The UK watchdog has launched a criminal investigation into allegations of fraud, bribery and corruption on London-listed Kazakh miner Eurasian Natural Resources Corporation (ENRC).
The probe comes when a group of shareholders led by co-founder Alexander Machkevitch are mulling to take Kazakh miner private for $6-billion. (See: ENRC co-founder plans $6-bn bid for Kazakh miner)
The UK Serious Fraud Office (SFO) said,"The focus of the investigation will be fraud, bribery and corruption relating to the activities of the company or its subsidiaries in Kazakhstan and Africa."
The company had last month hired the London office of US law firm Dechert to conduct investigations after a whistleblower alleged corruption at the company's Kazakhstan and African operations.
Dechert left the investigation midway but the SFO demanded that it hand over documents relating to the case.
The Guardian reported that Dechert's investigation was hampered by the company employees ''forging electronic documents, supplying the wrong computer to the investigation team and setting up a false office.
Some of the allegations include the acquisition and maintenance of a farm in Kazakhstan by a director of ENRC subsidiary Sokolovsko-Sarbaiskoye Mining Production Association (SSPGO) being though SSGPO funds, and paying for the entire US college fees of the son of Kazakh regional police commander from SSPGO workers' education fund.
The company was also involved in a business partnership with highly controversial Israeli billionaire Dan Gertler in the Democratic Republic of Congo, where they jointly held copper-mining company Camrose Resources.
Following months of pressure from British politicians and NGO's ENRC finally acquired Gertler's 50-per cent stake in Camrose Resources for $550 million.
Gertler has been accused by campaigners of being close and bribing Congo's President Joseph Kabila to get mining licences in the country at cheap prices.
Transparency campaign group Global Witness had criticised ENRC for using Gertler, who works from secretive offshore companies in the British Virgin Islands to pay corrupt local politicians at the cost of the poor Congolese.
Mehmet Dalman, chairman of ENRC who surprisingly resigned from the company early this week, had also conducted a parallel investigation.
Dalman's resignation comes shortly after three other directors Victoria Penrice, Tony McCarthy, and Stuart Nolan, also quit.
ENRC has recently emerged from a bruising boardroom battle, which saw deputy chairman Sir Richard Sykes and non-executive director Ken Olisa being removed from the board, while Dalman, a former banker was appointed chairman in place of Johannes Sittard.
The bitter boardroom brawl plus an aggressive six-year acquisition spree that burdened ENRC with debt of $5 billion, has led to its stock price falling by 57.5 per cent since its 540 pence-a-share IPO in 2007.
The miner is also facing a January 2014 deadline to exit the FTSE 100 or lift its free float under new stock exchange rules. Its free float is currently is less than 20 per cent, and media had speculated that the company would issue new shares to meet the requirements.
With annual revenues of $7.7 billion, ENRC is a large diversified natural resources group with main production assets located in Kazakhstan.
Apart from Kazakhstan, ENRC also operates in China, Russia, Brazil and Africa, including the Democratic Republic of Congo, Zambia, Mozambique and South Africa.
The company's divisions include ferroalloys, iron ore, alumina and aluminum, energy, logistics and other non-ferrous. ENRC controls sizeable proven reserves of minerals including chromium, manganese, iron ore, bauxite coal, copper and cobalt.