{"id":174923,"date":"2016-04-05T22:40:11","date_gmt":"2016-04-05T22:40:11","guid":{"rendered":"https:\/\/www.meydan.tv\/article\/aliyevs-secret-mining-empire\/"},"modified":"2021-10-29T12:59:38","modified_gmt":"2021-10-29T08:59:38","slug":"aliyevs-secret-mining-empire","status":"publish","type":"post","link":"https:\/\/www.meydan.tv\/en\/article\/aliyevs-secret-mining-empire\/","title":{"rendered":"Aliyevs’ secret mining empire"},"content":{"rendered":"
\n \"\"
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\n by
\n
\n Miranda Patrucic, Eleanor Rose, Lejla Camdzic and Khadija Ismayilova
\n <\/b>\n<\/p>\n

\n \"\"
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\n At the end of a hard month of work, Jumshud Asgerli, a 46-year-old geologist, war veteran and father of three, was crestfallen when he did not receive his expected salary from the Azerbaijani gold mine where he worked. Soon after, he was among 300 other employees that got an email informing them they were taking a mandatory two-month vacation.\n<\/p>\n

\n \u201cAfter two months they sent us another email to say we\u2019d be on vacation for an unknown period and would receive two thirds of our salary,\u201d said Asgerli.\n<\/p>\n

\n But nearly two years later, the employees haven\u2019t been paid a cent officially, but they are still officially full-time mine workers who, under Azerbaijani law, can\u2019t take jobs elsewhere. Some have lost everything, they are stuck in a hellish limbo.\n<\/p>\n

\n Their employer, Azerbaijan International Mineral Resources Operating Company Ltd. (AIMROC), came out of nowhere suddenly to become the second-largest gold producer in the country. Then it disappeared as quickly as it came, leaving employees in a desperate search to find out who actually was employing them.\n<\/p>\n

\n Frustrated and desperate, they reached out to every government institution they could think of – from the Ministry of Ecology and Natural Resources and the Ministry of Labor and Social Protection of Population to the Parliament to the president himself. \u201cThey all pretend they don\u2019t know anything,\u201d said Asgerli.\n<\/p>\n

\n But, cloaked behind an offshore organization, their employers were much closer than they imagined. They saw them almost daily wearing the latest fashions, carrying expensive handbags, and smiling from the pages of newspapers and magazines. Their employers were on TV attending openings and gala ceremonies and grand events talking about how great Azerbaijan was.\n<\/p>\n

\n Their employers were Leyla and Arzu Aliyeva, the daughters of President Ilham Aliyev.\n<\/p>\n

\n \"\"
<\/figcaption><\/figure>\n

\n
\n Photo Arzu Aliyeva: azertag.az
\n <\/i>\n<\/p>\n

\n This information can be found in data from the Panama-based offshore services provider Mossack Fonseca, obtained by the German newspaper S\u00fcddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with the OCCRP and more than 100 other media partners from 82 countries.\n<\/p>\n

\n
\n Golden Days
\n <\/b>\n<\/p>\n

\n Nine years ago, the president awarded a
\n
\n \u00a0consortium of six gold fields
\n <\/a>
\n \u00a0worth billions of dollars to one company in the United Kingdom (UK) and three in offshore jurisdictions: Globex International LLP, Londex Resources S.A., Willy & Meyris S.A. and Fargate Mining Corporation. But in reality, the fields went to his family.\n<\/p>\n

\n A 2012 investigation by Radio Free Europe\/Radio Liberty and the Organized Crime and Corruption Reporting Project (OCCRP) journalist Khadija Ismayilova
\n
\n showed
\n <\/a>
\n \u00a0the daughters were behind Globex International LLP which owned 11 percent of the consortium.\n<\/p>\n

\n But the daughters\u2019 stake appears to be significantly bigger than previously reported.\n<\/p>\n

\n The leaked records reveal that the daughters control
\n
\n \u00a0Londex Resources S.A.
\n <\/a>
\n , a Panama company with a 45-percent stake in the consortium, putting their total control at 56 percent. The company has been the main operating company under the agreement and has been responsible for negotiations with the government.\n<\/p>\n

\n It has acted on behalf of the other three partners to secure funding and manage the mining development.\n<\/p>\n

\n The Aliyevs did not respond to repeated requests for comment from OCCRP.\n<\/p>\n

\n As for the other three partners, Londex Resources S.A. owns AIMROC. The third company, Fargate Mining Corporation, was incorporated the same day as Londex Resources S.A. and seems to be controlled by Aliyev\u2019s close associate and business partner
\n
\n \u00a0Nasib Hasanov
\n <\/a>
\n , according to the leaked records. The government said the fourth company in the consortium, Willy & Meyris S.A., is registered in Panama, but OCCRP reporters couldn\u2019t find a trace of it. That share, given past patterns of family owned businesses, may be owned by them or someone close to them as well.\n<\/p>\n

\n Financial records obtained by OCCRP show that Londex Resources S.A. spent nearly US$ 230 million to set up and operate the mining business. A factory was built in the mining town of Chovdar in western Azerbaijan and the consortium produced as much as US$ 30 million in gold before it abruptly ceased operations.\n<\/p>\n

\n How did a company with such possibilities disappear so quickly? Some say the company had trouble selling gold on the world market due to its secretive ownership structure, while others are saying the consortium is still looking to sell.\n<\/p>\n

\n Workers blame Londex Resources S.A. for their suffering. \u201cThe main company was Londex Resources S.A. The main company is responsible for everything,\u201d said Asgerli.\n<\/p>\n

\n Whatever the reason, the fact the workers have gone without pay for nearly two years is, at the very least, an indictment of managerial indifference and incompetence.\n<\/p>\n

\n
\n The Aliyevs\u2019 Gold Rush
\n <\/b>\n<\/p>\n

\n In the 2000s, the hamlet of Chovdar was just another small mountain village in Azerbaijan \u2013 unassuming and rural, with a local population of wolves and foxes that occasionally picked off the villagers\u2019 chickens.\n<\/p>\n

\n Archaeological remains sketch a biography of the hamlet: Bronze Age burial mounds; an early Caucasian\/Albanian church; later medieval Muslim sites. According to historians who studied the site, the relics are characteristic of the region, which like many other areas of Azerbaijan is now home to families displaced in the early 1990s by the Nagorno-Karabakh conflict with Armenia, a long-simmering dispute which flared up again on Saturday.\n<\/p>\n

\n \"\"
<\/figcaption><\/figure>\n

\n
\n The village of Chovdar, where miners and refugees from Nagorno-Karabakh have been left abandoned by a local mine owned by the president\u2019s daughters. (Credit: OCCRP)
\n <\/i>\n<\/p>\n

\n But Chovdar stood out in one important way: it sits atop fabulous deposits of gold ore estimated at one point to be worth as much as
\n
\n US$ 2.5 billion
\n <\/a>
\n . Chovdar is thought to be the richest of several gold deposits in the country. Because industrial gold production requires investment and infrastructure, it was not until after the fall of the Soviet Union and independence that Azerbaijani authorities took notice.\n<\/p>\n

\n In the oil boom of the mid-1990s, foreign capital flooded into Azerbaijan through production sharing agreements (PSAs) in which investors paid down costs and contributed expertise to develop rich natural resources, in return for a share of the profits.\n<\/p>\n

\n In 1997, the oil industry
\n
\n \u00a0PSA model was applied
\n <\/a>
\n \u00a0to the right to mine nine copper and gold development properties in three areas of Azerbaijan. These were signed over with much fanfare by then-President Heydar Aliyev to RV Investment Group Services LLC, a US firm based in Delaware that today is known as Anglo Asian Mining PLC.\n<\/p>\n

\n Anglo Asian Mining is run by Iranian businessman Reza Vaziri.\n<\/p>\n

\n Vaziri at first failed to secure capital to invest and the project nearly died, but a large and continuous rise in gold prices from US$ 350 an ounce in 2001 to more than US$ 1,800 an ounce 10 years later saved him. Azerbaijan started to think big about gold mining. The media wrote of large-scale construction of modern gold-mining tunnels and factories that would put Azerbaijan among the largest suppliers of gold on the world market.\n<\/p>\n

\n In June 2005, Azerbaijan
\n
\n \u00a0Minister of Ecology and Natural Resources Huseyn Baghirov announced
\n <\/a>
\n \u00a0that 30 new fields of precious metals, including four gold deposits, had been identified through survey work over the previous three years. One was of special importance: Chovdar in western Azerbaijan.\n<\/p>\n

\n The media reported that the gold reserves in Chovdar dwarfed all of the other fields and Minister Baghirov announced that talks about developing Chovdar were underway with foreign companies.\n<\/p>\n

\n Only one name was ever mentioned: RV Investment Group Services LLC, which
\n
\n \u00a0told Trend News Agency
\n <\/a>
\n \u00a0in August 2005 that it was preparing a proposal to present the government for developing Chovdar. Company experts visited the field.\n<\/p>\n

\n By the end of 2005, the price of gold had almost doubled to more than US$ 600 per ounce. RV Investment Group Services LLC begun to build facilities to extract 20 tons of gold at its Gedebey site, not far from Chovdar. Chovdar was not mentioned again.\n<\/p>\n

\n But more than 12,000 kilometers away in Panama, one of the most popular places in the world to set up new companies in secret,
\n
\n \u00a0a company called Londex Resources S.A.
\n <\/a>
\n \u00a0appeared. Londex took a leading role in a consortium it formed with three other companies. The company, on behalf of the consortium, would lead negotiations with the government and the president of Azerbaijan for a mining license to get at some of the country\u2019s best deposits.\n<\/p>\n

\n
\n The PSA: Aliyevs\u2019 Gain, Azerbaijan\u2019s Loss
\n <\/b>\n<\/p>\n

\n On Dec. 30, the last Saturday of 2006 and a non-working day, the government of Azerbaijan secretly signed over rights to the Chovdar mine and five other sites to the Londex-led consortium.\n<\/p>\n

\n Unlike the PSA agreements signed with RV Investment Group Services LLC in Azerbaijan, this one was never published. The only information about it came during a Parliamentary discussion in June 2007. The contract was approved even though members of Parliament complained that the consortium\u2019s ownership wasn\u2019t transparent, that the contract did not follow normal bidding procedures, and that none of the companies had any record of actual mining. The
\n
\n \u00a0Parliamentarians complained
\n <\/a>
\n \u00a0that the deal worked against national interests.\n<\/p>\n

\n At the hearings, Valeh Aleskerov, chair of the Natural Resources Committee of the Milli Mejlis (the Azerbaijani parliament), the body that reviewed the contract, advocated for the deal.\n<\/p>\n

\n Aleskerov had worked with President Aliyev when they were both vice presidents at the state oil company, and he said the government had negotiated with three other companies, but dismissed their offers because those firms had demanded exclusive rights and offered no guarantees.\n<\/p>\n

\n OCCRP could find no evidence that a tender was ever issued regarding the gold mine.\n<\/p>\n

\n The other terms of the deal included a 30-year lease
\n
\n \u00a0on the mineral fields, and a government profit share of 30 percent
\n <\/a>
\n \u00a0after all consortium costs were recovered. The deal was much more favorable than the one RV Investment Group Services LLC had signed a few years earlier. The consortium would end up getting 70 percent of profits compared to only 49 percent in the RV Investment Group Services LLC deal.\n<\/p>\n

\n Aleskerov praised the fact that government would also receive a
\n
\n \u00a0US$ 2 million bonus
\n <\/a>
\n . But financial records OCCRP obtained show that the consortium not only never paid the bonus, but is facing a US$ 2.8 million penalty for non-payment. While not paying the bonus represents a breach of contract that would allow the government to terminate the contract, the records show consortium members were not at all concerned about such an event. Auditors who examined the financial statements noted that the government never requested the payment.\n<\/p>\n

\n The consortium received other benefits. It was not required to pay any taxes other than the 22 percent income tax, and, unlike RV Investment Group Services LLC, it had higher quotas for hiring foreign nationals. Azerbaijan does not have a mining tradition and the ability to hire skilled foreign workers is of huge importance for any mine\u2019s success.\n<\/p>\n

\n \u201cOnce the agreement was signed we realized they had much better terms then we did,\u201d said a mining executive with knowledge of the company who asked to remain anonymous. \u201cPerhaps the fact that daughters were involved had something to do with that.\u201d\n<\/p>\n

\n
\n Fall of the Empire: Naivety or Greed?
\n <\/b>\n<\/p>\n

\n The Aliyevs were quick to get the business going.\n<\/p>\n

\n \u201cWhen I joined they had already committed a fair amount of money to setting up the project company and quarry assets, the portfolio of mining projects and mineral properties, but they obviously were not mining people,\u201d said Carl Caumartin, CEO from 2008 until 2011 of AIMROC, the local operating company established by Londex Resources S.A.\n<\/p>\n

\n With the price of gold at US$ 900 per ounce, the company was \u201cchasing all kinds of properties and projects\u201d and throwing money around. Caumartin says he stopped it and focused on Chovdar, believing it potentially held 1.3 million ounces of gold, which at the time was worth more than US$ 1 billion.\n<\/p>\n

\n And the price was still rising, with some estimates saying it could reach as much US$ 3,000 per ounce. With some US$ 3 billion at stake, the Aliyevs were eager for a big return on their investment.\n<\/p>\n

\n Caumartin tells a story of what he calls AIMROC\u2019s naivety. In Ganja, they bought a farm that was supposed to be used as an exploration base. Londex Resources leaders picked the place because it had an underground cave where they wanted to smelt their gold securely.\n<\/p>\n

\n \u201cWe got a gold room all figured out. Let\u2019s find gold now. It became our inside joke,\u201d said Caumartin.\n<\/p>\n

\n He left in mid-2011. He said he was not totally in favor of the direction owners wanted to take the firm. The company had decided to speed up development of the project while Caumartin preferred to complete the full evaluation and engineering studies first before digging.\n<\/p>\n

\n That might have been one of the factors that contributed to the project\u2019s failure to date. \u201cThey probably took a shortcut technically speaking \u2026 they were eager to get a return on the money invested,\u201d Caumartin said.\n<\/p>\n

\n After he left, the company commissioned the plant and started production. The first gold bar was produced in late 2012. \u201cThe performance was not optimal and they were struggling to get the (financial) recovery they were hoping to get,\u201d said Caumartin.\n<\/p>\n

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