SYDNEY (Reuters) - Rio Tinto (AX:RIO) (L:RIO) has axed two of its top 10 executives sparking a feud with one of them, amid a probe over $10.5 million in payments to a consultant who helped it win rights to develop the world's largest untapped iron ore lode in Guinea.
There is no suggestion that the officials or consultant acted illegally. But emails detailing payments, which involve two former Rio Tinto chief executives, are a blow to a group that has campaigned for transparency even in complex countries and in projects as tough as Guinea's $20 billion Simandou mine.
The world's second-largest miner said on Thursday it had terminated the contracts of Energy and Minerals Chief Executive Alan Davies and Legal and Regulatory Affairs Group executive Debra Valentine after reviewing the findings to date of an internal investigation into 2011 contractual arrangements with the advisor.
It said last week it had alerted U.S., British and Australian regulators about the payments.
Davies, with Rio Tinto for nearly 20 years, said in an emailed statement there were no grounds for his termination and that he would take legal action. "I have not been privy to Rio Tinto's internal investigation report, nor have I had any evidence of the reasons for my termination of my employment given," Davies said.
"My rights are fully reserved, and I have been left with no option but to take the strongest possible legal action in response."
Rio Tinto declined to comment on Davies' statement.
Valentine, who had been due to retire in 2017 and had already stepped down, could not immediately be reached for comment.
CHINALCO COMPLICATION?
U.S. authorities have investigated corruption in Guinean mining before, and a former representative of a rival miner, BSG Resources (BSGR), was jailed for two years in 2014. BSGR denied allegations it paid bribes or ordered others to do so.
Any U.S. investigation into Rio's activities and any payments in Guinea could complicate a move announced late last month to sell its 46.6 percent stake in the Simandou project to the miner's Chinese partner, Chinalco (HK:3668).
The scandal erupted last week after Rio Tinto said it had become aware of emails from 2011 that referred to payments to a consultant providing advisory services on the Simandou project in the West African nation of Guinea.
Rio's board concluded that Davies, who was in charge of the Simandou project at the time, and Valentine had failed to maintain the standards expected of them under its global code of conduct, though the decision did not pre-judge the course of any external inquiry into the matter, the company said in a statement.
Last week Rio Chief Executive Jean-Sebastien Jacques said in an internal email that staff were "shell-shocked" by the discovery and any investigations could take several years.
The leaked emails showed then-CEO Tom Albanese, then-iron ore boss Sam Walsh, and Davies discussed a $10.5 million payment to Francois de Combret, a former Lazard investment banker with a long history operating in Guinea.
Albanese was replaced by Walsh in 2013, and Walsh retired in July. Albanese, now head of Vedanta Resources (NS:VDAN), declined to comment on the situation last week, when asked about it on a Vedanta earnings call.
Davies said in his statement on Thursday Rio Tinto had made no effort to abide by due process and had given him no opportunity to answer any allegations.
"This treatment of me and my past and recent colleagues is totally at variance with the values and behaviours of the company to which I have devoted my professional life," he said.
Davies will be replaced by Bold Baatar as Energy & Minerals chief executive. Baatar had been managing director of marine and vice president of Iron Ore Sales and Marketing.
Chief Financial Officer Chris Lynch has temporarily stepped in to run the legal and regulatory affairs function while the company looks for a new chief legal counsel.
Davies and Valentine would not be paid any bonus for 2016 and it would cancel all their unvested awards from previous years, Rio said.