SRC Mongolia coal deal done without feasibility study, says AG report on 1MDB

For Lim to declare in his first press conference that government debt has exceeded 1 trillion ringgit ($251 billion) because of a sly public bailout of 1MDB gets him full marks for honesty, but not for tact.

KUALA LUMPUR: Investment in a coal mine in Mongolia by a joint-venture company between SRC International Sdn Bhd (SRC) and Aabar Investments PJS,  was done without evidence showing a feasibility study being conducted.

The Auditor-General report said  the board of SRC approved a USS45.5mil investment in the coal industry in Mongolia without evidence to show a feasibility study on the status of the project to be undertaken by the joint venture ASRC in the Gobi Coal & Energy Limited (GCE) company. 

“SRC also invested in PT ABM Investama TBK, Indonesia amounting to US$120mil (RM366.68mil) through quoted shares listed on the Indonesia Stock Exchange. During the meeting on Feb 14, 2012, Chief Executive Officer of SRC reported an estimated profit on the investment amounting to US$4mil,” the report said.

The report said that as a subsidiary of 1MDB, SRC obtains financial resources from Government grants in the form of development grants of RM15mil from RM20mil approved by the Economic Planning Unit (EPU) and RM2bil financing from the Retirement Fund (Incorporated) (KWAP). 

The proposal to establish SRC was submitted to ex-Prime Minister Datuk Seri Najib Tun Razak in August 2010. 1MDB established SRC on Jan 7, 2011.

Financing amounting to RM2bil was received on 29 August 2011 is a term financing of 10 years. The loan is secured by the Government which includes principal and financing benefits of RM2.902bil.

SRC’s objective was to identify and invest in projects related to exploration, extraction, processing and trading of conventional and renewable natural resources and minerals including acquisition and hold stocks, stocks or company securities. 

On Feb 15, 2012, SRC’s shareholding by 1MDB was transferred to the Ministry of Finance. 

The transfer of SRC shares reduced the operating losses of the 1MDB from RM25mil to RM16.2mil, lowering the gearing ratio of 1MDB from 12 times to 9.5 times and reducing the government’s total guarantee of RM2.902bil to the 1MDB Group.
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