HEFTY FINES FOR THESE BIG MINING PLAYERS

FINES TO THE MINES IN THE BILLIONS OF DOLLARS IN SOME CASES

Mining companies have accrued a hefty list of fines this year. Offences include violations of safety and environmental standards, financial regulations, and bribery.

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So who are the bad kids getting coal this Christmas? Here’s a list of some of the biggest fines so far this year.

BELOW ARE SOME IN NO PARTICULAR ORDER

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Chile’s environmental regulator blocked Barrick Gold Corp.’s (NYSE, TSX: ABX) controversial Pascua-Lama project on Friday and imposed its maximum fine of over $16 million on the company, alluding to “very serious” violations of its environmental permit, as well as a failure by the gold firm to accurately describe what it had done wrong.

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Chilean newspaper El Mercurio reports (in Spanish) that, after a four-month investigation, the country’s Superintendent for the Environment, Juan Carlos Monckeberg, ordered all construction activity at Pascua Lima to stop immediately, at least until it until builds the water management systems it promised to put in place for containing contaminated fluids.

Both Barrick and its joint-venture partner in the project, Silver Weathon, were halted on the news.

Monckeberg highlighted that while Barrick itself reported the failures, a independent investigation by the agency’s own supervisors discovered the miner wasn’t telling the full truth.

In a brief statement Barrick said is in the process of reviewing the resolution and that the company “is fully committed to complying with all aspects of the resolution and to operating at the highest environmental standards.”

“We found that the acts described weren’t correct, truthful or provable. And there were other failures of Pascua Lama ‘s environmental permit as well,” Monckeberg was quoted as saying.

The ruling comes after a court accepted an injunction filed by indigenous communities concerned by damage to glaciers in the Andes mountains.

Pascua Lama, which would produce about 800,000 to 850,000 ounces of gold a year in the first full five years of its 25 year life, was scheduled to start production in the second half of 2014.

The gold and silver mine straddling the border with Argentina, was set to become one of the top gold and silver mines in Chile, the world’s top copper producer.

(Image of protests in Santiago, Chile, against Pascua-Lama back in 2007)

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MMX Mineração e Metálicos S.A., the flagship mining company of Brazilian billionaire Eike Batista, has been handed a $1.86 billion fine for unpaid taxes, the company said Tuesday.

It’s been a bad year for Eike Batista, the mining magnate behind the EBX Group. He’s been selling off his assets due to his companies’ serious financial problems. To make matters worse, Brazil’s tax agency fined him $1.68 billion in January for unpaid taxes.

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In the statement the firm owned by the world of mining’s top entrepreneur said the penalty has no legal basis.

“MMX and the company’s independent legal advisers consider the charges to be totally unfounded, understanding that at the end of the process, they should be rejected,” the company said.

Brazil’s tax agency is charging MMX an amount equivalent to nearly 80% of its market value.

MMX added the issue dates back to 2007, and relates to moves by Anglo American (LON:AAL) to rise its stake in MMX’s Minas Rio iron ore project.

In recent weeks, the government agency has slapped more than $3 billion in fines on top corporations that it says owe back taxes. For some analysts, this is nothing but an aggressive play for cash as the South American country’s government struggles to meet its budget targets.

Brazil is Latin America’s largest economy.

Batista, who owns five public companies, famously said in 2008 – when his fortune was put at $6.6 billion, ranking him at No. 142 on the Forbes list – that his goal was to become the richest man in the world in five years.

Fast forward to 2012 and he climbed 135 places to become the 7th richest person on the planet, but still a long way away from Mexico’s Carlos Slim who has more than twice Batista’s money.

He was born into mining and is the son of a former CEO of Vale, the world’s second largest miner and iron ore titan.

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Griffith’s Energy (now Caracal Energy)
Amount: $10 million
Reason: Bribing African officials

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Calgary oil company Griffiths Energy has been hit with a hefty fine after pleading guilty to international corruption charges relating to the bribery of African officials.

The Calgary Herald
reports that Griffiths Energy agreed to pay a fine CND$10.35 million after pleading guilty to the charges on Tuesday in the Calgary Court of Queen’s Bench.

The company admitted paying a bribe of $2 million as well as providing exclusive opportunities to buy around four million founder shares to the Chad ambassador, his wife, and two other individuals, in order to obtain exclusive drilling rights to two blocks of land in Chad.

Griffiths is the second oil company from Calgary to be charged with international corruption in just the past two years. Niko Resources Ltd. pleaded guilty to similar charges in June 2011 under the same section of the Corruption of Foreign Public Officials Act.

Griffiths has been forced to pay a substantially heftier fine, however, with its punitive payment exceeding Niko’s by $850,000.

Janet Keeping, the president and chair of Transparency International Canada, hailed the decision as step in the right direction for disciplining the conduct of Canadian companies abroad.

“I think we’re beginning to see Canadian courts taking violations of the Corruption of Foreign Public Officials Act seriously,” said Keeping.

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OGX – EBX Group
Amount: 1.3 million
Reason: Violating antitrust legislation

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RIO DE JANEIRO–Brazilian oil company OGX Petroleo e Gas Participacoes (OGXP3.BR), the flagship firm of businessman Eike Batista’s troubled empire, was fined by local antitrust regulators for completing the purchase of an offshore oil concession before the deal was approved.

In a decision posted on antitrust agency Cade’s website late Wednesday, regulators said that OGX had agreed to pay a three million Brazilian reais ($1.3 million) fine for “gun jumping.” OGX carried out “administrative acts” before the agency had approved the deal, Cade said.

OGX purchased a 40% stake in the offshore BS-4 oil and natural-gas exploration block in November from state-run oil company Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, for $270 million. Cade could have nullified the deal, but opted to instead issue a fine because the purchase didn’t generate any “anticompetitive” effect and the field isn’t yet in operation, the regulator said.

Mr. Batista’s oil company, which is suffering a cash crunch and could run out of funds by the end of the third quarter, could have been issued a fine of between BRL60,000 and BRL60 million, according to Cade.

Write to Jeff Fick at jeff.fick@dowjones.com

(Updates with OGX unavailable for comment.)

RIO DE JANEIRO–Brazilian oil company OGX Petroleo e Gas Participacoes (OGXP3.BR), the flagship firm of businessman Eike Batista’s troubled empire, was fined by local antitrust regulators for completing the purchase of an offshore oil concession before the deal was approved.

In a decision posted on antitrust agency Cade’s website late Wednesday, regulators said that OGX had agreed to pay a three million Brazilian reais ($1.3 million) fine for “gun jumping.” OGX carried out “administrative acts” before the agency had approved the deal, Cade said.

OGX purchased a 40% stake in the offshore BS-4 oil and natural-gas exploration block in November from state-run oil company Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, for $270 million. Cade could have nullified the deal, but opted to instead issue a fine because the purchase didn’t generate any “anticompetitive” effect and the field isn’t yet in operation, the regulator said.

OGX officials weren’t available for comment.

Mr. Batista’s oil company, which is suffering a cash crunch and could run out of funds by the end of the third quarter, could have been issued a fine of between BRL60,000 and BRL60 million, according to Cade.

Write to Jeff Fick at jeff.fick@dowjones.com

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Vale
Amount: $1 million
Reason: Safety violations resulting in death

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Brazilian mining giant Vale’s Canadian unit has been fined over $1 million for an accident that took the lives of two young men at the company’s Stobie Mine in Sudbury Ontario.

Jordan Fram and Jason Chenier were buried by a torrent of wet mud and ore on June 8, 2011.

Canada’s Ministry of Labour laid charges under Canada’s Occupational Health and Safety Act when it was found that there had been blockage in the ore pass where the two had been working, the CBC reports. The ministry also claims Vale neglected other water-related problems at the mine.

The $1,050,000 fine – the most severe by an Ontario court under the safety act – was dealt after Vale pleaded guilty to three counts, which included:

  • Failing to prevent the movement of material through an ore pass in hazardous conditions.
  • Failing to maintain the drain holes at the 2,400-foot level of the Stobie Mine (leading to the accumulation of water, and creating wet muck).
  • Failing to ensure that water, slimes and other wet material was not dumped into the ore pass.

The accident has also prompted Ontario Premier Wynne to call for probes into mining safety province-wide.

Wynne met earlier this month with members of the Fram family, who have been pushing for better safety standards since they lost their son.

“There hasn’t been a review of mining safety for many years, and that needs to happen,” Wynne said after the meeting.

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Ian Telfer, GoldCorp chairman
Amount: $200,000
Reason: “Acting contrary to the public interest”

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The Ontario Securities Commission (OSC) has reached a settlement agreement with Ian Telfer, chair of Canadian Goldcorp, who admits his conduct during a private share transaction was contrary to the public interest.

The Canadian mining magnate will be dinged $200,000 and is banned for a year from trading the securities of issuers for which he is a promoter.

“Your conduct fell below the standard required of you as a senior market participant and was contrary to the public interest,” Christopher Portner of the OSC told Telfer during the settlement meeting.

Telfer admitted admitted to advising Ed Marie Agueci of GMP Securities to use instant messaging rather than email in discussing securities trading, and to telling Agueci not to purchase specific shares using her real name.

Telfer secretly told Agueci “to buy 500,000 shares of a shell company called 222 Pizza Express Corp,” the Financial Post reports. The value of the shares jumped up from $5,000 to $500,000 “after the shell was converted into a large mining royalty firm called Gold Wheaton Gold Corp.

The Telfer case is being called “a sideshow” of a much larger insider trading probe involving Agueci.

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Henry Sapiecha

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