Rothschild's Bumi dives on launch of Indonesia investigation

Possible financial 'irregularities' found after development funds written down

Shares in Bumi plc sank by 25 per cent yesterday after the coal miner part-owned by the financier Nat Rothschild said it had launched an urgent investigation into potential financial "irregularities".

Its former chief executive, Ari Hudaya, resigned last night as a non-executive director.

The FTSE 250 company, which owns stakes in several Indonesian mining operations, said the allegations related to operations at PT Bumi Resources, Asia's biggest thermal coal exporter. Bumi owns a 29 per cent stake in the resources company and said it had set up an independent investigation to look into its development funds, which were written down to zero last year.

Bumi said: "The extensive development funds in PT Bumi Resources Tbk and the one development asset in PT Berau Coal Energy Tbk were marked down to zero in the accounts of Bumi plc as at 31 December 2011, except for one investment with a carrying value of $39m [£24m] in the consolidated financial statements." The findings of the investigation will be reported to the board but Bumi added that it intended to contact "relevant authorities in the UK and Indonesia … in respect of some of the allegations".

It is understood the Financial Services Authority and the Serious Fraud Office were informed of the allegations on Friday. The inquiry is expected to examine some $300m of funds used by Bumi's subsidiaries and affiliated companies to start up new projects, and also at certain loans extended by PT Bumi.

Richard Knights, an analyst at Liberum Capital, said the investigation had "the potential to bring to light some gross, and potentially criminal, mismanagement of funds which may turn off shareholders in the short term".

On Friday, ahead of yesterday's announcement, shares in Bumi lost more than 20 per cent of their value. When asked if there would be an investigation into the share price fall, a source close to the group said: "Not that we know of. The volumes involved were tiny."

Mr Knights said market concerns were mounting about Bumi's "high debts and low cash levels". The shares fell 48.3p yesterday to 147.6p. In April last year they peaked at 1,400p. He also warned that the inquiry could have major consequences. "Clearly, given PT Bumi's high debt levels [about $4bn] the repatriation of funds and focus on core coal mining business is critical."

The miner's presence in London began when Mr Rothschild and a former Anglo American executive, James Campbell, set up a cash shell called Vallar in November 2010, to fund acquisitions in the resources industry. A $3bn deal then gave the company stakes in Bumi Resources and PT Berau Coal Energy, with Mr Hudaya, then head of Bumi Resources, as its chief executive. Vallar was renamed Bumi plc last June.

Mr Rothschild wrote a letter last year calling for a "radical cleaning-up" of Bumi's major subsidiary PT Bumi Resources, flagging up the company's level of debt. Indonesia's politically connected Bakrie family, who set up Bumi plc in London alongside Mr Rothschild – and their shareholder partner then tried to oust the British financier from the board. Mr Rothschild stepped down as co-chairman soon after.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before