Australia's ALS probe finds half of coal quality reports amended

MELBOURNE (Reuters) - Testing laboratory ALS Ltd said on Thursday an investigation found that about half the certificates it provided for export coal samples over the past decade had been manually altered to improve the quality of the commodity.

The assay reports, going back to 2007, had been amended at four laboratories of the coal superintending and certification unit of ALS’s Coal business in New South Wales and Queensland states, it said in a statement to the Australian stock exchange.

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

The ALS unit has about 40% of the market for testing coal samples to ensure shipments meet quality standards agreed with buyers, according to industry estimates.

The issue came to light earlier this year after allegations in an unfair dismissal case that Australian miner TerraCom Ltd had worked with ALS’s Brisbane-based testing laboratory to falsely upgrade the quality of its coal in export documentation. TerraCom denied the allegations.

A review of court documents by Reuters showed an average upgrade to energy content of 13 TerraCom shipments of 1.6%. Two TerraCom customers told Reuters last month the changes were within acceptable tolerance levels. A third customer said it was investigating.

ALS, which launched an independent investigation into the claims, said on Thursday the probe had found no evidence of bribery or other third-party payments to ALS staff. It did not give a reason for the alterations.

“This is a very serious breach of the ethical standards we expect from everyone who works for ALS, and we have taken strong action to put an end to the behaviour,” Chief Executive Raj Naran said in a statement.

An ALS spokesman told Reuters the manual amendments had upgraded coal quality characteristics such as energy and moisture content.

ALS said the general manager in charge of its coal assaying business and three other employees were no longer with the firm, while “stringent additional measures” had been taken to stop amendments to certificates without proper justification.

The Coal business certification unit accounted for less than 3% of the company’s earnings, it said, and an independent review had cleared its other testing and sampling units.

ALS said it had referred the matter to New South Wales police, in line with its legal duties.

TerraCom said in a statement to Reuters on Thursday that a separate independent review of its business had found the allegations against it were unfounded. It said no customers had raised concerns about coal quality, even after additional testing.

Shares in ALS fell 4.1% and are down 41% since it announced the investigation, outpacing a 28% decline in the broader market.

Reporting by Nikhil Kurian Nainan in Bengaluru and Melanie Burton in Melbourne. Additional reporting by Jane Chung in Seoul and Aaron Sheldrick in Tokyo. Editing by Sherry Jacob-Phillips and Richard Pullin