Sierra Rutile bribery scandal unlikely to affect Iluka operations

PERTH (miningweekly.com) – ASX-listed mineral sands miner Iluka said on Wednesday that a bribery scandal at its recently acquired Sierra Rutile operations, in Sierra Leone, was unlikely to have a material impact on the company.

Reports emerged this week that Iluka had uncovered suspected bribe payments made by London-listed Sierra Rutile, prior to Iluka acquiring the company in a A$375-million transaction in December of last year.

The Sydney Morning Herald reported that the alleged corruption included allegations that the UK firm’s former CEO and Sierra Leone Presidential candidate, John Sisay, oversaw bribe payments to senior government officials to secure mining licences, which have now been inherited by Iluka.

It is alleged that the UK firm also spent more than A$50 000 to provide Sierra Leone Cabinet Minister Diana Konomanyi with international flights.

Iluka on Wednesday told shareholders that the company had alerted authorities in the UK and Sierra Leone of the alleged offences, after conducting a post-acquisition review of Sierra Rutile.

Iluka chairperson Greg Martin said in April that some aspects of pre-acquisition conduct by Sierra Rutile were “inconsistent” with Iluka’s code of conduct, and remarked, at the time, that the company did not consider these matters to be “financially material” to the company.

The miner has maintained this position, saying it did not anticipate any impact on its operations as a result of these issues.

“Iluka is committed to conducting its business in accordance with the highest standards of corporate governance and has a zero tolerance for bribery and corruption,” MD Tom O’Leary said on Wednesday.

The company was unwilling to give more comment on the issue, given that it is under active investigation by the relevant regulatory authorities.

With its acquisition of Sierra Rutile in December last year, Iluka took ownership of four mines producing rutile, titanium dioxide, ilmenite and zircon.

Iluka will be spending some $60-million over the next two years on operational and safety performance improvement measures at Sierra Rutile, subject to developing detailed plans and obtaining any necessary regulatory approvals, as well as the company’s normal capital expenditure approval.

Meanwhile, the ASX-listed miner on Wednesday also announced a 49% increase in revenue for the first six months of 2017, compared with the previous corresponding period, while the net loss after tax decreased by 290% on the back of a A$106-million post tax impairment on the Hamilton mineral separation plant, which will be placed on care and maintenance in October this year.

Revenue for the interim period increased from A$338.4-million to A$503.6-million, while underlying earnings before interest, taxes, depreciation and amortisation increased from A$41.9-million to A$123.5-million.

The net loss for the period decreased from a loss of A$20.9-million to a loss of A$81.5-million.

“These results reflect improved market conditions for both zircon and titanium dioxide products. Iluka’s cash flow generation was a highlight for the half, with operating cash flows up A$209-million to A$194-million, and free cash flow of A$180-million,” said O’Leary.

“This enabled significant reduction in net debt and a return to moderate gearing levels of 23% following the acquisition of Sierra Rutile in December 2016.”

O’Leary told shareholders that the profit results reflected the June decision to consolidate Iluka’s Australian processing operations and to idle the Hamilton plant, resulting in the on-off impairment charge.

However, he noted that the significant improvement in the underlying result was encouraging, and had enabled Iluka to announce an interim dividend of 6c a share.

The miner has increased its full-year production guidance from 720 000 t to 795 000 t, following revisions to mineral separation plant settings. Of the full-year production target, zircon was expected to account for some 310 000 t, while rutile would account for 280 000 t and synthetic rutile for 205 000 t.