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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