Shares in Indonesian coal mining giant Bumi (BUMI) came under intense pressure on Monday after admitting it was investigating potential financial irregularities in a major part of the business. The heavily indebted business saw its shares close below 150p on Monday, a far cry from the 1,400p heights it scaled at its peak in April 2011. Vallar floated in 2010 at £10 a share.
The company is to investigate the valuations attached to 'development assets' previously listed in its accounts which were written down from $247m to zero at the last results. The assets belong to PT Bumi Resources, the Jakarta-listed coal miner in which Bumi holds a 29 per cent stake, and PT Berau Coal Energy, in which it holds 85 per cent. In particular, certain non-executive directors have brought to the board's attention potential irregularities in transactions at PT Bumi Resources and questioned what has happened to funds which were earmarked for projects before being written down to zero. On the same day that Bumi announced the investigation non-executive Ari Hudaya, a former chief executive of the business, resigned from his position.
We have long felt uneasy about Bumi due to its hefty debts and last year's boardroom disagreements between Nat Rothschild, whose Vallar vehicle provided Bumi with a UK listing, and the Bakrie family who built up a coal empire supported by prodigious amounts of debt. Bumi has instigated an investigation into the potential irregularities and the news has clearly spooked investors in a company which has never been far from controversy during its short life as a London-listed business. Last year Mr Rothschild criticised the management and corporate governance of the company saying it needed a "radical clean-up", a dispute which ultimately led to his removal as co-chairman earlier this year.
