June 1, 2020 / 1:26 AM / a month ago

UPDATE 1-Korea Midland power bans Australian lab ALS; police assess probe

(Updates with ALS comment)

MELBOURNE, June 1 (Reuters) - A second South Korean power provider has banned Australian testing laboratory ALS Ltd from certifying its coal tenders, as Australian state police said they were assessing whether to start a probe into financial fraud.

Korea Midland Power Co Ltd said in a tender document dated Friday that it was seeking 600,000 tonnes of thermal coal for delivery by August and that ALS was “not allowed as an international independent inspection agent.”

The ban follows one by Korea South-East Power (KOEN) earlier this month, and comes after the testing provider told regulators that about half the certificates it provided for export coal samples over the past decade had been manually altered.

The ban shows a growing backlash against the laboratory that has had around 40 percent of the market for testing coal samples to ensure shipments meet quality standards agreed with buyers, according to industry estimates.

A police probe could result in criminal charges and show if the practice of increasing coal quality for export was widespread among Australia’s miners.

ALS said its coal certification business had experienced no material change as a result of an independent review it initiated into the unit following allegations made in an unfair dismissal suit.

“Process improvements identified by the review are almost complete and the enhanced transparency has helped ALS to win some new business,” it said in a statement to Reuters late on Friday.

ALS said in April that as a result of its review, it had overhauled processes in its coal division, which accounted for less than 3% of earnings, let four workers go, and had referred the matter to state police.

“The matter has been referred to the State Crime Command’s Financial Crimes Squad. Inquiries are ongoing,” a New South Wales police spokesman told Reuters.

Australia, which is known for its high quality coal, is the world’s biggest exporter of the fuel to markets such as Japan, South Korea, China, Taiwan and India.

Reporting by Melanie Burton in Melbourne. Additional reporting by Joyce Lee in Seoul; editing by David Evans and Richard Pullin

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