The chief executive of BSG Resources Ltd. resigned in August, a departure the company hasn't previously disclosed, amid a financial storm at the miner controlled by Beny Steinmetz, one of Israel's richest men.

Brett Richards bared new details of the company's financial troubles, saying he left during what he described as tense negotiations between BSGR and the government of Sierra Leone over how the company's mining arm, Octea Ltd., was operating its Koidu diamond mine. The mine supplies most of its diamonds to retailer Tiffany & Co.

The mine's operator had come under fire for missing payments to contractors, creditors and Sierra Leone, Mr. Richards said in an interview this week.

He had been leading an effort to sell the Sierra Leone mining assets for the past few years but had failed to strike a deal, in part because of the ebola outbreak, which he said made it difficult for investors to inspect the mine. He also had looked into a public offering of shares in BSG Resources.

Mr. Richards said he resigned because Mr. Steinmetz had rejected a deal to sell the company.

BSGR Director Dag Cramer, speaking on behalf of the company and Mr. Steinmetz, said the Guernsey-based company is committed to staying in Sierra Leone, and that it plans to pay all of its obligations. "We are paying our creditors according to concessions that have been made," he said in an interview.

He also said the company didn't favor the deal Mr. Richards proposed. Mr. Steinmetz, whose businesses range from real estate to engineering, has owned Koidu since 2003, when he gained control of it at the end of a decadelong civil war in Sierra Leone.

BSGR's financial wrangles in Sierra Leone occurred as the company separately battled with Guinea over Simandou iron-ore assets that the Guinea government stripped from it in 2014. That government has alleged that people connected to BSGR bribed government officials to obtain the license to operate the Simandou assets. The Wall Street Journal reported in March that the U.S. Justice Department was investigating BSGR over its dealings in Guinea, and that the probe could yield up to a half-dozen indictments. No charges have been filed.

A BSGR spokesman told the Journal at the time that there was "no evidence linking BSGR and its employees to corruption in Guinea." The company continues to insist it has done nothing wrong in Guinea.

In Sierra Leone, the government has sent multiple letters over the past year threatening BSGR with the loss of its mining license for its alleged failure to pay fees to contractors and the government, among other alleged violations, said people familiar with the letters. Sierra Leone government officials didn't immediately respond to a request for comment.

In August, Standard Chartered Bank sent a letter to Octea—formerly named BSGR Diamonds Ltd.—saying the company "failed to comply with your obligations" by not paying installments on a $92 million loan made in 2011. "This means an Event of Default…has occurred and is continuing," the letter reviewed by the Journal says. A spokesman for Standard Chartered declined to comment.

A unit of Tiffany that lent the company $50 million in 2011 has deferred payment demands on the loan, according to the New York-based retailer's regulatory filings. A Tiffany spokesman declined further comment.

Talks over how to handle problems at Koidu came to a head in August, when Mr. Richards met with several Sierra Leone government officials to discuss Koidu.

Mr. Richards recommended that the government threaten to demand immediate payment of the fees BSGR owed it, according to a recording of part of the meeting reviewed by The Wall Street Journal. He said he believed BSGR wasn't seriously pursuing a sale and needed to be "hit with a big stick" to motivate it.

"I don't like the direction the shareholder is taking the business," he said in the meeting, referring to Mr. Steinmetz and the billionaire's business partners.

Mr. Richards said he was trying to help BSGR resolve a difficult situation, since it was laden with more than $100 million in debt and he believed it didn't have the cash to fund an underground expansion at Koidu that will help it keep producing diamonds for several more years. Without the expansion, he said its output will grind to a halt next year. BSGR's Mr. Cramer said it can finance the expansion.

"I didn't do anything wrong; in fact, I did everything right with a very difficult employer," Mr. Richards said.

The recording of the August meeting was made without Mr. Richards's knowledge, he said, and he doesn't know who made it.

Mr. Cramer said Mr. Richards was acting contrary to specific directions from BSGR's board to tell the Sierra Leone government that the company planned to meet its financial obligations and expand the mine. "He was supposed to tell them 'we're staying, we're paying.' He goes down and says something else," Mr. Cramer said.

Sierra Leone continues to review Octea's license for Koidu and could strip the company of its right to operate the mine in the coming months, according to people familiar with the deliberations. It also could decide to let the company continue to run the mine in the absence of other viable operators, another person familiar with the matter said.

Mr. Richards, a longtime mining executive in Africa, joined BSGR—the mining arm of Mr. Steinmetz's family-owned conglomerate—in 2012 as CEO of Octea. He was appointed CEO of BSGR in January 2014.

 

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(END) Dow Jones Newswires

November 09, 2015 20:45 ET (01:45 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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