Wikileaks: Junta Crony Brokered Ivanhoe’s Burma Sale to Chinese Arms Firm

By Canadian Friends of Burma • March 16, 2012

Newly disclosed American diplomatic cables made available by Wikileaks show that infamous Burmese regime crony Tay Za served as a broker in a series of transactions that saw Ivanhoe Mines 50% stake in Burma’s largest copper project sold first to the Burmese regime and then re-sold at a steep profit by the regime to a consortium led by Chinese weapon’s firm Norinco. The cables also suggest that Ivanhoe violated Western sanctions against Burma, something long suspected by the Canada Friends of Burma (CFOB).

According to the cables Tay Za played a “pivotal role” in the negotiations over the fate of the copper project and was set to receive a US $50 million fee for his involvement in the deal. Tay Za a close ally of General Than Shwe is the subject of American, Canadian and EU sanctions.

The information contained in the cables strongly suggests that for more than 4 years Vancouver-based Ivanhoe Mines deliberately misled the Canadian public and its own shareholders about its ongoing involvement in Myanmar Ivanhoe Copper Company Ltd (MICCL), the 50/50 joint-venture partnership between Vancouver-based Ivanhoe Mines and Burma’s state-owned Mining Enterprise No. 1 (ME-1).

The leaked cables indicate that Ivanhoe’s senior management was directly involved in the daily operations at MICCL long past the firm’s supposed withdrawal from Burma in early 2007. This is a glaring contradiction to Ivanhoe’s previously stated claim that the firm stopped being involved in MICCL’s activities after Ivanhoe transferred its MICCL stake into a so called “third party blind trust” in February 2007.

CFOB believes the leaked cables contain enough information to warrant a serious criminal investigation by both Canadian and US authorities as to whether Ivanhoe violated the relevant Burma sanctions and legislation forbidding financial kickbacks and bribery. Ivanhoe and its notorious founder and Chairman Robert Friedland (AKA Toxic Bob) must be held to account for the firm’s dubious business practices in Burma.

CFOB’s Executive Director Tin Maung Htoo along with many members of the Canadian public want answers now. “We’ve known for a long time that Ivanhoe’s involvement in Burma is a textbook case of corporate wrongdoing, now thanks to Wikileaks we have hard evidence that proves how outrageously unethical Ivanhoe’s Burmese operations really were”, says Tin Maung Htoo.

In light of the revelations from Wikileaks CFOB urges Ivanhoe’s major institutional shareholders the Caisse depot and the Canadian Pension Plan to take action and investigate what has been going on. In particular the Caisse, Quebec’s public pension plan must pay serious attention given that it controls 5.8% of Ivanhoe shares currently valued at more than US$800 Million.

Mine General Manager Glenn Ford’s startling admissions to US embassy staff

As the Monywa copper project was for many years Burma’s largest mine and one of the top sources of revenue for the Burmese regime, the US embassy in Rangoon spent a considerable amount of time focusing on the controversial project. There are more than a dozen cables that mention MICCL and many quote MICCL’s General Manager Glenn Ford (sometimes misspelled in the cables as Glen).

A January 2009 cable written by the US Embassy in Rangoon and marked confidential quotes Glenn Ford telling US diplomats that “In September 2008, ME-1 [Burma’s state owned Mining Enterprise No 1] began negotiating with the Chinese consortium over the purchase of MICCL, using regime crony Tay Za as a broker. Ford told us the Chinese agreed to pay USD 250 million for the mine and equipment, USD 50 million to Tay Za in consulting fees, and an additional USD 100 million to upgrade the mine.” See the cable here.

The cable also confirms CFOB’s previously stated concern that Ivanhoe would sell its MICCL stake back to the regime allowing the regime to resell the MICCL stake to the Chinese at a higher price. The same January 2009 cable reports that Glenn Ford informed US embassy staff that “Ivanhoe plans to sell its share of MICCL to ME-1 for $100 million, who in turn will sell the entire company to the [Chinese] consortium for $250 million.”

That same January 2009 cable states “According to Andrew Mitchell, Ivanhoe Representative in Burma, Ivanhoe agreed to sell its shares to ME-1 because the company is desperate to divest. While it would be easier and more profitable to negotiate directly with the Chinese, Ivanhoe is afraid the GOB would block the sale. In early 2008, Ivanhoe and ME-1 agreed on a USD 100 million purchase price. However, ME-1 lacked the money to pay Ivanhoe directly — it needed to sell MICCL first (technically selling what it did not own).”

Subsequent developments suggest both Ford’s and Mitchell’s statements to the US diplomatic staff were indeed accurate and Ivanhoe’s assets were first transferred to the Burmese regime before going to the Chinese consortium. (See Mizzima article here.)

In August 2011 Ivanhoe reported that the “independent, third-party” had sold its stake in MICCL for $103 million. If Ivanhoe’s 50% stake was then resold by the Burmese regime to Norinco and the Chinese consortium along with ME-1’s other half of MICCL for a combined $250 as Ford said would happen, it would mean the Burmese regime received a $25 million dollar mark up for Ivanhoe’s stake in MICCL. CFOB urges both the Canadian government and the US Treasury Department’s Office of Foreign Assets Control (OFAC) to investigate the sale to determine if sanctions and other rules were indeed violated.

Cable contradicts numerous Ivanhoe’s claims about “blind trust”

In February 2007, Ivanhoe Mines announced that it had transferred its 50% stake in MICCL to an “independent third party trust” in return for a guarantee that when the trust sells the stake Ivanhoe will then be paid. Ivanhoe claimed in a June 2010 “statement” posted on the Ivanhoe website “Since the divestment in 2007, Ivanhoe Mines has had no involvement in the ownership and operation of MICCL and the Monywa Copper Project. The sole purpose of the Monywa Trust is to sell the Myanmar assets acquired from Ivanhoe Mines in 2007.” See Ivanhoe’s statement here.

In August 2011 when Ivanhoe finally acknowledged that its 50% stake in MICCL was sold by the “third party trust” Ivanhoe made the bold claim in a press release that “Ivanhoe Mines had no involvement in discussions between the Monywa Trust and its service provider with potential purchasers or with the ultimate sale of the interest.” See here for Ivanhoe’s 2011 statement.

The Wikileaks cables suggest however that both of the aforementioned statements made by Ivanhoe are false. The Wikileaks cables reveal that even after the supposed creation of the “third party blind trust” Ivanhoe was dealing directly with MICCL, the Burmese regime, Tay Za and potential Chinese buyers for its stake in MICCL, thus violating Western sanctions.

An embassy cable dated September 2008 which again quotes Glenn Ford states “For the past year, Ivanhoe has been negotiating through regime crony Tay Za with a consortium of three Chinese companies — WanBo Copper, Norinco Copper, and Aluminum Corporation of China (Chalco) — that want to purchase its contract. Ford informed us that the negotiations are going well and that the Minister of Mines has indicated the GOB will approve the sale. He opined that the consortium’s connections to Tay Za play a pivotal role in the negotiations with the GOB.” Please see the cable here.

Wan Bao Copper and its Burmese subsidiary Wan Bao Mining (Myanmar) Copper Co are owned and controlled by China North Industrial Corp, the same quasi Chinese state entity that also controls both Norinco International and Norinco Copper.

Subsequent cables which also quote Ford reveal that the Burmese regime vetoed Ivanhoe’s attempts to directly sell to the Chinese and Ivanhoe was instead compelled by the regime to sell its stake back to ME-1, enabling the Burmese state owned enterprise to in turn sell the stake to the Chinese group at a higher price. A cable dated February 2010 that again quotes Ford explains that Ivanhoe’s dealing directly with the Chinese consortium was halted when “In May 2009, the GOB [Government of Burma] unilaterally ceased negotiations and announced plans to purchase Ivanhoe’s shares itself, according to Ford.” See the cable here.

While Ivanhoe said that it had no direct involvement in MICCL after February 2007, a September 2008 cable indicates that Ivanhoe had been paying for operations at the mine for more than a year after supposedly shifting its 50% stake in MICCL to the “blind trust”.

The cable states “Ford told us that Ivanhoe has been covering the mine’s operating costs since 2006, estimated at more than USD 50 million, but it is no longer willing to do so. In April, MICCL halted all production at S&K mine. According to Ford, MICCL has no plans to resume operations until the GOB allows Ivanhoe to divest.” See here.

A January 2009 Cable indicates that Glenn Ford was still receiving instructions from Ivanhoe Mines head office in Canada despite the firm’s claims to the contrary. The cable states “According to Ford, Ivanhoe Headquarters instructed him to produce a small amount of copper every six months to prevent the one-year timeframe from elapsing.” See here.

Ford’s repeated conversations with the US diplomats clearly show that Ivanhoe has been deliberately misleading the Canadian public and its own shareholders about the handling of the firm’s Burmese assets. CFOB executive director Tin Maung Htoo is appalled by Ivanhoe’s conduct “the Wikileaks cables show that Ivanhoe has been lying to the Canadian public and their own shareholders about the nature of the so called ‘blind trust’. This fiasco must be investigated immediately and Ivanhoe must be punished for any laws they may have violated.”

Sale of MICCL stake to Burmese regime violates Ivanhoe’s own policy on “Trust”

Glenn Ford’s statement to the US embassy representatives revealing that Ivanhoe’s stake in MICCL was going to be sold first to a Burmese state owned enterprise before being re-sold to Norinco suggests that Ivanhoe willfully disregarded its supposed Burmese divestment policy.

When the blind trust was created in February 2007 Ivanhoe claimed its stake in MICCL would not be sold to “excluded persons” who the firm defined in repeated regulatory filings as “residents or entities controlled by citizens or residents of Myanmar (Burma) or the United States”. See for example Ivanhoe’s 2008 filing with US SEC.

Did “trust” administered under Canadian law violate Canadian Burma sanctions?

Tom Albanese the CEO of Rio Tinto which currently owns 49% stake in Ivanhoe revealed at a Rio Tinto shareholders meeting held earlier this year that Ivanhoe’s blind trust was administered under Canadian law. Attempting to deflect a question about Ivanhoe’s controversial actions in Burma Albanese claimed that “since the Trust was administered under Canadian law, what it did was none of Rio Tinto’s concern.” (This statement recorded by Roger Moody, a long time critic of Robert Friedland and Rio Tinto who attends the Rio Tinto shareholders meeting every year. See here. )

How a “trust” administered under Canadian law would be allowed to sell Ivanhoe’s 50% stake in MICCL back to the Burmese regime’s mining state owned enterprise is something that must be examined by the Canadian government. Under Canada’s present sanctions regime it would be illegal for a Canadian entity to sell something like Ivanhoe’s 50% stake in MICCL to a Burmese state owned firm.

The Canadian Pension Plan and the Quebec equivalent the Caisse Depot have a fiduciary responsibility to look into what happened with the trust. In particularly the Caisse, a publicly run entity controlled by the Province of Quebec must examine what happened given the massive 5.8% stake the Caisse currently owns in Ivanhoe.

Numerous Ivanhoe statements on Burmese mine disproven by cables

Back in 2009 CFOB issued a press release after we learned that Gerald Nugawela a self described former employee of Ivanhoe had stated in an SEC filing for his new firm that he had taken part in the sale of Ivanhoe’s Burmese assets to the Chinese Aluminum Company (Chinalco also referred to as Chalco in the US cables). See here.

Following our press release Ivanhoe posted an open letter to CFOB on its website attacking our organization’s credibility. The openletter dated April 2009 and written by Ivanhoe’s then President and Chief Executive OfficerJohn Macken not only denied that a sale had taken place but also denied that any Chinese aluminum firm was involved in any way in bidding for Ivanhoe’s stake in MICCL.

Ivanhoe’s open letter stated “Ivanhoe Mines is assured that Gerald Nugawela is not, and never has been, involved in any way, shape or form with the Monywa Trust’s 2007 acquisition, and subsequent offer for sale, of the interest in MICCL that formerly was held by Ivanhoe Mines. Ivanhoe Mines also is assured that the Monywa Trust is not associated with any Chinese aluminum business.” See here.

Macken instead chose to attack CFOB and claimed that our reporting on the matter was part of what he termed a “disinformation campaign”.

Contrary to Macken’s denial the Wikileaks cables show that Glenn Ford told the US embassy that the Chinese Aluminum Corporation had in fact been involved in the consortium negotiating with Ivanhoe. Going by the information disclosed in the leaked cables its clear that Nugawela’s brokering of the sale to Chinalco and its partners was vetoed by the Burmese regime which wanted ME-1 to get Ivanhoe’s MICCL stake. See here.

Several of the cables mention a Chinese Aluminum company’s involvement in the bidding for MICCL. Its clear that this is Chinalco but on the odd chance its some other Chinese aluminum company, Macken’s claim that no Chinese Aluminum firm of any kind was involved in the bidding for Ivanhoe’s Burmese assets is also untrue.

Cables show Tay Za’s “pivotal role” and his “right hand man” in Monywa deal

A cable dated September 2008 reveals that Ford was of the opinion that the Chinese consortium’s “connections to Tay Za play a pivotal role in the negotiations with the GOB [Government of Burma].” See here.

Another cable dated June 24 2009 states that Tay Zaw’s right hand man “Lu Lu, a.k.a. Kwan Lu Chan, Chan Kwan Lu, and Zaw Min, is Vice Chairman of Air Bagan and regime crony Tay Za’s top assistant and advisor” was brokering the deal on behalf of Tay Za. See here.

The cable describes Lu Lu as in the following terms “Known in business circles to be cunning and ruthless, Lu Lu boasts to businessmen that he taught Tay Za “all he knows.”

The June 2009 cable also quotes Ford as telling the US Embassy staff “that Lu Lu, working on Tay Za’s behalf, acts as liaison with several Chinese companies interested in acquiring MICCL’s shares in the Monywa copper mines”.

The cable quotes a businessman based in Burma named George Soon who provided more details about Tay Za’s relationship with Norinco, alleged weapons sales and the MICCL deal.

The cable states “Rumors abound that Tay Za has long smuggled Chinese weapons into Burma via his aviation and trading businesses. Soon alleges that Lu Lu, who has close ties to the senior management of Chinese firm Norinco (an alleged arms dealer that has business dealings in Burma), is the mastermind behind Tay Za’s involvement in the arms trade. According to Soon, Lu Lu introduced Tay Za to Norinco officials and has secured several business agreements between Htoo Trading and Norinco, including a partnership for a gold mine in Mandalay Division and a broker contract for Norinco’s planned purchase of MICCL”.

Cables confirm Ivanhoe execs stayed active in Burma after “trust” created

According to the MICCL website which was avaliable online till the end of 2011 but appears not to have been updated since 2010, Andrew Mitchell continued to serve as a board member of MICCL for at least three years after the so called transfer of Ivanhoe’s Burmese assets to the “trust”. Mitchell was described in a US embassy cable dated January 2009 as an “Ivanhoe Representative in Burma”. See cable here.

While Ivanhoe claimed to be in the dark about MICCL’s activities after the blind trust was created the MICCL website showed that as recently as 2010 Ivanhoe’s Executive Vice-President, Exploration Douglas Kirwin remained a director of MICCL along with Mitchell representing Bagan Copper Holdings, the entity formerly known as Ivanhoe Myanmar Holdings Limited, (the British Virgin Islands based holding firm that held Ivanhoe’s stake in MICCL). Oddly enough Ivanhoe ignored Kirwin’s continued role with MICCL failing to mention it in any financial reports or corporate filings published after 2007.

Burma’s state owned newspaper the New Light of Myanmar also shows that Kirwin continued to travel to Burma after 2007 and on at least two occasions in September 2009 and September 2010 gave presentations to the Myanmar Geosciences Society. See NLM Sept 2009 article and NLM Sept 10 2010 article.

(We have a screen capture of the MICCL website which shows that in 2010 both Mitchell and Kirwin were on the MICCL board representing Bagan Holdings formerly known as Myanmar Ivanhoe Holdings.)

At both of Kirwin’s presentations he was accompanied by fellow MICCL board member Mitchell. Dr. Mitchell an Oxford trained Geologist was described in the state controlled New Light of Myanmar in September 2010 as still being a representative of Ivanhoe Myanmar Holding Ltd (IMHL).

It was Mitchell who recklessly ordered his driver in December 2003 to drive to Aung San Suu Kyi’s house where she was under house arrest. Mitchell apparently thought that being an employee of a foreign company meant he could drive anywhere. When they approached Aung San Suu Kyi’s heavily guarded house they were stopped. His driver described as an employee of Ivanhoe by Burmese state media, was jailed by the Burmese regime for a lengthy sentence for the absurd charge of forcing Mitchell to drive to Suu Kyi’s house while being on drugs.

Tags: Canadian Friends of Burma, Ivanhoe Mines, Sanctions, Tay Za, Wikileaks

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Wikileaks: Junta Crony Brokered Ivanhoe’s Burma Sale to Chinese Arms Firm

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