VALE Vale SA

An internal Rio Tinto PLC investigation raised questions about whether company executives followed rules for paying people close to government officials in foreign countries, a finding that helped lead to the dismissal of two top officials this week.

The probe, which was related to a large payment to a consultant of the company in the West African nation of Guinea, turned up no evidence that top Rio Tinto executives were aware of any bribes paid to Guinean government officials, a person familiar with the matter said.

The abrupt firings this week of energy and minerals chief Alan Davies , as well as head of legal and regulatory affairs Debra Valentine, followed a review of internal Rio Tinto emails detailing $10.5 million in payments made in 2011 to a consultant who helped acquire rights to a massive iron-ore deposit in Guinea.

The dismissals sent shock waves through the British-Australian mining giant's executive ranks, particularly angering allies of Mr. Davies, who said he wasn't given a chance to defend himself, according to people familiar with the matter.

The emails, which were reviewed by The Wall Street Journal, show Mr. Davies asking permission from the company's then-iron-ore chief, Sam Walsh, to make the payments to Franç ois de Combret, a former Lazard Ltd. managing director.

Mr. de Combret had been helping the company negotiate with the Guinean government to retain an iron-ore concession in the country's Simandou mountain range, according to Mr. Davies's email, and his services "were of the most unique nature," including helping the company's communications with Guinea's president, Alpha Condé . Mr. Condé was at the time being advised by Mr. de Combret, a friend he had met in school in Paris, according to a person familiar with the matter.

Mr. Walsh, who later became Rio Tinto's CEO in 2013, checked the idea with Tom Albanese, the company's then-chief executive, who gave the green light but warned Mr. Walsh to "think of the optics to the [government of Guinea.]," according to the emails.

Both Messrs. Walsh and Albanese are no longer with Rio Tinto.

The Guinean government wasn't notified by Rio or Mr. de Combret about the payments to Mr. de Combret, a person familiar with the matter said.

Mr. Albanese, currently CEO of India-focused miner Vedanta Resources PLC, declined to comment. Mr. Walsh, who stepped down in July, Mr. de Combret, and Ms. Valentine couldn't be reached.

Rio did retain the rights to Simandou deposits that year, though it sold them this year to Aluminum Corp. of China for up to $1.3 billion.

An internal Rio Tinto investigation, which was conducted in the past few months, aided by the Chicago law firm Kirkland & Ellis LLP, raised questions about whether standard procedures and reviews involving such payments were strictly followed, the person familiar with the internal company probe said.

Such reviews typically entail referrals of details of the payments and their recipient to internal compliance officers, among other things.

Rio Tinto has said it has turned the emails and additional information about the payments over to authorities in the U.K., Australia and the U.S. Law-enforcement agencies from the three countries haven't said whether they are investigating.

In a statement Wednesday, Mr. Davies said Rio Tinto has "given me no opportunity to answer any allegations" and that he has "been left with no option but to take the strongest possible legal action in response" to his dismissal.

Rio Tinto Chief Executive Jean-Sé bastien Jacques on Sunday addressed the tensions simmering across the company, sending an internal memo on Sunday, reviewed by the Journal, saying employees are "shellshocked."

"Speculation is running in some quarters and some of what is being said strikes at the heart of the culture and values of our company," Mr. Jacques wrote.

The dispute highlights tensions between Rio Tinto's iron ore and copper divisions. Mr. Jacques rose to power through the copper unit, while Mr. Davies was a longtime iron-ore executive.

One of Mr. Jacques's first moves after taking over as CEO earlier this year was to cancel Mr. Davies's Simandou project and sell the assets. People familiar with the matter say some high-level iron-ore employees have been angered by how Mr. Davies has been treated.

Rio Tinto, like most big miners, has emphasized a renewed focus on human-rights issues. In March 2015, Mr. Walsh, then Rio's CEO, said in a speech in London that one of his most important considerations is "the lives of our neighbors in the communities and countries that host us."

Rio first secured exploration rights to Guinea's Simandou iron-ore deposit in the 1990s, but was slow to develop it. In 2008, the government stripped the miner of half of concession and awarded it to BSG Resources Ltd., or BSGR, the mining business of Israeli billionaire Beny Steinmetz. BSGR later struck a deal to sell a 51% stake to Vale for $2.5 billion.

An investigation by Guinea's government later determined that BSGR obtained the rights through corrupt dealings and stripped them from the company. BSGR denies the allegations. Rio entered negotiations to retain the rest of the concession, which it concluded in 2011 in a deal that included a $700 million payment to the Guinea government.

Write to Scott Patterson at scott.patterson@wsj.com

(END) Dow Jones Newswires

November 17, 2016 17:05 ET (22:05 GMT)

Vale (NYSE:VALE)
Historical Stock Chart
From Mar 2024 to Apr 2024

Vale (NYSE:VALE)
Historical Stock Chart
From Apr 2023 to Apr 2024