African Minerals Ltd., the Sierra Leone iron-ore miner that’s plunged more than 70 percent in London trading this year, held an internal investigation into Chairman Frank Timis and a director over a $50 million payment.
The probe was completed last month and led to the resignation of director Dermot Coughlan, the company said in documents posted on its website today. Both Timis and Coughlan denied benefiting from the payment and the company said the probe didn’t prove or disprove allegations against them.
The payment was made to Global Iron Ore Ltd. after African Minerals canceled iron-ore sale agreements with the Cyprus-registered group in 2012, the document shows. The $50 million settlement to GIO Cyprus was agreed to by Timis, the founder and biggest shareholder of African Minerals, without board approval, the company said. No board sign off was required for the payment, it said.
Affidavits from the former chief financial officer of GIO Cyprus, who wasn’t named by African Minerals, and an investor in GIO Cyprus contained claims that Timis, Coughlan, his son Craig and a fourth person each owned 25 percent of GIO Cyprus “pursuant to a side agreement.”
A spokesman for Timis, who owns almost 13 percent of the company, and African Minerals declined to comment further on the report today. The spokesman also declined to comment on whether the investigation had found that Timis was a director or shareholder in affiliates of GIO Cyprus.
African Minerals rose 8 to 50.75 pence by the close in London, after earlier dropping as much as 9.6 percent. The stock declined 19 percent yesterday to its lowest in more than five years.
The company appointed Good Governance Group, known as G3, to conduct an independent investigation into the allegations. G3 completed its final report into the matter on July 16, finding that Dermot Coughlan had failed to disclose his position as a director of, or shareholder in, affiliates of GIO Cyprus.
African Minerals, which has spent more than $2.5 billion on its Tonkolili mine, announced Coughlan’s resignation on July 16. No reference to the investigation was made at the time.
“His failure to disclose his position and interest subjected African Minerals to a heightened risk of improper transactions in dealing with GIO Cyprus,” the company said in today’s document. “The investigation reported that there was a lack of clear and transparent governance at the time of African Minerals’ dealings with GIO Cyprus and weaknesses in systems and controls evidenced by a lack of due diligence, written policies and written contracts.”
No allegations were made against African Minerals and it isn’t aware of any direct action having been taken against Timis or Dermot Coughlan regarding the allegations.
“While Frank Timis and Dermot Coughlan strongly denied the allegations, the independent investigation did not discover any direct evidence to support the allegations, which therefore were neither proved nor disproved,” African Minerals said.
“The investigation was subject to a number of practical limitations, such as the lack of keyword searches on relevant computer servers due to the expected limited utility of such searches and the lack of cooperation from GIO Cyprus and key individuals,” it said.