Fraud case highlights risks facing global mining companies

Edward James and Feifei Zheng of Pinsent Masons, who support businesses in implementing anti-corruption policies and practices and in conducting internal investigations, were commenting after Jinchuan Group International Resources (Jinchuan) said (18-page / 338KB PDF) it had uncovered an “alleged misappropriation scheme” worth $144.5 million.

The disclosure was contained in a regulatory filing in which the company shared details of an independent forensic investigation it commissioned into certain payments of its Ruashi Mine in the Democratic Republic of Congo.

The investigation, which covered the period from 1 January 2016 to 31 March 2025 and included the use of digital forensic procedures, identified payments totalling $144.5m that had been made "without any apparent business purpose", according to Jinchuan. It said the evidence suggests there had been misappropriation by various employees. Those employees, it said, "may have taken advantage of Ruashi Mine approval arrangements at the time and perpetrated a misappropriation scheme to deceive various management of Ruashi Mine at the relevant time that Ruashi Mine had purchased foreign ores and incurred mining and other operational expenses in amounts greater than Ruashi Mine actually incurred".

Disclosure of the review’s findings – and a subsequent filing (18-page / 352KB PDF) detailing actions the company has taken to improve its controls – come amidst the continued suspension of trading in Jinchuan’s shares on the Hong Kong stock exchange. Trading was suspended on 28 March 2025 after auditors refused to sign off the company’s annual results for 2024.

The recent disclosures of Jinchuan highlight risks that international mining companies, particularly Chinese miners, face when operating in Africa, according to James and Zheng.

James said: "In a sense, the company became a double victim – not only have millions of dollars been allegedly misappropriated, it also faced the challenging position of having its share trading suspended. The incident highlights the risk that international mining companies face when operating in overseas countries. These companies often place reliance on trust and the integrity of expat employees or senior local employees. This trust can, however, be exploited. Companies should ensure that they have sufficient control and oversight of what is really going on in their overseas businesses." 

Zheng said: "Many people believe that compliance impedes commercial success but when implemented sensibly, compliance is commercial. Robust controls and regular hands-on oversight of overseas businesses is essential to avoid being exploited, which can have significant financial consequences." 

James added: "In practical terms, this is not about adding further measures as part of tick box exercise. It is about focused, risk-based interventions – such as periodic in-country audits carried out by teams that are independent of the local business, and a willingness to test what management is reporting against underlying data and documentation. Where something doesn’t look right, headquarters need to ask probing questions and not simply accept what local management say at face value."