"Loss-making" Vietnamese gold mines raise questions of Canadian owner

• Vietnamese subsidiary of Taiwan’s Formosa suspected of transfer pricing

As of June 30, 2014, the Bong Mieu operation had reported accumulative losses of $30.1 million and short-term loans of VND1.14 trillion (over $51 million), while the Phuoc Son mine had lost $16 million. Besra has been blacklisted by Quang Nam's provincial tax agency because it owes VND400 billion (nearly $18 million).

Besra reported a loss of nearly $46 million and short-term loans of VND2.5 trillion (over $112 million) as of June 30, 2014, and with falling gold prices, interest on loans and other expenses over the last two years, the actual loss must be much higher.

However, doubts have been raised from 2012 when global gold prices were still high (up to $1,700). The company reported falling profits after actually stepping up output at that time (827kg in 2010, 1.7 tons in 2013 and 1.85-2 tons in 2014).

Even Besra Gold Incorporation in Canada (the holding company) is reporting accumulative losses of $145 million. Phuoc Son and Bong Mieu are registered in Vietnam but the owner operates from a “tax haven”.

Phuoc Son comes under the ownership of New Vietnam Mining Corp registered in the British Virgin Islands (BVI), and Bong Mieu’s Formwell Holdings Limited is also based in the BVI. This overlapping and complicated relationship in Besra’s business model raises transparency questions of the giant gold producer.

Quang Nam Province is dubbed the “land of gold”, and generations of miners flocked there throughout the last century.

Bong Mieu's gold mine. Photo from hanoimoi.com.vn

Besra first started mining gold in Bong Mieu in 2005. Once considered Vietnam's largest gold field, output is now declining after a hundred years of excavations.

Falling global gold prices and large financial loans only add to the gloomy picture the Toronto-based gold company has painted in Vietnam. From its peak of $1,895 per ounce in 2011, the price now fluctuates at around $1,200 per ounce.

Total revenue registered by Phuoc Son and Bong Mieu climbed from $16.4 million in 2009 to $36 million in 2010 and peaked in 2011 at $58.5 million, but the reported profit quickly fell to a net loss of over $4 million in 2010 and 2011. Phuoc Son’s recorded accumulative profit of $10.2 million while Bong Mieu lost $14 million.

Besra is a Canadian gold producer focused on Southeast Asia. In July 2014, Besra suspended its operations at the Bong Mieu and Phuoc Son gold mines, saying the decision came as a direct result of coercive measures taken by the Quang Nam Tax Department due to delayed tax payments.

Besra Vietnam, the operator of Vietnam's largest gold mines, had its bank account frozen and its income invalidated in April 2014 by Quang Nam, but resumed production in September the same year.

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