Guinea President Says Rio Payment Saga Tied to Internal Feud

GUINEA (Capital Markets in Africa) – The President of Guinea is disputing public statements made by Rio Tinto Group regarding the firing of a senior executive for a $10.5 million payment made to the president’s friend Francois de Combret.

President Alpha Conde said the firing of Alan Davies, who headed Rio’s $20 billion Simandou iron ore project in Guinea, was the result of an internal feud. Rio has said it was because of improper payments to de Combret in 2011 for assisting the company’s negotiations with Conde on the mine.

Davies had been seen as a challenger to Jean Sebastien Jacques prior to the Frenchman becoming chief executive officer in July.

“In reality, it was a settling of scores because the new CEO wanted to get rid of Alan Davies,” the 78-year-old Conde, who’s been president since 2010, said in an interview on Wednesday in Davos, Switzerland.

Following an internal probe, Rio in November alerted authorities including the U.S. Department of Justice and the U.K.’s Serious Fraud Office to a $10.5 million payment made in 2011 to de Combret, a veteran French investment banker. The fee was compensation for his assistance in negotiations with Conde, a university friend, after Rio agreed to pay Guinea $700 million to keep hold of its licenses in the country.

Davies and de Combret declined to comment. Davies has previously said there were no grounds to fire him and has vowed to take legal action. Rio also dismissed its head of legal and regulatory affairs following its probe into the payment.

“The decision was taken by the Rio Tinto board, under my leadership, following a thorough review of the findings of the comprehensive internal investigation, supported by external counsel,” Chairman Jan du Plessis said in an e-mailed statement to Bloomberg News. “The review demonstrated that both executives had failed to maintain the standards expected of them under Rio Tinto’s global code of conduct. The matter is now with the regulators in the U.S., U.K. and Australia.”

Simandou Payment
The payment came to light in late October after internal e-mail correspondence, seen by Bloomberg, showed Davies explaining to then CEOTom Albanese that de Combret had provided “very unique” services and had a “closeness to the president” that helped Rio to retain licenses.

“He vouched for our integrity when it was needed and helped bring us together when things were looking extremely difficult,” Davies wrote in a 2011 e-mail, seen by Bloomberg News, to the head of the company’s iron ore division at the time, Sam Walsh, in which he requested the payment. “These services were of the most unique nature, and we will never fully be able to judge the potential outcome if he was not assisting in us in good faith.”

Conde says the government wasn’t aware of any relationship between Rio and de Combret.

“They’re settling scores because Alan Davies never hid the contract,” Conde said. “Rio Tinto knew because they signed it. In Guinea, we never knew there was a contract between Rio Tinto and de Combret. It’s a pretext to get rid of an individual quite simply.”

$700 Million
While Conde said he’s been friends with de Combret since studying at university in France together, he denied that the former Lazard Ltd. banker ever had a role in his government and was never in a position to influence his decision-making. He said his advisers were only seeking a $400 million payment from Rio Tinto before he insisted on the final $700 million amount.

“He was not working for me,” Conde said, adding that the only paid adviser to the government at the time was the George Soros-backed Revenue Watch Institute. “I have many friends in France. They come some time to Guinea and we talk. None of them has a role, not adviser or anything.”

“If de Combret would have an influence on me do you think I could be in a position to impose a $700 million penalty on Rio Tinto?” he said.

The comment conflicts with a statement from Guinean Mines MinisterAbdoulaye Magassouba, who, in November, said de Combret was “acting in a capacity that would have given him access to highly confidential information.”

Simandou was once one of the world’s most prized mineral assets. It has been at the center of a power struggle for almost a decade, having attracted some of the biggest mining companies, Israeli billionaire Beny Steinmetz and powerful advisers including Soros and former U.K. Prime Minister Tony Blair. It also spawned many legal challenges and a U.S. grand jury probe into potentially corrupt payments to Guinean officials.

Rio Tinto exited the Simandou project in October, selling its stake in the asset to partner Aluminum Corp. of China, or Chinalco, after failing to attract the funding needed to develop it. Conde said China had been unwilling to help finance the project unless Chinalco had a controlling stake.

The government is currently reviewing the project with Chinalco and hasn’t set the Chinese company any firm deadlines on first production, he said. The government has yet to decide on when it will put out for tender two of the four licenses covering Simandou that it stripped from BSG Resources Ltd. in 2014, Conde added.

Conde became the nation’s first freely elected president after spending much of the previous two decades opposing then-leader Lansana Conte. He survived an assassination attempt in 2011 when the presidential residence was shelled, and won a second term in October 2015.

The president said Rio shortlisted a few people known to be close to him as candidates to be a consultant. He said they included de Combret, Blair and ex-French Foreign Minister Bernard Kouchner.

“Rio got its license over Simandou 14 years before I became president and there was no move,” he said. “It is a tragedy for Guinea” that the mine has never been developed, he said.


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