by his fellow MICCL board member Dr. Andrew Mitchell who worked as a senior geologist for Ivanhoe in Burma. Mitchell was described in a New Light of Myanmar published last September as still being a representative of Ivanhoe Myanmar Holding Ltd (IMHL).

It was Mitchell who ordered his driver in December 2003 to drive to Aung San Suu Kyi’s house. Mitchell apparently thought that being an employee of a foreign company meant he could drive anywhere. When they approached Aung San Suu Kyi’s house they were stopped. His driver was jailed by the Burmese regime for an lengthy sentence for the absurd charge of forcing Mitchell to drive to Suu Kyi’s house while being on drugs. See previous CFOB press release here.

Monywa area’s Environmental Degradation caused by Ivanhoe’s operations

Since large scale heap leaching first began at the Monywa site in 1998 local farmers in the area of the mine have been increasingly unable to grow crops on their land because of higher level of acidity in their soil. CFOB believes that toxic runoff from one of the world’s largest heap leach operations has destroyed the farmer’s land and is the cause of the lower PH level.

Australian researchers who studied the three leach pads used at Monywa found that they were some of the most acidic heap leach operations in the world. In the words of the Australian team “The heap solution chemistry is extremely acidic, with a solution pH of usually less than 1.5 and in some cases less than 1.0.” The researchers speculated that high acidity was caused by the pyrite content of the ore. (see J.J Plumb et al 2007)

According to a second paper published by two of the same researchers unlike the Monywa mine “Most heap bioleaching operations treating low grade ore operate with a solution pH between 1.5 and 2.5”. (see J.J Plumb et al 2008)

Ivanhoe has repeatedly claimed that environmental degradation in the Monywa mine area is a result of previous operations at the site which took place between 1983 and the early 1990’s by the Burmese regime initially with the support of Bor Copper Institute of Yugoslavia. The Yugoslav-Burmese copper project was relatively small compared to the MICCL operations which are much larger and involve the use of acid generating heap leach system.

While previous operations at Monywa certainly caused damage to the environment its clear the higher acidity in nearby farm land did not become an issue until after Ivanhoe and MICCL became involved at the mine site.

Prior to launching his partnership with Burma’s killer generals Ivanhoe Chairman Robert Friedland was CEO of another Vancouver based mining firm Galactic Resources. Galactic ran a disastrous gold mine in the San Juan Mountains of Colorado called Summitville. Thousands of liters of toxic mining waste leaked from the mine into a nearby river killing all aquatic life downstream for at least 17 miles, earning Friedland the nickname Toxic Bob.

Friedland and his colleagues at Galatic blamed previous mining operations at the mine site for the environmental problems. The US Environmental Protection Agency and the State of Colorado disagreed with Friedland’s alibi and took him to court.

In December 2000 after nearly a decade long legal fight with US government authorities, Friedland agreed to personally pay US $27.5 million towards the clean up of the mine, the largest such fine in US history. To date US taxpayers have spent more than $200 million to clean up Summitville, called by many the costliest environmental mining disaster in US history.

Friedland pal from Summitville “responsible” for Burma open pit/heap leach

James Currie, who worked in Burma for Ivanhoe Mines for three years previously served as Technical Services Manager for Friedland’s notorious Galactic Resources in 1990 when the firm’s main property the Summitville mine was leaking large amounts of cyanide laced toxic fluid into local rivers on a daily basis.

According to Currie’s professional career history contained in an SEC filing for a different firm where he was recently employed “As Operations Manager for Ivanhoe, Mr. Currie was responsible for Ivanhoe’s copper operations in Myanmar including an open pit, heap leach SX/EW mine.” In addition to his involvement with the open pit leach pad, Currie served as board member of MICCL from August 1999 to October 2002. (Please see Highwood Resources LTD 6-K filing with SEC November 12, 2002)

No doubt Currie, Friedland and their fellow colleagues at Ivanhoe were pleased that in Burma there isn’t an Environmental Protection Agency to follow up on what they were doing.

Notes:

J.J. Plumb, R.B. Hawkes, and P.D. Franzmann, 2007 “The microbiology of moderately thermophilic and transiently thermophilic ore heaps”, in Biomining, D.E.Rawlings and D.B. Johnson, eds., Springer, Berlin, pp. 217–235.

J.J. Plumb, R. Muddle, P.D. Franzmann, 2008 “Effect of pH on rates of iron and sulfur oxidation by bioleaching organisms” Minerals Engineering 21 pp. 76–82.

Highwood Resources LTD 6-K filing with SEC November 12, 2002

Tags: Canada, Canadian Friends of Burma, China, Ivanhoe Mines, Mining, Norinco, Union of Myanmar Economic Holdings Ltd.

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Transfer of Ivanhoe’s Burmese assets to weapons firm must be probed

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