April 15, 2013 9:41 pm

ENRC hit by whistleblower claim

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ENRC has suspended one of its managers in Africa due to whistleblower allegations of impropriety in the latest blow to the FTSE 100 miner left reeling by investor concerns over corporate governance.

The manager in Mozambique, where the company has coal assets in the resource-rich northern Tete province, has been suspended pending the outcome of an internal investigation, the company said.

In a statement the company said: “ENRC takes all whistleblowing allegations seriously and it is of paramount importance that they are thoroughly investigated. ENRC remains committed to a full and transparent investigation of its procedures and conduct.”

The suspension comes after Alex Gaft, an ENRC corporate investigator, left the company earlier this month while last week saw the sudden departure of chief commercial officer Jim Cochrane. The company declined to comment on the details of the allegations related to the Mozambique manager or Mr Gaft.

During his time at ENRC, Mr Gaft was sent a threatening and anti-semitic email – seen by the FT – warning he would be “torn to pieces” if he came to ENRC’s businesses in Kazakhstan.

The Kazakhstan-based miner has suffered from a series of governance debacles since listing in 2007 at 540p. The company’s share price, which has declined by 58 per cent in the past year, fell by 4.5 per cent, or 11.3p, to 238.1p on Monday.

One mining analyst, who asked not to be named, said the company had to sort out its corporate governance if it wanted to regain investors’ confidence.

“From an investment perspective the key thing [about ENRC] is corporate governance,” said the analyst. “They’ve been partly hit by the fall in commodities [prices] ... but you talk to a lot of institutions and they feel the company is un-investible because they cant get a handle on corporate governance.”

ENRC has replaced the US law firm it hired to investigate whistleblower allegations of fraud in the company’s overseas assets.

Dechert was hired in 2011 to conduct an internal investigation into allegations of fraud in ENRC’s Kazakhstan and African businesses. In the UK, the company is working with the Serious Fraud Office.

A draft presentation to the SFO prepared by Dechert related to allegations of fraudulent payments at ENRC’s Kazakhstan unit Sokolovsko-Sarbai – known as SSGPO – raised concerns over payments totalling at least $100m over four years.

Mehmet Dalman, ENRC’s chairman, who is also part of the internal investigation team, recently threatened to leave after a “pressure point” on an undisclosed issue was reached in his relationship with other executives at the company, according to one person familiar with the matter.

Meanwhile, ENRC is pondering issuing new shares to meet a forthcoming increase in the required minimum of readily tradeable shares at FTSE 100 companies. The rule change requires a “free float” of at least 25 per cent of the company’s shares as of January 2014. ENRC’s current free float stands at 18 per cent.

The founders of the business, Alexander Mashkevich, Patokh Chodiev and Alijan Ibragimov, together own 44 per cent of the company’s shares.

Last month ENRC took a $1.2bn impairment charge and, amid lower commodity prices, posted a $550m pre-tax loss for 2012.

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