SouthGobi Resources fires CEO Alexander Molyneux
Financial Post Published 12/9/2012
Mining giant Rio Tinto Ltd has terminated the chief executive of SouthGobi Resources Ltd, removing one of the only remaining links to the Robert Friedland era in its Mongolian business.
The move Wednesday to fire Alexander Molyneux is part of Rio's effort to improve strained relations with the Mongolian government and get SouthGobi's idled mine re-started. It comes just a day after Mr Friedland launched an initial public offering of Ivanplats Ltd, his first big move since resigning from Turquoise Hill Resources Ltd (formerly Ivanhoe Mines).
Rio Tinto took control of Turquoise Hill in April in order to get its hands on the giant Oyu Tolgoi mine in Mongolia. It also ended up with some non-core assets. One of them is the majority stake in SouthGobi, which controls the Ovoot Tolgoi coal mine (also in Mongolia). And SouthGobi was turning into a major political headache for Rio Tinto.
Shortly before Rio got control of Turquoise Hill, Mr Friedland cut a deal to sell its SouthGobi stake in to Aluminum Corp of China Ltd (Chalco).
This infuriated many Mongolians, who dislike their powerful Chinese neighbours and worry about falling under their thumb. The timing of the announcement was particularly bad because Mongolia was in the midst of an election cycle and political rhetoric was elevated.
The Mongolian government quickly suspended SouthGobi's licences on Ovoot Tolgoi, and the parliament passed a foreign investment law the main purpose of which appeared to be stopping this deal.
Mr Molyneux, SouthGobi's then-CEO, said last month that he thought the Chalco deal had virtually no chance of success.
Without clear regulation on the foreign investment law or without a process through which such foreign investment proposals can be reviewed and considered, it's almost impossible to see how Chalco can navigate its bid through the Mongolian government infrastructure, he said on a conference call.
Apparently, Chalco agreed, it dropped the bid a couple of weeks later.
It is understood that Rio Tinto was not pleased about Mr Molyneux's public comments, seeing them as detrimental to its relations with the government. It also wanted to bring someone into SouthGobi with mining experience who could manage a re-start of the mine.
As a former investment banker, Mr Molyneux was not that person. He was replaced Wednesday with Rio Tinto veteran Ross Tromans.
Rio's move also distances SouthGobi from the Friedland era. Mr Molyneux was personally hired by Mr Friedland to run the coal business, and is one of his longtime business associates. But SouthGobi is now controlled by Rio Tinto, and no one was surprised that Rio wants one of its own people running it.
http://business.financialpost.com/2012/0...drops-bid/
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