JUNE 1997 · VOLUME 18 · NUMBER 6
E C O N O M I C S
JUNE 1997 · VOLUME 18 · NUMBER 6
E C O N O M I C S
The Ugly Canadian (see "The Ugly Canadian," Multinational Monitor,
November 1994) -- or "Toxic Bob" as he's also sometimes called -- has, in the
space of four short years, transformed himself from the pariah of North
American mining into the "Man with the Midas touch." That's what investment
institutions, the media and mining analysts are now dubbing the Canadian mining
magnate, Robert Friedland. Friedland's mining empire extends from Indonesia to
Fiji to Zambia.
The urbane, clean-cut, 47-year-old ex-hippy Friedland first shot into the public spotlight in 1990, after the calamitous failure of the Summitville gold heap-leach project in Colorado, which was mal-constructed by his company Galactic Resources. According to Vancouver-based financial analyst Adrian Duplessis, remediation measures to contain the heavy metal pollution from this mine have already "cost the American people well over $100 million."
|
ONE OF ROBERT FRIEDLAND'S closest business associates has also recently become embroiled in deals with private armies. Born in Mauritius and now resident in Monaco, diamond dealer Jean-Raymond Boulle initially worked for the world's biggest diamond producers, Anglo-De Beers, cutting his teeth in Zaire. Boulle branched out on his own in 1984, first in Minnesota and then in Arkansas, where he claims to have interested former governor Bill Clinton in exploiting the diamond potential of his home state. Mild-mannered and soft-spoken, Boulle seems the antithesis of the brash and bullying Friedland, but the two teamed up comfortably to form Diamond Fields Resources (DFR) in December 1993. The Canadian had access to cash; the Mauritian had experience in the diamond markets. In 1996, after DFR sold its 75 percent interest in Voisey's Bay to Inco, Boulle set up American Mineral Fields (AMF), taking many of DFR's staff with him, but also recruiting senior management from Anglo De Beers and, like Friedland, from RTZ. He quickly pledged support for rebel leader Laurent Kabila's Alliance of Democratic Forces for the Liberation of Congo-Zaire (AFDL). In March 1997, against stiff competition from both foreign and domestic companies, AMF won a $1 billion tender for Zaire's vast cobalt, copper and zinc reserves at Kolwezi and Kapushin; it also secured a diamond contract in Zaire's Kasai Oriental province. While he may be forced to team up with Anglo-De Beers and state-owned Gecamines, Boulle may well have struck a secret, long-term deal with Kabila and upper echelons of the AFDL. The Mauritian is said to have loaned his private jet to the rebel leader and contributed up to $20 million to the "war effort."
John Clemmow, an analyst for the Johannnesburg firm, Investec, warns: "Boulle
has goals beyond copper and cobalt ... and could challenge De Beers in the
Zaire diamond market." |
Friedland resigned all his positions at Galactic in 1990, as the U.S. Environmental Protection Agency (EPA) began building a criminal case against him and his fellow directors. In May 1996, trustees for the bankrupt Summitville mining company (a wholly owned subsidiary of Galactic) pleaded guilty to 40 felony counts, mostly related to unauthorized pollutant discharges at the Colorado mine. The trustees were hit with the maximum $20 million penalty. "This sets a tone that significant crimes were committed at the mine," says U.S. assistant attorney Ken Fimberg.
Meanwhile, Friedland escaped U.S. enforcement agents by moving both his assets and himself from the United States. He had also masterminded one of the biggest mining deals anywhere in the last 20 years. It centered on a company called Diamond Fields Resources (DFR), which began trading on the Toronto Stock Exchange in 1994.
DFR started out drilling for diamonds in the relatively unexplored Voisey's Bay area of Labrador, and within eight months the company had struck a vast base metal lode, containing huge resources of nickel, cobalt and copper. Less than two years later, Inco, the Canadian company which is the world's largest nickel miner, acquired DFR for $4.3 billion. Friedland, who owned 13 percent of DFR stock, pocketed an estimated $500 million in the deal.
The state of Colorado and the EPA were incensed that Friedland had slipped from their grasp and then collected such enormous personal profits from the Inco deal. In August 1996, they obtained secret Canadian and U.S. court orders freezing shares worth $152 million which Friedland got from the payout on Voisey's Bay. A belligerent Friedland retaliated by accusing the U.S. authorities of "legal stealth" and "surreptitious and high-handed tactics." Believed to be the first time the U.S. government had attempted to seize assets abroad in order to finance a domestic environmental clean up, the move ultimately failed after a Canadian court ordered Friedland's shares released.
As he escaped liability for Summitville and cashed in on the DFR find in Voisey's Bay, the Man with the Midas touch was scheming to cast his corporate web over at least a dozen other countries, including Mongolia, China (where his Shanghai Land Corp. builds houses from plastic panels for the poor), the Canadian Yukon and the Northwest Territories. While most of his overseas forays would continue his lucky streak, they would also lead him into yet another great scandal, this time in Papua New Guinea.
KNOWING WHO TO KNOW
It is on the Asia-Pacific region that the astute alchemist is now focused. As calls for his indictment over Summitville grew louder in 1994, Friedland shifted his main investment vehicle, Ivanhoe Capital Resources, from Vancouver to Singapore. Vengold, a company Friedland initially used to penetrate the gold-rich eastern flank of Venezuela, became mining giant RTZ's junior partner in the vast Lihir gold project in Papua New Guinea. At the same time, efforts in Burma began paying off. In 1990, Friedland had been the first foreign mine promoter to ignore calls for a boycott of SLORC, the Burmese military regime. His Indochina Goldfields has a copper exploitation deal with the state-owned Number One Mining enterprise and has spent over $30 million exploring and drilling the indigenous territory of Burma's central valley. Friedland "seems to thrive in countries that have dodgy governments, that are reputed to be corrupt," says John Woods of Canada Stock Watch. Friedland himself has said: "To do business in Asia you not only have to know how, you have to know who." And in Burma he certainly knows who. One of Indochina Goldfields directors is Reggie Tun Maung, a Burmese national who has intimate connections to the SLORC. John Woods suggests that Friedland's Burmese partners in Indochina Goldfields may be the Burmese generals themselves.
Indochina Goldfields has also penetrated Fiji, where the company has acquired significant interests in the Emperor Gold Mines and recently announced it would finance prospecting throughout the region. Emperor has the longest record of wilful exploitation of indigenous labor of any mine in the South Pacific.
Friedland is also active in Vietnam and Indonesia. Friedland has forged a close relationship with one of Indonesia's richest exploiters, Johannes Kotjo. As part of his marriage dowry to the Ugly Canadian, Kotjo offered 90 percent of his Setdco Mining Corp in 1995 to another Friedland corporate operation, First Dynasty. This share in Setdco included an 81 percent interest in the large Montagu Minika contract of work in West Papua, a promising site for copper and gold. First Dynasty also has major stakes in oilfields on Kalimantan (Indonesian Borneo) and goldfields on Java.
In 1996, Friedland bought a $7 million luxury villa at Point Piper, in Sydney Bay, Australia, where he plans to spend half the year. It put him in a good strategic position to claim Australian citizenship, should he need to abandon his Canadian citizenship. Coincidentally or not, it also set him on his feet in the southern Pacific, just before the region's biggest-ever mining-related scandal began to break.
THE SANDLINE SCANDAL
In August last year, British-born Colonel Tim Spicer offered the services of his mercenary company, Sandline, to Sir Julius Chan, then-prime minister of Papua New Guinea. Prompted by a proposal originated by fellow mercenary Tony Buckingham, Spicer promised Chan he could mount an invasion of the central area of Bougainville island, and recapture the Panguna copper mine. Panguna was a heavily polluting project, operated by the world's biggest mining company RTZ (through its Australian subsidiary, CRA), which had been a major source of local discontent and nationalist sentiment since construction started nearly 30 years ago. RTZ's rejection of indigenous landowners' compensation claims in late 1988 provoked a sabotage attack upon the mine. This attack triggered an island-wide independence movement, the Bougainville Revolutionary Army (BRA) and, later, an interim government. RTZ pulled out of Bougainville in 1989, abandoning the mining area, which then became the stronghold of the BRA. Meanwhile, although Papua New Guinean forces have managed to reclaim around two thirds of the island through brutal methods, central Bougainville remains firmly under BRA control.
The latest in a bloody series of "final" attempts by Papuan military forces to recapture Panguna abjectly failed in 1996, causing personal humiliation to Chan. Even Papua New Guinea's strongest ally, the Australian government, balked at continuing to finance the escalating savagery.
The Spicer-Buckingham grand plan must have seemed a godsend to Chan. For $27 million, paid to mercenaries under Spicer's command in Sandline, the companies promised to deliver Panguna swiftly back into Papua New Guinean hands, hopefully without the loss of a single government soldier. Buckingham's Executive Outcomes (EO) also came with what must have seemed like impeccable military credentials. Drawn largely from British special forces and South Africans who had fought the African National Congress before South African independence, EO had recently masterminded several battles against rebels in West Africa. It recaptured the Sierra Rutile mine in Sierra Leone and crucial diamond fields in both Sierra Leone and Angola.
A company called Branch Energy, also headed by Buckingham, had technically managed the EO successes in Africa. Branch Energy now owns some of the West African diamond fields it captured in 1995. The ownership and control relationships between Branch Energy, Executive Outcomes (EO) and Sandline are not known. Branch Energy and Sandline share the same registered London address and are both connected to another shadowy company called Plaza 107.
In any event, these hidden connections matter less than one further startling fact which only emerged in April this year: EO, Branch Energy and Sandline have now concentrated much of their existing finance, and lines of management control, in a new company called DiamondWorks. And DiamondWorks is indisputably a Friedland company.
Largely to restructure his diamond interests in DFR after the Inco takeover, Friedland created DiamondWorks in 1996, changing the name and reorganizing a company previously called Carson Gold. DiamondWorks has mining claims in Canada, and some gold projects in China. But its major concern has been to maintain control over the lucrative Koidu diamond property in Sierra Leone which it acquired in 1994, before anti-government forces overran the diamond fields. Executive Outcomes/Branch Energy fielded the mercenary force that recaptured Koidu in early 1996. This was apparently the point at which DiamondWorks met Branch Energy and the two agreed to merge.
Michael Grunberg, a director of DiamondWorks, negotiated Friedland's Koidu concessions with the Sierra Leone government and is both financial adviser to Sandline International and a senior executive of Branch Energy.
Tony Buckingham holds 125,000 share options, through two of his other companies, Hansard Management Services Ltd. and Hansard Trust, making him the biggest potential shareholder in Diamondworks. Tim Spicer also has substantial stock options. Although Friedland's Vancouver media officer, Bob Williamson, told Australian researcher Stan Correy that the Ugly Canadian only holds 3 percent of the company, the London Mining Journal has discovered otherwise: "Robert Friedland is a major shareholder in DiamondWorks through his control of Madras Holdings which holds a 21.2 percent interest," declared the world's leading mining publication in March of this year. And Friedland's brother, Eric, is DiamondWorks' president.
Spicer's motley band of mercenaries never got to Panguna. Outraged at such crass foreign intervention, Papua New Guinea's defense chief, Brigadier Singirok, demanded the mercenary scheme be abandoned. With the vast majority of his fellow citizens behind him, Singirok forced the discredited Chan to step aside. A judicial commission of inquiry was set up in the capital Port Moresby, to hear testimony from all sides on the "Sandline affair." When it finished in mid-May, the inquiry left little doubt of the connections between EO, the mercenaries and Branch Energy.
RTZ AND THE VANCOUVER SALESMAN
More than a decade ago, Robert Friedland first shook hands with RTZ-CRA, when his ill-fated Galactic Resources sold a 30 percent share in the Philippine Far South East project (based in the country's indigenous Cordillera region) to RTZ. Since then, the two have never been far apart. The most intriguing potential convergence of their interests centers on the southeastern ranges of West Papua (Indonesian-controlled Irian Jaya). Here RTZ, along with the U.S. mining corporation Freeport McMoRan, controls a 5-million-acre exploration contract of work in one of the world's richest copper and gold belts. Friedland's 500-square-kilometer contract of work borders Freeport-RTZ's concession, making a future corporate link-up very likely. Several key RTZ staff have joined the Friedland camp since 1994. Most notable are Marcus Randolph, who became president of First Dynasty after working as a top RTZ executive, and Gordon Toll. The latter resigned in November 1995 as RTZ group mining executive, in order to become executive vice president of Indochina Goldfields.
Others poached from or provided by the global giant include Lee Caldwell, now in charge of Friedland's "environmental and community relations" and formerly RTZ's associate general counsel for wholly owned Kennecott Copper, and Nick Bridgen, who worked for 14 years with RTZ, and then served four years as finance director of Friedland's Bakyrchik Gold, until resigning in early 1997.
It is quite remarkable for so many key players in a group of junior mining outfits to be recruited from one major company over less than three years. It is unlikely that RTZ would have easily let go men of the caliber of Toll and Randolph unless the company stood to benefit from further deals with Friedland. The more pressing question is whether the world's premier mining company was in any way involved in the Sandline conspiracy: after all, it was RTZ's mine on Bougainville which the mercenaries were supposed to seize.
Bougainville Copper Ltd. (BCL) is 53 percent owned by RTZ. At its annual general meeting held in Port Moresby this April, BCL's chairman David Karipn vigorously denied any knowledge of the mercenary deal, declaring that the company "does not believe that the use of mercenaries, or indeed any other military initiative, would have a lasting solution to the conflict." Having learned from nine years bitter experience that you cannot simply foist a mine on the indigenous communities of Papua New Guinea, least of all on Bougainville, the British-Australian company probably had the sense to avoid any direct association with a military putsch. Nonetheless, RTZ may well have been kept unofficially abreast of Chan's plans to recapture the minesite and his later offer to buy out the company's commanding share.
The cost of re-opening the Panguna mine was recently estimated by BCL at around $450 million. That figure does not appear to include insurance or long-term rehabilitation plans, although it does include some provision for compensation payments to landowners for polluted land and water. Any serious offer to buy BCL's shares at par value would acquit the company, not only of carried debt and interest repayments, but also of the enormous problems and expense of working from scratch in an area from which it was chased at gunpoint by a revolutionary force of local landowners.
Even more speculative is any arrangement between Friedland and RTZ to share the spoils of a recaptured Panguna mine. However, no one has yet explained how Sandline or the Papua New Guinean government expected to resurrect the project without attracting enormous new investment in capital and equipment, and the experience of a world class mining company. Friedland might well have been counted on to provide the capital, and he might have expected to call on his friends in RTZ to provide the mining expertise for re-opening the mine.
The collapse of the Sandline/Buckingham/Chan conspiracy, and the exposure of DiamondWorks as a Friedland front, will likely ensure that there will not be any similar initiatives in Papua New Guinea, and that Friedland will never get a stake in the Panguna copper mine, if it ever starts up again.
Elsewhere in the Asia-Pacific region, indigenous communities and people's organizations cannot be so sanguine. Friedland commands unrivaled access to new mining investment in disputed, strife-torn and frontier areas, which the bigger mining companies will not penetrate, whether out of political sensitivity or for fear of burning their fingers.
A few years ago, the "Friedland phenomenon" could be blamed on the weakness of stock exchange oversight, and the lack of fiduciary regulation of Canadian junior mining companies. But this is no longer a sufficient explanation, either for his durability or his growing financial power. The Ugly Canadian has now spread his wings far beyond the Americas and the two products -- gold and diamonds -- on which he grew fat. Since 1994, Friedland has been moving into the copper market, and securing key positions in both Burma and West Papua. His rise to power is a symptom of the New World Trade Order, as Southern states abandon longstanding protectionist investment rules, allow the dismemberment of state-owned mining companies and connive in the abandonment of any global standards for how and where resources can be mined.