Ivanhoe's Burma subsidiary added to US sanctions list while Rio Tinto remains in the "shame" frame

In an important move, on January 15th US Treasury Department's Office of Foreign Assets Control added Ivanhoe Mines to its Burma "sanctions list".

This was because, while ostensibly quitting the country in 2007, Robert Friedland's flagship company continues to profit from its Monywa copper mine - as has the Burmese military junta.

Shortly afterwards, Canadian Friends of Burma (CfoB) issued a press statement summarising the US decision. It also called on the company to "come clean" about the so-called "independent third party trust", set up in 2007 to sell Ivanhoe's stake on its behalf, and which appears to have done nothing since.

Missing from CfoB's statement is reference to the critical role played by Rio Tinto in setting up the trust, raising the question of what the UK-Australian company has done since (if anything) to ensure that the trust sells the Monywa mine.

Rio Tinto acquired 9.95% of Ivanhoe Mines equity in an important deal with the Canadian company at the end of 2007 which allowed Rio to buy further equity in Ivanhoe over the following two years. The deal enabled both companies to embark on a huge copper-gold project in Mongolia (a venture which remains stalled) and specified that Ivanhoe would sever its links with Burma's military regime.

The contract also enabled Rio Tinto to appoint a director to Ivanhoe's board: currently Brett Clayton, head of Rio Tinto's copper and diamond operations and based in London.

Ivanhoe's Burma subsidiary added to US sanctions list,

CFOB calls on Ivanhoe to disclose the subsidiary's "blind trust" agreement

Canadian Friends of Burma - Ottawa, January 19, 2009

Last Thursday January 15th the US Treasury Department's Office of Foreign Assets Control (OFAC) added Vancouver-based Ivanhoe Mines' Burmese subsidiary Myanmar Ivanhoe Copper Company Limited (MICCL), to its Burma sanctions list. MICCL was created as a 50/50 joint venture between the Burmese military junta and Ivanhoe Mines to operate the Monywa copper mine, Burma's largest mine. The sanctions list is designed to target the Burmese junta's senior leadership, their business cronies and the financial networks that continue to prop up the violent military dictatorship.

According to the Treasury Department when a firm or individual is added to the sanctions list "any assets the designees may have subject to U.S. jurisdiction are frozen, and all financial and commercial transactions by any U.S. person with the designated companies and individuals are prohibited."

Canadian Friends of Burma's executive director Tin Maung Htoo called the inclusion of MICCL on the sanctions list "a major step forward for the Burma pro democracy movement. For a number of years Ivanhoe's Burmese mine was one of the leading sources of revenue for a military regime that declared war on its own people".

Kevin McLeod member of CFOB's board of directors added "For far too long Ivanhoe Mines and its notorious Chairman Robert Friedland have been able to avoid facing serious questions about their extremely reprehensible business relationship with Burma's generals. Toxic Bob and the generals made millions from the Monywa copper project and sadly all the people of Monywa got in return was poisoned farmland."

Ivanhoe has long made self serving claims about Burma that show a complete disregard for the people of the country. In September 2000 then Ivanhoe President Daniel Kunz had this to say about a regime that is responsible for the death of hundreds of thousands if not millions of people during its four decade reign of terror; "There are 146 different ethnic groups that have been at civil war for decades and decades . . . It's complicated. The military government, unfortunately, is probably the only form of government that can deal with such a complex problem." (Cohn Regg Martin Toronto Star Jan 28 2001)

Current Status of Subsidiary unclear

In February 2007, Ivanhoe announced that it had sold its 50% stake in MICCL to an "independent third party trust" in return for a guarantee that when the trust sells the stake Ivanhoe will then be paid. After completing this maneuverer Ivanhoe claimed it left Burma. While the independent trust agreement may give the impression that Ivanhoe is no longer in Burma, throughout 2007 the firm continued to accrue profits from the joint venture.

Citing a lack of knowledge about what was occurring at Monywa, Ivanhoe declared at the end of 2007 that it was "prudent to record a $134.3 million write-down" in the value of their 50% holding in the Monywa joint venture thus reducing its value to zero. Ivanhoe continues to refuse to disclose who oversees the third party trust. After nearly 2 years of being on the block, "the third party trust" has failed so far to come up with a buyer for Ivanhoe's stake in the joint venture.

Ivanhoe's operations in Burma and those of the so called independent "Monywa Trust" must be thoroughly examined. CFOB has no way of verifying Ivanhoe's claims that the trust is indeed independent because we don't know who oversees the trust. While Ivanhoe claims that it has no knowledge of what is going on at Monywa it is important to remember that it was Ivanhoe who intentionally put in place an arrangement where ostensibly the firm would be kept in the dark about developments and operations at Monywa. It is very likely that the so called "blind trust" was designed in such a way as to help Ivanhoe avoid the fallout of any possible US sanctions, an eventuality that has now occurred.

The Burmese military junta has maintained a high level of security around the Monywa site and it is unclear whether the mine is still operating. CFOB has received credible reports that farm land that surrounds the Monywa mine is contaminated so badly with sulfuric acid that farming has become impossible for many who live near the mine.

Since Ivanhoe has so far refused to disclose the details of the Monywa blind trust CFOB calls on the institutional shareholders of Ivanhoe to put pressure on the firm to reveal who controls the blind trust. The latest figures available which come from last year show that the Canadian Pension Plan had a 1.28% stake in Ivanhoe with $C52 million worth of shares, while Quebec's equivalent the Caisse de dépôt et placement du Québec had a 6.65% stake valued at C$225 million.

Presently Ivanhoe is busy developing a massive copper project in Mongolia where unhappy locals have made numerous protests against Ivanhoe. Mr. Friedland angered many Mongolians when he boasted at a mining conference in 2005 about the Mongolian project's huge potential, "The nice thing about this, there's no people around. ...There's no NGOs. ...You've got lots of room for waste dumps without disrupting the population." Shorlty after making these comments Mr. Friedland was burned in effigy at a massive protester in Ulan Bator, an apparent worldwide first for a Canadian Mining executive.

Prior to leading Ivanhoe, Mr. Friedland was CEO of Galactic Resources, a mining firm that ran a gold mine beset with environmental problems in Colorado. US taxpayers have spent more than $200 million to clean up the Colorado mine called by many the costliest environmental mining disaster in US history. In December 2000 after several years of legal battles between Mr. Friedland and US government authorities, Mr. Friedland agreed to personally pay US $27.5 million towards the clean up of the mine.

The US Department of Treasury's press release regarding its latest additions to the Burma Sanctions list can be found here

http://www.treas.gov/press/releases/hp1355.htm

Media contact: 613-297-6835

The Canadian Friends of Burma (CFOB) is federally incorporated, national non-governmental organization working for democracy and human rights in Burma since 1991. Contact: Suite 206, 145 Spruce St., Ottawa, K1R 6P1; Tel: 613.237.8056; Email: cfob@cfob.org; Web: www.cfob.org