Ground Breakers: Rio Tinto $22 million lighter as air clears over SEC Simandou probe, Sayona $55m heavier after cap raise

Rio Tinto draws line under Guinea consultant scandal, agreeing to US$15 million SEC penalty
Sayona raises ~$55m for lithium exploration in flow though share issue
Navarre gains $5m support of New York backers for Mt Carlton mine exploration

Rio Tinto’s (ASX:RIO) long and winding road to the development of the Simandou iron ore mine in Guinea is almost at an end.

An infrastructure development and sharing deal is likely to be wrapped up this year between the world’s biggest exporter of seaborne iron ore, China’s biggest steelmaker Baowu, its other Chinese and international partners and the Government of Guinea.

It comes almost three decades since the deposit, at 3.8Bt and a grade of over 65% one of the richest agglomerations of high grade iron ore on the planet, was discovered by Rio.

That process has been so long and difficult not just because of its scale and the intemperate nature of the iron ore market, which tends to swing violently from peak to trough and back again.

But also because of the endemic corruption and political instability which has long plagued the West African nation, a situation which stewed until a Coup d’Etat in 2021 removed cozy long time president Alpha Conde.

Rio’s own part in that dubious history was revived today by the US Securities and Exchange Commission, which charged Rio Tinto “for violations of the Foreign Corrupt Practices Act (FCPA) arising out of a bribery scheme involving a consultant in Guinea”.

In the same breath Rio has settled the SEC’s charges with a US$15 million civil penalty, equivalent to $22.3 million Aussie.

It means Rio, which made a US$12.42 billion profit after tax last year, will make no admission of guilt with the charges now in the rearview mirror, with the fine somewhere around the revenue generated from a single shipment of iron ore.

“We are glad to have resolved this matter related to events that occurred over a decade ago on appropriate and reasonable terms. When Rio became aware of the issue, an internal investigation was immediately launched, and we proactively notified the appropriate authorities,” Rio chair Dominic Barton said.

“Since becoming aware, Rio Tinto has taken significant actions to enhance our compliance programme based on best practices. Under current leadership we are taking action to build a culture guided by our values of care, courage and curiosity; an environment where every team member feels comfortable to speak up if something is not right.

“We remain committed to conducting business to the highest standards of integrity, and ensuring that our projects benefit communities, host governments, shareholders, and customers.”

What does the SEC say happened?

The SEC says Rio hired a French investment banker in July 2011, reported elsewhere as Francois de Combret, to help retain its mining rights in Guinea at Simandou.

But there was no written agreement defining his scope of deliverables. The mining rights were retained, a US$10.5m payment was made but Rio never verified it.

The SEC claims the consultant offered and attempted to make an improper payment “of at least $822,000 to a Guinean government official in connection with the consultant’s efforts to help Rio Tinto retain its mining rights.”

“Furthermore, none of the payments to the consultant was accurately reflected in Rio Tinto’s books and records, and the company failed to have sufficient internal accounting controls in place to detect or prevent the misconduct,” the SEC said.

“Even well-designed controls need committed managers to be effective,” Chief of the SEC Division of Enforcement’s FCPA Unit Charles E. Cain said.

“Here, deficient controls were no match for managers determined to hire a consultant whose only ostensible qualification was a personal relationship with a senior government official.”

Rio stood down executive Alan Davies and legal head Debra Valentine back in 2016 after the story came to light, though in Australia ASIC announced last year it’d be taking no action against Davies.

It also suspended payments to former CEO and, as of 2011, iron ore chief, Sam Walsh amid the investigation, though Walsh later won the right to claim his entitlements.

Rio Tinto (ASX:RIO) share price today:

Americans pile cash into Sayona, Navarre

While Rio Tinto’s pockets may be a little lighter today (though CEO Jakob Stausholm’s shoulders must be too), Sayona Mining (ASX:SYA) and Navarre Minerals (ASX:NML) will be feeling better fed after chomping on some big capital raisings from North America.

Sayona’s shares lifted after banking $54.9 million (C$50m) though a premium flow-through share placement via a subscription agreement with PearTree Securities.

Conducted at 31.5c per share, a 34% premium over its last closing price and 41% premium to its 10-day VWAP, it means the Canadian lithium developer can keep its foot on the pedal when it comes to its exploration in Quebec as it continues the commissioning and ramp up of the North American Lithium project in the Canadian territory.

Flow-through share schemes, used in a limited form in Australia through the Junior Minerals Exploration Incentive, provide tax benefits to investors in junior mining companies to encourage investment in drilling.

By raising the capital at a premium, it enables companies to restock without major dilution.

“Sayona has made significant progress in developing the leading hard rock lithium resource base in North America, with the pending restart of production at NAL set to mark our progression from explorer to producer,” Sayona boss Brett Lynch said.

“This funding will provide an added boost to our expansion plans, with the FTS provisions allowing us to raise capital at a premium to the current share price, thereby minimising dilution for the benefit of our shareholders.”

Meanwhile, New York asset managers Lind Partners will make a $5 million cornerstone investment in Australian gold miner Navarre Minerals (ASX:NML).

Owner of the Mount Carlton mine in Queensland where it produced 2873oz of gold, 170,092oz of silver and 272t of copper Navarre at all in sustaining costs of $2222/oz in the December quarter, Navarre will use the staged funding to increase the pace of exploration at Mt Carlton.

It will include a 10,000m program designed to target a major new discovery at Mt Carlton, bought from Evolution Mining (ASX:EVN), due to start this month.

“Navarre is very pleased to have entered into this agreement with Lind. We welcome their direct investment in the company and look forward to what we hope will be a long and fruitful relationship,” NML MD Ian Holland said.

“The structure of the agreement provides the company with additional flexibility to pursue our growth strategy and potential pricing upside as we continue to develop the higher-grade Mt Carlton United open pit operations and execute our exciting LODE (Large Orebody Discovery Exploration) exploration programs over the coming months.”

Lind, which will make an advance payment of $5m, will receive shares at a fixed subscription price of 6.8c for the first three months of the deal, and can pick up shares to the value of $5.6m over a maximum two year period, with prices calculated with reference to the VWAP after the end of May this year.