shareholders dodgy money make headlines again

Puntland offers up a Range of possibilities
Hawthorne
November 21, 2008
Page 1 of 2
PERTH-BASED Range Resources was quick to issue a statement to the Australian Securities Exchange regarding its relationship with the self-appointed government of Puntland — a group of clan elders that issues resource rights to small-cap mining outfits and rules a region that is home to the world's most lucrative piracy operation.

Being linked with pirates of the high seas, who this week seized a Saudi Arabian supertanker with $US100 million ($A157 million) of oil aboard, isn't the kind of news any board wants to read. Especially one with an annual meeting with shareholders scheduled in Perth on Monday.

Investors may wish to ponder if the hijacked oil tanker, Sirius Star, holds more oil than Range Resources will ever get its hands on in Somalia.

London-based Range Resources director Peter Landau — a man with extensive business dealings with former Melbourne day trader and Opes Prime victim Leo "The Gun" Khouri — responded to questions from The Age regarding payments totalling $US6 million to the Puntland government.

"The monies were paid to the Puntland government NOT the president or any other member of the government," Landau told The Age. "Importantly, at the end of each year, a letter has been sent by the Puntland government to Range Resources acknowledging the monies have been received."

Shareholders will no doubt appreciate that a rebel government operating in a war-torn region of Somalia is happy to perform such efficient bookkeeping on their behalf. Maybe the owners of the Sirius Star will also get a receipt after paying pirates their ransom money?

In its statement to the ASX, Range Resources vehemently denied it was involved in any wrongdoing in Puntland.

"The company would like to make the following specific comments," read the statement. "Neither the company, nor any of its directors, have any ties to Somali oil pirates."

Range also denied it had "paid millions of dollars in controversial fees to Somali rebels responsible for a surge in international piracy".

Of course, Range Resources and its directors have little idea just what the $US6 million of shareholders' money the board paid to the internationally disputed government of Puntland was used for. And the point is, they probably don't want to know.

But here's a clue. Range's deal with Puntland was struck with Puntland's minister of finance, Mohammed Ali Yusuf, whose name appears on documents lodged by Range with the ASX.

In 2005-2006, Mr Yusuf's department spent $US4 million on military equipment for Puntland's security forces — a year in which that department received $US3.1 million from Range and had total expenditure of just $US11.3 million.

That equipment was used, according to Mr Yusuf, for the "pacification of neighbouring non-Puntland territories, like Southern Mudug and disputed territories of Sol and Sanag".

There is, of course, no way of proving that Range Resources' money was specifically used to arm security forces, but the Australian company certainly helped to finance a Puntland department involved in the "pacification" of its rivals.

One must wonder if that's the sort of overseas deal a listed Australian company ought to be involved with.

Given the rise of piracy in Puntland, which captured the world's attention this week, and its entrenchment in Puntland society, few doubt that the ruling clans of the region also control that trade. Despite this, Range is happy to do business with the government of these very clan elders.

"The article suggests that the current government of Puntland is disputed. It was selected by tribal clans representing the Puntland region," Range wrote to the ASX.

"To suggest that the government is disputed implies that the Puntland people do not have the right to appoint parliamentary members who then elect the president of Puntland."

Range Resources and its directors obviously hold a unique definition of the word democracy, one that differs to the Australian Government.

According to the Department of Foreign Affairs and Trade, Australia does not recognise the rebel state of Puntland.

"Australia does not have diplomatic relations with Somalia, but it does deal on occasion with the Transitional Federal Government, which is broadly accepted by many countries as the legitimate authority in Somalia and which represents Somalia in international bodies such as the United Nations," a spokesman for DFAT said.

"Australia does not recognise Puntland as a separate state."

Neither, for that matter, does the TFG. In 2005, then TFG prime minister Ali Mohammed Gedi wrote to the ASX to state that Puntland had no legal right to sell any mineral or hydrocarbon rights for the region to an Australian company.

Yet the deal went ahead, rivals to the ruling Puntland clans were pacified, pirates were armed, Range Resources' share price soared and hundreds of small investors have since been burned — from a high of $1.09 in May last year, Range's share price is now 5¢.

All that ought to make Monday's annual meeting in Perth an interesting affair.