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.
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