UK listed mining companies and the case for stricter oversight ...

UK-LISTED MINING COMPANIES &THE CASE FOR STRICTER OVERSIGHTCase Studies And RecommendationsLondon Mining NetworkFebruary 20121

also sought to ensure not only ‘goodhousekeeping’ at company boardlevel but also that no one group orshareholder could exercise overweeninginfluence when decisions are taken bythe board. It should therefore be ofconsiderable concern that, in the case ofseveral UK mining companies, this rulehas been flouted. 18In the case of Brinkley Mining(case study 3.2), this breach of rulescontributed to the company’s downfall.Among other examples, FTSE 100-listedEurasian Natural Resources (ENRC)was until recently majority-owned bythree oligarchs – Alexander Machkevich,Patokh Chodiev and Alijan Ibragimov– with the Kazakhstan Governmentapparently holding the upper hand.And AIM-listed Archipelago Resources,embroiled for several years in conflictswith Indonesian communities, fisherfolkand, at one point, a provincial governor,as it struggled to bring on-stream agold project in North Sulawesi, is nowmajority-owned by the huge privatebusiness conglomerate Rajawali, whichis registered in Indonesia. 19Disproving the idea that, by havinga few ‘independent’ directors onboard, a company can counteract thepotentially malign influence of oneor more of its leading shareholders,Vedanta is again a prime example.Appointed executive chairman of thecompany in 2005, Vedanta’s founderAnil Agarwal rubs shoulders with fivefellow board members, only two ofwhom can reasonably be described as‘independent’. 20 In defending Agarwal’srole as executive chairman – a clearviolation of the UK Combined Code –Vedanta’s 2010 corporate governancereport notes merely that he ‘hasshown continuing commitment todeveloping the Group for the benefitof its shareholders. For this reason theBoard is unanimously of the opinionthat his continued involvement in anexecutive capacity is vitally importantto the success of the Group.’ 21 MrAgarwal has indeed been developing hiscompany for the benefit of shareholders:Volcan, the trust owned by himself andhis family, controls more than 62% ofVedanta’s shares.3. CASE STUDIES3.1 African Barrick (FTSE 250 listed)Barrick Gold Corp of Canada is theworld’s biggest gold producer in termsof mined output. The company’s fourmain Tanzanian mining operations werespun off by the Canadian parent inMarch 2010 when it launched AfricanBarrick Gold (ABG) through an initialpublic offering (IPO) on the LSE.Barrick currently holds around 74% ofABG. Some analysts saw the IPO as an‘attempt by Barrick to reduce portfoliorisk’, with one commentator judging itsimply ‘a marketing thing’. 22Within nine months, the companysuffered what Numis Securitiesdescribed as ‘two false starts’, and byOctober 2010 its share price had fallenby almost 10%. 23 Hedge fund managerDavid Einhorn had disposed of his stakein ABG by January 2011, declaring thatonly the rising price of gold ‘preventedan even worse outcome’. 24African Barrick blamed its poorperformance mainly on the theft offuel intended for trucks and miningequipment at one of its four mines. Theimpression it conveyed was that suchevents were all too likely in a countrylike Tanzania. Barrick spoke of ‘criminalfuel-theft syndicates’ which had ‘widelyinfiltrated our mining department’. 25mine, were higher than standards set bythe World Health Organisation and bythe Tanzanian and US environmentalprotection agencies. In respect of nickel,lead and chromium, levels in waterhad become much higher than whenobserved in 2002. 26The report followed an allegedpoisonous leak from the mine in May2009 into the Thigithe river, Rarimedistrict, which local people claimed hadkilled their cattle, and even some people.Tanzanian human rights organisationscalled for the mine to be closed untilan independent enquiry could be held,while Barrick dismissed the accusations.No independent enquiry has yet beenorganised; nor has Barrick called for one.In May 2011, Zahra Moloo, acorrespondent for the Africa-widenews service Pambazuka, published anaccount of her investigation into theconsequences of this disaster. She foundwhat had happened nearly two yearsbefore still at the forefront of the mindsof local people – but not, apparently,of the minds of those representing thecompany. When Ms Moloo asked AfricanBarrick spokesperson Charles Chichesterfor an interview she was refused, withChichester reportedly claiming that ‘theThigithe River incident was no longer anissue of concern’. 27Bumi’s Kaltim Prima Coal mine in Kalimantan, Indonesia -see case study 3.8 on p. 40. Photo: JATAMIn June 2009, a report presented tothe Christian Council of Tanzania(CCT), researched by a team under DrMkabwa Manoko of the University ofDar es Salaam, concluded that nickel,cadmium, lead and chromium levels inwater sediment and soil samples, takenfrom the vicinity of Barrick’s North MaraVillage chairperson Abel KeremanNyakiha told Moloo that ‘more than 40people from the three villages of Weigita,Nkerege and Nyakunguru have diedsince the spillage occurred in 2009, 20 ofthem alone in the months between Juneand October 2010’. Mr Nyakiha added:‘We don’t yet have an official record at1011

the village level, but we have asked eachhamlet to record all the deaths that havetaken place. The problem areas are threeand these are the areas that are primarilyusing Thigithe river water in theireveryday life.’ 28Nyahiri Ryoba Mwita, a farmer fromWeigita, also testified to the loss of39 heads of livestock due to the spill,claiming animals continued to dielater: ‘We have complained, but ourcomplaints were not listened to. Thecompany has never been here to talk tothe villagers who have been affected bythe spillage.’ 29In March 2011, Bloomberg reported aboard member of the Dar es SalaamStock Exchange saying that ABGplanned to start trading shares on theEast African bourse later in the year. 30On 23 May 2011, in one of the mostserious recent incidents of its kindreported from sub-Saharan Africa, fivemen (some reports claimed seven) wereshot dead by security forces at NorthMara and at least a dozen injured, whenseveral hundred people entered themine site in search of gold ore. ABGissued a statement that: ‘A number ofintruders sustained gunshot wounds,resulting in seven intruder fatalities andtwelve injuries. African Barrick Goldsincerely regrets any loss of life or injuryon or near its mine sites. The companywill continue to support the governmentand the community in their efforts toimprove law and order and security inthe North Mara region.’ 31This was by no means the only eventof its kind to have impacted on NorthMara communities and the companyover the past three years – although itwas arguably the worst. One Canadianjournalist reported: ‘[I]t has taintedCanada’s international mining image, sayindustry observers.’ 32Previously, barely nine months afterABG’s London listing, evidenceprovided by an independent journalisthad cast strong doubts on the company’sclaim to observe fundamental humanrights around its North Mara operations.In an unusually harsh critique of thecompany’s behaviour, Bloombergjournalist Cam Simpson reported inDecember 2010: ‘At least seven peoplehave been killed in clashes with securityforces at the mine in the past two years.’(The statement was based on testimonygiven to Simpson by 28 people heinterviewed.) ‘In at least four cases,police acknowledged the shootingsin contemporaneous press accounts,’said Simpson, while Barrick companydocuments showed that the company‘pay[s] the Tanzanian government forfederal police protection at the mine andemploy[s] private armed guards’. 33Barrick did acknowledge deaths at theNorth Mara mine during 2008 in its 486-page UK pre-listing prospectus of March2009, stating that: ‘In some cases, thoseinvolved in security incidents have beeninjured, sometimes fatally.’ However,the company has never admittedresponsibility for such injuries or deaths.A year and a half later, in November2010, Barrick announced it had joinedan international group of extractivecompanies, governments and non-profitorganisations that promotes voluntarystandards to foster human rights insecurity operations. These VoluntaryPrinciples on Security and HumanRights include one which recommendsthat companies should report credibleallegations of human rights abuses bypublic security forces to the appropriateauthorities. 34Andrew Wray, head of investor relationsfor ABG, promised Cam Simpson thathis company ‘will make a formal requestto the regional police commissioner’soffice for an investigation if it’smade aware of allegations of abuse’.Nonetheless, says Simpson, ABG‘mentioned no violence at the minein reports describing its socialresponsibility record on communityrelations, health and safety for 2009 and2010’. The company’s 2010 report simplystated: ‘At Barrick, we are committedto making a positive difference in thecommunities in which we work.’In a December 2010 written responseto questions posed by Bloomberg, Wrayalso said that: ‘ABG categorically refutesany claim that any persons injuredor killed were artisanal or small scaleminers’ (as if this justified the shootingof citizens who may not fall into thiscategory). But, according to Simpson,Wray ‘decline[d] to comment on specificcases, citing active or potential policeinvestigations, except for one. He saidallegations that mine security inflictedlethal injuries in that instance are“fundamentally untrue”. They were theresult of a fight between intruders overstolen ore.’ 35In the space of little over a year, thisUK company, a subsidiary of one of themost powerful mining corporations onearth, has had a great deal to answer for.First, according to local people it hasneglected to take seriously allegationsof major failures at its largest Tanzanianproject, leading to the poisoning ofpeople and animals. Second, it isaccused of effectively standing bywhile ‘security’ forces guarding itsassets kill and injure those claimedto be sabotaging – or ‘invading’ – thecompany’s operations. Third, whateverthe truth behind these events, AfricanBarrick has not joined calls for anindependent enquiry; nor has the UKFSA demanded one.Just a year before, the NorwegianGovernment Pension Fund (which ismanaged by the Ministry of Finance)had, on the recommendation of itsCouncil on Ethics, removed BarrickGold from its investment ‘universe’.This followed an investigation of thecompany’s operations at its Porgera minein Papua New Guinea, which yieldedevidence of significant environmentalviolations. The Council concluded thatBarrick posed ‘an unacceptable riskof contributing to ongoing and futureenvironmental damage’. 36Thus one European governmentmade a considered judgment on theconsequences of continuing finance fora company whose behaviour it could notcondone; nor did it place much faithin the company changing its ways. Bycontrast, another European governmentauthority, that of the UK, just over ayear later, accepted that same corporateentity on to its premier stock exchange– and maintained it there, even whenaccusations of serious environmentalpollution (causing the deaths of humansand animals) and complicity in unlawfulkillings swirled around it.What, we may wonder, was the UKCompanies Act of 2006 – with itspromise to significantly improve thecorporate social responsibility behaviourof London-listed businesses – all about?1213

3.2 Brinkley Mining (formerlyAIM listed)Before a mining company may beadmitted to trading on AIM, anindependent ‘competent person’ isrequired to assess its ‘trustworthiness’,by assembling a wide variety of dataspecific to the industry, such as on thenature, availability, grade, and economicvalue of a deposit; the extraction andprocessing technologies to be employed;the environmental implications of anyparticular project; the legal status of landto be used; and the issue of explorationor mining permits. 37 (See also Glencore,case study 3.6.)What a ‘competent person’ need notcarry out (and is not usually qualifiedto perform) is an assessment of thewider socio-political risks a companymay face. As the example of BrinkleyMining demonstrates, this is arguablya major omission of what should be akey prerequisite of the pre-admissionprocess.SRK Consulting is one of the leadinginternational independent advisory andengineering groups that prepare listingparticulars for mining company IPOs.Among SRK’s recent reports has beena resources estimate, performed forAfrican Minerals’ Tonkolili venture inSierra Leone (see case study 3.3), andan independent engineers’ report whichincluded ‘an … opinion of projectionsand cash flow forecasts’ for VedantaResources, prior to its inclusion on theLSE in December 2003.SRK prepared a ‘competent person’sreport’ for Brinkley Mining’s applicationto trade on AIM in May 2006, whereit estimated the mineralised potentialof the Waterval uranium prospect inSouth Africa: a lease then 49%-owned byBrinkley through its associate companyWestern Uranium. 38Brinkley’s other major interest at thetime was in the Democratic Republicof Congo (DRC)’s uranium potential,specifically uraniferous deposits inwar-torn Katanga Province. In October2006, Brinkley signed an agreementwith state-run CGEA (the CongoleseAtomic Energy Authority) under whicha new company would be formed, calledSOCIMAR, over which Brinkley wouldhave board control. SOCIMAR would beentitled to access and test five areas forthe presence of uranium, while Brinkleypledged to certify ‘export materials witha view to implementing proper controlsand to restrict the illicit export ofradioactive material’. 39The plan seemed practicable and mostlyabove suspicion. However, there wasan unusual clause in the agreement,whereby Brinkley would also be grantedpriority rights to any uranium discoveredthrough its explorations. The clause isunusual because uranium is a strategicmineral whose ownership is usuallyrestricted to a government authority.Some of this fissile fuel, included inthe bombs dropped on Hiroshimaand Nagasaki, had come from the thenBelgian Congo.Brinkley suffered a pre-tax loss of nearly£1 million for the first half of 2007, andby the end of that year was still awaitingits prospecting rights from the DRCGovernment. According to the FinancialTimes, Brinkley’s shares had ‘slumped toa new low … in spite of [the company]insisting that mining agreements signedwith the [DRC Government] were legallybinding. Reports … suggested thearrangements were under threat as partof a DRC anti-corruption drive.’ 40By September the following year,Brinkley had been forced out of DRCongo, as well as withdrawing fromChad. In August 2009, the companyannounced it would dispose of its tworemaining assets in South Africa and theSudan – instead turning itself into ‘aninvesting company with its main assetbeing its cash balance’. 41What had happened to bringBrinkley down?From the outset, pointed questionsshould have been asked about the roleof the company’s executive chairman,Gerald Holden. He is a financier whospent most of his career at BarclaysBank, for seven years as global head ofmining and metals. Why was Holdenable to take a position which, inprinciple at least, violated a key tenetof corporate governance, as laid downin the 1992 Cadbury Report, whichstrongly advocated a separation of CEOand chairman roles? 42Mr Holden has never been charged withcorrupt dealings in promoting Brinkley’sDR Congo ventures, but he was less thancircumspect in negotiating them and, atthe very least, incompetent in defendingthem. On 16 September 2007, two daysbefore the company’s shares dropped toan all-time low, and while Holden wasdefending the legality of his agreementwith the DR Congo’s CGEA, BenLaurance of the London Sunday Timesbroke a disturbing story.Laurance claimed to have establishedthat ‘a convicted fraudster played apivotal role in securing uranium miningrights in the Congo for the Britishminerals group Brinkley Mining’. Thealleged criminal, a South African calledNiko Shefer, had been ‘sentenced to 14years in jail in the late1980s for his partin one of South Africa’s biggest bankfrauds. Moreover, a 2002 United Nationsreport into the plunder of the Congo’snatural resources named him as one of54 people who should be subjected totravel restrictions and penalties.’ 43‘It has now emerged that a Shefercompany was instrumental in securinga deal for Brinkley to mine uranium inthe Congo,’ wrote Laurance, going onto say that ‘since the deal was struck,Shefer was declared persona non grataby the government of the DemocraticRepublic of Congo (DRC) last month.The minister who approved the deal hasbeen sacked and a civil servant involvedin the agreement has been suspended.’Laurance commented: ‘[T]he companyhas yet to tell shareholders of the newdevelopments’; while ‘Shefer’s role inBrinkley’s DRC uranium project hasnever been disclosed to investors.’However, ‘papers seen by The SundayTimes show that Brinkley acknowledgesthat a key role in securing the dealwas played by Sentinelle Investments.Shefer’s wife’s family trust has beena major shareholder in Sentinelle.Shefer’s accountant is the company’ssole director.’Moreover: ‘The other key Congoleseplayer was Fortunat Lumu, head of thecountry’s atomic energy commission.He was suspended from his job thisyear after being accused of agreeinguranium deals with Brinkley without theauthorisation of DRC president JosephKabila. Science minister Bonane wassacked from the government in July –only days after Brinkley announced inLondon that a deal with the DRC hadbeen signed.’ 44On 18 September 2007, Holden stuckup for Brinkley in an interview he gaveto Allan Seccombe of miningmx.com.Without naming any specific party, heclaimed that ‘People have been puttingrumours into the market for somemonths now to damage us and get usout of the DRC.’ Holden agreed thatSentinelle Investments ‘had laid thefoundations with the CGEA for about90% of the transaction’ although heclaimed this was ‘before Brinkley boughtthe deal’.1415

Holden then said that Shefer – theconvicted fraudster – was ‘extremelywell connected in the DRC, making avaluable consultant’. The former Barclaysmining investment chief admitted thatBrinkley had put some reliance onShefer, although he claimed this was‘sporadic and likely to become less asBrinkley set up and established its ownnetworks in the country’. Further: ‘We’lluse whoever we need to at differenttimes and if Niko can help then we willtalk to him again.’ 45A year later, and with Brinkley onthe brink of collapse, this saga mighthave been forgotten. Then, among thenumerous ‘Wikileaks’ released in early2011, was a cable, dated 11 September2007, sent home by Roger A. Meece, USAmbassador to DR Congo, which castfurther light on the affair.Meece was concerned to examineallegations that a company called MaltaForest, long active in DR Congo, hadbeen ‘trafficking’ uranium illegally out ofthe country. The ambassador found nocompelling evidence that this was true.But he confirmed that Fortunat Lumu –the CGEA official named in Laurance’sBumi’s Kaltim Prima Coal mine in Kalimantan, Indonesia -see case study 3.8 on p. 40. Photo: JATAMSunday Times story – ‘planned to … pushMalta Forest aside and form a personallyprofitable partnership with Brinkley’. 46On 3 April 2009, the DR CongoGovernment released its examinationof a host of contracts signed underthe previous regime that raised majorconcerns over their legitimacy, aswell as imputing complicity betweenformer political leaders and officialsand overseas mining companies. TheCongolese peoples had recently enduredthe most brutal civil conflict in therecent history of Africa (which is not yetat an end).The role played by AIM-listed BrinkleyMining may merit only a footnotein a future history of the continent.However, it is clear that the UKregulatory authorities had failed tomaintain a thorough, ongoing checkon the company’s activities, even whenallegations of impropriety, verging oncorruption, surfaced in the national press.3.3 and 3.4 African Minerals(AIM listed) and London Mining(AIM listed)African MineralsAfrican Minerals is listed on AIM but isa ‘non-UK registered company’ and, assuch, ‘not all fields of data are availableat this time’ – to quote the formula usedby Morningstar/Hemscott, a leading UKinvestors’ services provider. In fact, itsregistered office is in Bermuda.What we do know is that the companyis effectively controlled by Frank Timis,who was initially its executive chairman.This is yet another example of a breachof the guidelines for good corporategovernance set down in the CadburyReport twenty years ago; see Vedanta andBrinkley case studies. Timis is a 46-yearoldRomanian-Australian financierdomiciled in London with a track recordof disappointing investors. Those whobought shares in his Regal Petroleumsome years ago invested in what seemeda promising Greek oil discovery, hypedup by Timis between June 2003 andMay 2005, before the find proved to bechimerical (‘commercially unviable’).In 2009, Regal was fined £600,000 bythe LSE’s AIM – the largest penalty themarket had imposed – when it foundthat Timis’s company had ‘on 11 separateoccasions … failed to take reasonablecare to ensure its announcements werenot misleading, false or deceptive, anddid not omit material information’. 47In 2005 Timis bought into AIM-listedSierra Leone Diamond Corporation, viahis Bermuda-registered Timis DiamondCorporation. 48 With the acquisition camesome highly prospective diamond fieldsand the even more inviting Tonkoliliand Marampa iron ore projects. On 16August 2007, Sierra Leone Diamond wasrenamed African Minerals on AIM. 49In January 2008, Sierra Leone Diamondwas fined for putting out ‘misleading andunrealistically optimistic information’following statements made by thecompany in summer 2006 that it hadfound ‘a significant number’ of rare pinkdiamonds in Sierra Leone. However– and as the company admitted inDecember that year – the pink hue got‘washed out’ when put through an acidcleaningprocess. 50While Timis made some attempt tocorrect the official record, it took a yearand a half before the LSE took steps tocensure the company, and only then byway of a ‘private censure’, accompaniedby a relatively modest £75,000 fine(around the price of a genuine 1 caratintense pink Rio Tinto Argyle diamond).Worse, it appears that the public was notinformed about this censure for anothertwo and half years when the FinancialTimes divulged it in July 2010. 51African Minerals began testing theTonkolili deposit in Sierra Leone in 2003and judges that it might host a massive10 billion tonnes of ore. The companywas finally granted a mining licence inJuly 2009, currently covering an area of227 square kilometres. 52Some Sierra Leone local citizens claimto have been literally bulldozed byTimis’s company, while others say theyhave been fired upon by ‘security’ forcesprotecting his interests. According toSierra Leone’s Right to Food network:‘Since 2003 African Minerals has… promised development, jobs andbetter infrastructure. Nevertheless, itsoperations have resulted in bloodyconfrontations … 500 people live inKemedugu [where African Mineralsoperates], but when we arrived there itseemed like a ghost town. Only a dozeninhabitants came out to meet us on thevillage square, and bullet holes from thelast riot were still visible on a number ofthe houses.’1617

The Right to Food network reportcontinues: ‘The protest is said to havebeen triggered by the firm’s attempt toconduct surveys regarding the upcomingconstruction of a dam. One villageinhabitant told us, “If they build thedam, we will lose water for our fields.We are afraid that we will not be able togrow enough rice.”‘According to the police a number ofyoung men working for African Mineralsattacked the firm’s headquarters and setan excavator on fire. The police responsewas massive. They stormed the villageand destroyed a number of houses.More than eighty people were arrestedand there were numerous injuries,some of them serious. The majority ofthe villagers fled to the nearby forests.Those who have returned to the villagefear further attacks. As yet AfricanMinerals has refused to respond to therequest by a member of the alliancefor the Right to Food for a statementregarding the incidents.‘According to the villagers the firmhas refused to engage in any dialoguewith them. They have attemptedto communicate with the firm oninnumerable occasions and negotiatea compromise involving compensationfor the land the firm is using – to noavail. The only result has been massivepolice violence … Even though AfricanMinerals also talks about infrastructuralimprovements on its website, there isno evidence of these in Kemedugu. “Weare afraid that our land will be ruinedby African Minerals and we will not beprovided with any compensation,” says[Kemedugu Chief] Musa Turay bitterly.’ 53executive directors, backed by a clutchof ‘respectable’ investment funds(including F&C Asset Management,Schroder Investment Management,Fidelity Investment, BlackRock Inc., theUnion Bank of Switzerland, Investec andBarclays Wealth) none of which holds acontrolling stake in the company. 54London Mining has not progressed halfas far at its Marampa project as AfricanMinerals has at Tonkolili. The companydid not record any revenue for the pasttwo years and in February 2011 reporteda pre-tax loss of US$58 million for thefourth quarter of 2010. 55Adding to London Mining’s concerns,in November 2010, Sierra Leone’senvironmental protection agencytemporarily suspended the company’son-site operations, citing its failure tocomply with environmental regulations.‘Yet by the end of the day the head ofthe agency recanted and the companyannounced work was going on as usual.’ 56London Mining had already won someextraordinary concessions from theSierra Leone Government, allowing itan 80% reduction in income tax for tenyears and an 80% reduction in othermajor revenue streams for no fewer than26 years. Its corporation tax was fixedat only 6% (in contrast to the 37.5% setunder Sierra Leone’s 2009 Mining Act);duty on mining materials at 1% (ratherthan the official rate of 5%); royaltieswere reduced to 3%, rather than the 4%mandated by state law. 57 (For its part,African Minerals also benefited fromsome concessions – its corporation taxrate was set at 26%.)recover from these traumas, a number oforganisations have vigorously struggledto recapture the proceeds of mineralwealth in order to ‘rebuild’ the nation’scivil society.One of these is Sierra Leone’s NetworkMovement for Justice and Development(NMJD). At the February 2011 WorldSocial Forum in Senegal, the NMJD,along with the Association of Journalistson Mining and Extractives (AJME),hosted a symposium on ‘Reforms inMining Regime – Challenges in SierraLeone’, specifically targeting LondonMining’s operations. The symposiumdeclared that the West African country‘since the early 1980s till date, hasproduced billions and billions of dollars’worth of precious minerals, but yetremains at the very bottom of the humandevelopment index and classified as aleast developed nation.‘While structures such as thePresidential Task Force, the StrategicPolicy Unit, the Anti CorruptionCommission, the Income Tax Act of2000, the Law Reform Commissionetcetera have been put in place toenhance reforms that would ensurethat the country benefits most from itsalready hugely depleted mineral wealth,it came out that the said structuresare yet to display much seriousness infulfilling their all-important mandates.’Concerns were raised that ‘politicalwill seems to be there but that unduepriority is being given to attractinginvestors of all sorts, rather than strivingto change the resource-curse syndrome,thereby meeting the expectations of theelectorate and the suffering masses’. 58According to panellists at the forum,while the 2009 Mines and Minerals Act‘has the potential of changing the historyof mining in the country’, nonetheless‘the continued violation of some of itscrucial provisions to so-called attractinvestors who often turn out to beeconomic criminals, is undermining thevery act and at the same time treatingthe laws of the land with disregard’.In this key respect, these two AIM-listedmining companies, African Minerals andLondon Mining, were singled out forindictment.London MiningRunning parallel with African Minerals’forays into Sierra Leone are those ofanother AIM-listed company, LondonMining. In contrast to Timis’s dubiouscorporate vehicle, London Mining isdriven by an eminent board of non-Sierra Leone is one of the world’spoorest nations, yet endowed withsome of its richest mineral deposits. Fordecades its economy has been sacrificedto what is often called the ‘resourcecurse’ – not to mention the ravages of ahorrendous recent war, centred aroundits mining fields. As the people begin to1819

3.5 Vedanta Resources (FTSE100 listed)In May 2011, the world’s seventeenthlargest publicly-listed mining company,Vedanta Resources, 59 said it soonexpected to float its Zambian subsidiary,Konkola Copper Mines (KCM), onLondon’s Stock Exchange. AnilAgarwal, Vedanta’s progenitor, majorityshareowner and executive chairman, hadexpressed a similar intention in 2010. 60Possibly prompted by Glencore’s May2011 IPO, and with copper prices at ahigh, the UK-domiciled ‘Non-ResidentIndian’ presumably judged the time ripeto attempt a repeat of Vedanta’s LSEdebut in December 2003. 61Neither a pre-listing prospectus for KCMnor any formal announcement of a floathas yet been issued. Serious allegationshave been levelled against KCM’sbehaviour (see below), but whetherthese will be thoroughly exposed well inadvance of a listing must be in doubt.That doubt is strongly compoundedwhen we realise just how inadequate –to the point of misrepresentation – wasthe prospectus published by Vedantaitself more than eight years ago. Wehave good reason to demand that thecompany’s appalling record of violationsand mismanagement in the succeedingyears will be addressed in all its detailbefore the UK’s financial regulatoradmits any of its subsidiaries to publictrading of their own shares.If Vedanta is indeed an intrinsically‘bad actor’ (a concept soon to bediscussed by the US SecuritiesExchange Commission as it works onimplementing one of the provisions ofthe Dodd-Frank Act), 62 what should nowbe done to prevent the sins of the parentbeing repeated by the child?In 2007 Norway’s Council on Ethicsreleased the results of a two-yearexamination of Vedanta’s operations,primarily those in the Indian state ofOrissa (see below). It concluded that‘[C]ontinuing to invest in the …company would present an unacceptablerisk of contributing to grossly unethicalactivities.’ 63In response to this indictment, theNorwegian Finance Ministry sold all thegovernment’s Vedanta shares (valuedat around US$13 million). An openinvitation had already been extendedby the Council to Vedanta to refuteits findings and, at any future point,demonstrate a radical improvementin its modus operandi, at which timethe Council would consider reversingits earlier stance. Vedanta has failedto do so, and the company remains‘blacklisted’. 64Norway’s is not the only governmentconcerned at allegations of Vedanta’sbehaviour. In the second half of 2010,Agarwal had inked an agreement (wortharound US$9.6 billion) with CairnEnergy in order to secure a controllingshare of the Scottish oil enterprise’sIndian subsidiary. With this dealVedanta would secure access to India’slargest known oilfield, in Rajasthan.Although quickly bankrolled by anumber of UK and other commercialbanks, the arrangement raised fearswithin India’s state-owned oil and gasproducer ONGC (itself holding a 30%stake of the field) that it would loseeffective control over a prized nationalresource, and sacrifice an equitableshare in the project’s future royalties.In view of this, prominent ex-civilservant E.A.S. Sarma (a former adviseron energy to India’s governmentplanning commission) wrote to IndianPrime Minister Manmohan Singh,questioning the appropriateness of thetakeover. Said Mr Sarma: ‘Vedanta’strack record so far in mining and powersectors has not been satisfactory ...To allow that company to get hold ofBumi’s Kaltim Prima Coal mine in Kalimantan, Indonesia -see case study 3.8 on p. 40. Photo: JATAM2021

a sizeable share in the equity of thecompany that controls the extractionof hydrocarbons in Rajasthan andelsewhere may not be desirable.’As a result of this intervention, theIndian Prime Minister’s Office calledfor a review of Vedanta’s track record. Itwas an unusual move on the part of thegovernment. More importantly, in late2007, India’s Supreme Court had heardcompelling evidence of contraventionsby Vedanta’s aluminium subsidiary(VAL) of state forest and environmentalregulations at the company’s costliestproject to date.The Niyamgiri bauxite deposit lies at theheart of a thickly forested Kondh tribalarea, linked to the nearby Lanjigarhalumina refinery which serves Vedanta’sJharsaguda smelter, 335 kilometresaway – all three situated in Orissa. Inrejecting Vedanta’s application to accessNiyamgiri, the judges had paid tributeto the weight of allegations against thecompany, contained in the NorwegianCouncil of Ethics report. 65Orissa: breaking more than one lawThe Niyamgiri mountain is regarded bylocal tribal inhabitants as Niyam Raja –roughly translated as ‘Lord of the Law’or ‘Lord of Dharma’: ample testimonyto the reverence paid by the DongriaKondh to a deeply sacred place. 66In September 2005, an inquiry by aleading advisory committee to India’sSupreme Court (the Central EmpoweredCommittee, or CEC) concluded that interalia Vedanta had ‘falsified information’to obtain environmental clearances forthe alumina refinery under constructionon plains below the mountain. Thecompany had also destroyed more thanten hectares of forest land. The CECurged the mining venture be rejected onenvironmental grounds, and also becauseit would violate the constitutional rightsof the Kondh people. 67Despite the CEC’s forthrightrecommendation, during the succeedingfive years Vedanta continued battlingto clear the mining project. Meanwhilemany Khonds rose up in vociferousopposition to what they perceivedas an unprecedented threat to theirland and livelihoods. The strength oftheir campaign attracted the backingof leading Indian human rightsand environmental NGOs and ofinternational organisations such asAmnesty International and ActionAid. 68In September 2009, the UK-basedtribal peoples’ campaign group SurvivalInternational submitted a complaintabout Vedanta’s activities aroundLanjigarh to the UK Government’sNational Contact Point (NCP) for aruling under guidelines set by theOECD for the conduct of multinationalcorporations. 69 The NCP ruled thatVedanta ‘did not respect the rights ofthe Dongria Kondh’; did not ‘considerthe impact of the construction of themine on the [tribe’s] rights’; and ‘failedto put in place an adequate and timelyconsultation mechanism’.The UK Government body concludedthat a ‘change in the company’sbehaviour’ was ‘essential’. Moreover, itcriticised Vedanta for ‘fail[ing] to provideany evidence during the examination’– despite repeated requests. Accordingto Survival International, this was ‘theonly time a [UK] company has refused toparticipate in an OECD investigation’. 70In February 2010, Amnesty Internationalpublished detailed allegations about thecompany’s social and environmentalviolations in the Lanjigarh area, whichVedanta has neglected to answer. 71Finally, in August 2010, a high-levelindependent report, commissioned byIndia’s Ministry of Environment andForests (MoEF), unequivocally rejectedthe Niyamgiri mining project and alsourged a halt to Vedanta’s planned sixfoldexpansion of its Lanjigarh refinery.The report’s authors concluded: ‘TheVedanta Company has consistentlyviolated the FCA, FRA, EPA 72 and theOrissa Forest Act in active collusionwith the state officials. Perhaps themost blatant example of it is their actof illegally enclosing and occupying atleast 26.123 ha of Village Forest Landswithin its refinery, depriving tribal, dalits[lowest-caste] and other rural poor oftheir rights.’ 73Shortly afterwards, the MoEF minister,Jairam Ramesh, went on record tocriticise India’s Supreme Court forpermitting construction of the Lanjigarhrefinery in the first place; and he placeda ban on expansion of the refinery. 74At the time of writing, Vedanta and itspartner, the state-owned Orissa MiningCompany, are trying to overturn thisBumi’s Kaltim Prima Coal mine in Kalimantan, Indonesia -see case study 3.8 on p. 40. Photo: JATAMruling. However, following an OrissaHigh Court ruling in January 2012, theexpansion has been barred. In Apriland May 2011, mismanagement at therefinery resulted in two involuntary andillegal on-site releases of highly alkalinetoxic solid wastes, commonly-knownas ‘red mud’. 75 On several occasionsbetween 2007 and 2009, the Orissa StatePollution Control Board had criticisedVedanta for the poor construction of itsred mud pond, issuing three ‘show cause’notices to the company and orderingthat it prevent these wastes entering intothe adjacent Vamsadhara river. 76On 5 April 2011, part of the pond wallburst open, causing many tonnes ofthese wastes to cascade into the river foraround three hours. Although a videoclearly showing evidence of the violationwas swiftly posted on YouTube, 77 theCEO of Vedanta Aluminium denied that2223

there had been any breach of the wall,even suggesting the footage was part of a‘dirty tricks’ campaign by those opposedto the mining.Just six weeks later, on 16 May 2011, thepond wall broke once again, promptingAmnesty International on 1 June toissue a statement drawing attention towhat it called a ‘toxic sludge leak’ that‘threatens rural communities’. Amnestyestimated that ‘four to five thousandpeople in twelve villages are threatenedby the leaks, which could worsen duringheavy monsoon rains’.It maintained that ‘Local people haveprotested that they have not been givenany information by Vedanta Aluminiumor the government about efforts toprevent further leaks … VedantaAluminium denies that there were anyspills from the red mud pond and hasreportedly not repaired the damagedareas.’ But Amnesty ‘is … not aware ofany attempts by the company to assesspollution of land and water caused bythe reported leaks, or to clean up anydamage that has occurred’. 78In addition, the Indian National HumanRights Commission identified 3.66acres of land within the refinery thatit said legally belonged to the tribalKhond, as a result of which the localadministration registered a case of landgrabagainst Vedanta. 79Jharsaguda: in the smelting potFrom the beginning of its trajectoryin Orissa, Vedanta conceived a threeprongeddesign to become one of theworld’s major aluminium producers,and at the cheapest possible cost.It would build a smelter to receivealumina from the refinery it hoped (andexpected) would be fed by bauxite onNiyamgiri mountain.The Jharsaguda smelter has been underconstruction since 2005. In the yearApril 2010 to April 2011, Vedanta claimsthe plant produced 380,000 tonnes ofaluminium.During this period, the Lanjigarhrefinery had been supplying the smelterdaily with hundreds of truckloadsof bauxite that travel 335 kilometresbetween the two points. 80 Thesejourneys have significantly damagedroad surfaces, caused a large numberof accidents and stirred up dust andparticulates, the impacts of which willinevitably deepen as output from thesmelter mounts. 81Prafulla Samantara, a respected Orissacivil society organiser, in mid-2006accused Vedanta of illegally undertakingconstruction work on the smelter andits captive coal-fired power plant –specifically of destroying protectedforests, trampling over vegetation andpolluting a stream. 82In 2007, Mr Samantara secured an orderfrom the Orissa State Pollution ControlBoard (OSPCB) which demandedVedanta cease the smelter construction.Yet, within a month, the order hadbeen withdrawn. Mr Samantara issueda vociferous objection to what heconsidered evidence of pressure by thecompany on the OSPCB. When, a yearlater in January 2008, he pleaded for thecase to be heard before India’s NationalEnvironmental Appellate Authority(NEAA), he was refused. The NEAAdetermined that he was not a ‘personaggrieved’ within the meaning of thelaw, since he was not directly affectedby the project.However, on 6 May 2009, in somethingof an historic decision, Delhi’s HighCourt recognised that Mr Samantarawas indeed ‘aggrieved’, since hewas an environmentalist with closeconnections to communities aroundthe smelter site. The court delivered aneloquent appraisal of activists like MrSamantara, recognising that they playa vital role in safeguarding rights andobligations broadly set out under thecountry’s constitution.Said Judge S. Ravindra Bhatt: ‘Ifstanding before a special tribunal,created to assess impact of projectsand activities that impact, or posepotential threats to the environment,or local communities, is construednarrowly, organizations working for thebetterment of the environment whetherin form of NGOs or otherwise, wouldbe effectively kept out of the discoursethat is so crucial an input in suchproceedings.’ The court then orderedVedanta to pay 50,000 rupees (aboutUS$1,000) to Mr Samantara by way of afine and in meeting his costs. 83In July the same year, the OSPCB issuedshow-cause notices against Vedanta,relating to various violations of waterand air pollution acts at the Jharsagudacaptive power plant: negligent disposalof coal ash, unacceptable emissions fromthe ESP (electrostatic precipitator), anddefects of the smelter’s effluent treatmentplant and in the coal handling area. 84More than a year later, thanks to thediligence of the Hindustan Times in itsuse of India’s Right to Information Act,journalist Priya Ranjan Sahu revealedthat ‘two 135 MW captive power units ofVedanta Aluminium’s 500,000-tonne-ayearsmelter never got any clearance fromthe board’. 85 Furthermore, said Sahu:‘[T]he “trial consent to operate” orderOSPCB issued to the smelter and sevenother 135 MW captive power plantsexpired on March 31 this year [2010].’According to Sahu, the board ‘refusedto renew its consent, citing numerousviolations of its guidelines’, and issuedfour show-cause notices betweenMay and September 2010. Even if thecompany had satisfactorily respondedto these, Sahu pointed out, ‘that doesn’texplain how the two power plants forwhich even trial consent orders were notissued remain in operation’. 86Zambia: the toxic riverIn 2004, Vedanta Resources acquireda 51% stake in Konkola Copper Mines(KCM), paying $48 million in cash.During the first full three months ofoperation, the company posted netprofits of $26 million, provoking anumber of Zambian politicians to askwhy the takeover had been allowed inthe first place at such a low price. A ‘calloption’, secretly negotiated in 2004, alsoenabled Vedanta to exercise a right topurchase another 28.4% in KCM fromBermuda-registered ZCI, effectivelygranting Vedanta a 79.4% monopoly. 87Vedanta benefited from an earlier drasticprivatisation of the country’s oncehighly profitable state-owned copperindustry. The labyrinthine process bywhich this was engineered, specificallyin relation to KCM, was exposed ina November 2001 report by PatriciaFeeney of Oxfam. 88 The report raisedurgent questions over KCM’s recordof environmental pollution and itsimpact on the health of workers andcommunities.Ms Feeney’s strictures applied to thecompany’s Konkola operations beforethey were sold to Anglo American – andthen on to Vedanta. However, in the lightof a later disaster, which occurred whenKCM had been firmly under Vedanta’scontrol for nearly three years, the reportsounded an important warning note:‘Women, men and children on theCopperbelt have to live with a range ofenvironmental hazards. Heavy metalssuch as arsenic and lead and otherindustrial chemicals have contaminatedstreams and the main Kafue River.’Although Vedanta took some steps toreduce this contamination, its failureto adopt a comprehensive management2425

plan soon became self-evident. By earlyNovember 2006, KCM’s nine-kilometrelongpipelines, conveying slurry fordisposal from its copper tailings leachingplant, had deteriorated to bursting point.And burst they did – precipitating aflood of highly acidic effluents into theKafue river.The discharges led to a majordisruption of domestic water supplyto 75,000 residents of the nearby townof Chingola. The country’s tourism,environment and natural resourcesminister, Kabinga Pande, declared ina ministerial statement to Parliamenton 14 November 2006: ‘The situationexperienced recently is not accidentalbut is a result of the failure by thecurrent mine owners to implement theKCM Nchanga Mine Environment Plan(EMP) that was inherited from the AngloAmerican Corporation, the previousowners of the mines.’ 89A detailed examination of Zambia’sminerals industry, published in 2007by an alliance of Zambian civil societyorganisations, noted that the Kafueriver had ‘turned blue’ as a result ofthe disaster and estimated that thedischarges raised the river’s raisedchemical concentrations to 1,000% ofacceptable levels of copper, 77,000% ofmanganese and 10,000% of cobalt. 90Later the same year, in a report bythree UK development NGOs, theEnvironmental Council of Zambiawas cited as declaring that KCMmanagement had displayed ‘grosslynegligent’ behaviour, resulting inrivers used by local communities fordrinking water becoming ‘significantlypolluted’. The report threw strong doubton KCM’s claims to be ‘corporatelyresponsible’ towards its subcontractedworkers and pointed out that thecompany was failing to make a fair andequitable contribution to governmentfrom its profits. 91In November 2010, KCM yet againpolluted the same Kafue river it hadpoisoned four years earlier. A courtfined the company and found itguilty of willfully failing to report the‘accident’ to the authorities. 92 KCM’slawyer, Mr Elijah Banda, reportedlytold the court that the company‘was remorseful and had undertakennecessary measures to mitigate thedamage caused and to prevent futureincidents’. 93 This was almost exactlywhat Vedanta had promised to dofollowing the 2006 disaster.Readers may note a similarity betweenthese Zambian incidents and recentevents at the Lanjigarh refinery site(see above); there is also a patternto Vedanta’s dismissive attitude inresponse to them. The PrecautionaryPrinciple places responsibility on theparty contemplating an action forproving that that action or practice willnot cause unacceptable harm. 94 At itsrefinery in Orissa, and its operationsin Zambia’s Copperbelt, Vedanta hassignally failed this test – and continueddoing so. In late March 2011, foursubcontracted KCM miners at theNchanga open pit in Chingola went totheir deaths after being suffocated by anexcavated heap of soil. 95The criminally negligent attitude ofVedanta to site safety, already warnedof by the three UK NGOs in 2007, 96 hasnot substantially improved. This leadsus directly to exposing one of the worstexamples in recent years of the fatalneglect of its contracted workforce by aUK-listed company.Korba: 41 workers buried alive 97One of the concerns mentioned inMr Sarma’s letter to the Indian PrimeMinister’s Office (see above) was theSeptember 2009 collapse of a powerplant chimney, under constructionat Korba town in the Indian state ofChhattisgargh. The disaster claimedthe lives of at least 41 workers (possiblyconsiderably more) 98 employed by twofirms contracted to Vedanta’s subsidiaryBALCO (Bharat Aluminium Company). 99It was around 4pm on 24 September2009 that the 245-metre chimneytoppled to the ground. 100 As local youthsran towards the clouds of billowing dustto help rescue workers and pull bodiesfrom the rubble, BALCO officers wereobserved fleeing the scene.There are no precise records of whodied in this worst Indian industrialaccident of recent times. In all theconfusion immediately followingthe event the subcontractors’ on-siteoffice was mysteriously burned down –whether by company officials (as somehave alleged) or by incensed workersand local people. The office containedrecords of workers’ names and otherdetails that might have enabled theauthorities to understand the causesof the accident and exactly how manyworkers had gone missing. 101Vedanta executive chairman AnilAgarwal has claimed the tragedy wasthe result of ‘severe thunderstorms andlightning’ earlier that day. 102 However,an investigation commissioned bythe Korba police and carried out bythe Raipur-based National Instituteof Technology (NIT) in Chhattisgarh,challenges this assertion.The NIT spent two days on-site, siftingthrough the wreckage soon after thedisaster and analysing the materials itgathered. Its report states categoricallythat lightning could not be attributedas a cause of the tragedy, since therewere no signs of melted steel rebars,nor evidence of burns on the recoveredbodies. The institute concluded that‘careless, poor construction practiceand poor workmanship in theconstruction of piles’ and ‘impropercement content in the concrete mix’were likely causal factors.The NIT found that new layers of thechimney were being built before lowerlevels had been given time to cure(harden) properly: ‘The compressivefailure of the chimney may have takenplace at somewhere in the upper portionof the chimney … the upper portionmay have sunk telescopically down tothe lower portion, exerting enormoussudden pressure to the bottom portion.’Three BALCO employees, includingthe project leader for the chimney,Viral Mehta, and one employee ofsubcontractor GDCL, were charged with‘culpable homicide not amounting tomurder’. All four were released on bailafter the Supreme Court overturneda Korba District Court decision towithhold it.The deputy director of prosecutions inKorba, J.N. Chandra, is palpably annoyedat the hoops he has had to jump throughin securing any kind of justice. He toldUK researcher Simon Chambers inApril 2011 that ‘there is no likelihoodof anyone being brought to trial in theforeseeable future because the accusedcontinue successfully applying for staysfrom the Chhattisgarh High Court andSupreme Court, which could drag outproceedings interminably’.A judicial enquiry into the disaster,the Buxi Commission, has alreadypostponed release of its findings threetimes due (it says) to ‘unavailability ofwitnesses and facts’. According to MrChandra, most people in Korba see thecommission as an attempt by the stategovernment to appear to ‘at least bedoing something’, when in reality ‘thereare too many powerful people who wantnothing to be done’.A senior ex-employee of BALCO,who left the company in 2003 anddid not wish to be named, informedSimon Chambers that, after Vedanta’sfoundation company, Sterlite Industries,took control of BALCO in March 2001,2627

company practices changed drastically.The management was told ‘it shouldnot worry about obtaining approvalsfrom the authorities on pollution,environment and forestry issues’.When a town and country planningnotice was served on BALCO inDecember 2003, ordering a cessation ofexpansion work, the company retorted:‘We wish to state that only basicpreparatory work like sample excavationand site grading are being taken upto ensure timely completion of thisprestigious project for the State andpeople of Chhattisgarh.’The mayor of Korba at the time of theSeptember 2009 disaster was LakhanielDewanen. He is sure that the fatalchimney was built illegally, on a 92.84-acre plot which is still classified as forestland, owned by the State of Chhattisgarh.The Korba Municipal Corporation(KMC) served a number of ‘stop notices’throughout 2009, threatening legalKorba chimnery disaster site.proceedings and the dismantling of anyprevious constructions. All were ignoredby the company. 103According to Mr Dewanen: ‘Just a weekbefore [the accident] a team from theKMC reached the site and stopped theconstruction work. But the companystarted the work again.’ BALCO alsoreceived notices from the CentralPollution Control Board and Town andCountry Planning Department orderingwork on the chimney to be stopped.The families of most of the workersreported dead on that traumaticSeptember afternoon in Korba haveeach received Rs5 lakh (500,000 rupeesor around £1,370) compensation fromBALCO, as well as some monies fromthe Indian subcontractor, GannonDunkerley, and from the government.Nobody representing BALCO orits subcontractors is known to havecontacted the families at any point tooffer condolences or explanations.In October 2010, Anil Agarwal himselfwas summoned to give evidence at theKorba District Court in answer to acharge of criminal trespass relating tothe previous year’s events. His lawyerssuccessfully applied for a stay from theChhattisgarh High Court, allowing himto remain in London. 104Numerous official notices from variousgovernment departments have been sentto the BALCO offices over the last fouryears, ordering that various work shouldstop at the Korba site, each soundinga little more desperate and impotentthan the previous one. Just five monthsafter those 40 and more workers losttheir lives, BALCO began constructinganother chimney on the same spotwhere the earlier edifice had collapsed.A notice sent to the company by theKorba Municipal Corporation, dated5 February 2010, declared: ‘You havestarted construction without submittingthe necessary papers. You have notobtained permission for construction,and we have told you repeatedly toplease submit your papers or we shallhave to file a case against you.’Clearly there has been officialprocrastination in bringing Vedanta tobook for its alleged corporate crimes inKorba. But arguably worse is the almosttotal neglect in calling the company toaccount on the part of UK authorities.It is not the case that the appallingevent of September 2009 was ignoredby international media. There wassubstantial coverage on the BBCNews channel and Al Jazeera. On 23September 2009, Dow Jones Newswiresfiled notice that ‘Chhattisgarh ChiefMinister Raman Singh said in astatement that “a judicial probe hasbeen ordered” into the accident’ andthat ‘a police case had been filed againstBALCO’. 105The same day, Vedanta issued a curtstatement in the form of an RNS alert(an LSE Regulatory News Service note),which clearly sought to underplay themagnitude of the disaster. 106 Vedanta’sexecutive chairman, Anil Agarwal, stuckto his self-exculpating version of eventsright through to a statement made toshareholders on 5 May 2010 (publishedin the company’s annual report for2010). Long before then, the ‘act ofGod’ defence had been demolished byIndia’s National Institute of Technology(NIT). But Agarwal compounded earlierapprehension that he was deliberatelydownplaying the tragedy by describing itas ‘an unfortunate accident’. 107The British Safety Council (BSC)awarded BALCO two internationalsafety awards in 2009. One of these wasgiven to the company itself, just fourmonths before the Korba killings, anda second to one of BALCO’s captivepower plants. 108 The awards were notwithdrawn until almost a year after thedisaster. Even then, the BSC admitted,this step was taken only because itsattention had been drawn to the eventby a London Observer analysis of thedeaths of workers at all FTSE 100mining groups, as recorded in theirannual reports. 109Although the BSC is a charitableassociation, it is actively supportedby the UK Health and SafetyExecutive (HSE), the UK’s officialhealth and safety watchdog, andthe two work closely together to siftsafety-related data relating to UKbasedcompanies. As a commentatorwith the International Trade UnionConfederation (representing 175 millionworkers worldwide) put it at the time:‘Th[is] publicity is likely to be a sourceof embarrassment to both HSE andBSC. It would be remarkable if bothorganisations were unaware of thedisaster in Korba, India, which waswidely reported at the time, and anyfatality in the award year automaticallyinvalidates an application.’ 1102829

The independent research and advisoryconsultancy Pensions InvestmentResearch Consultants (PIRC – ‘Thevoice of responsible shareholders’)issued a statement just before Vedanta’s2010 AGM. Describing the Korbacollapse as a ‘significant indicator of[the company’s] poor governance’,PIRC called on Vedanta shareholdersto oppose the election of three of thecompany’s non-executive directors(including senior non-executive directorNaresh Chandra, chair of its health,safety and environment committee, andits remuneration committee) ‘becauseof their role in the company’s poorhandling of environmental, social, andgovernance issues’. 111The Norwegian Government is not theonly shareholder to sell its Vedantastake, finding it incompatible withthe responsible manner in which itshould invest its clients’ (or citizens’)funds. When the Church of Englandsold its Vedanta shares in early 2010,the chairman of its Ethical InvestmentAdvisory Group, John Reynolds,wrote: ‘I am a passionate advocate forengagement with companies whenwe have ethical concerns. We have anexcellent track record of getting ourconcerns heard and acted upon bythe companies in which the Churchinvesting bodies hold shares. We aregrateful to Vedanta’s senior managementfor making themselves available to meetus on a number of occasions. However,after six months of engagement, weare not satisfied that Vedanta hasshown, or is likely in future to show,the level of respect for human rightsand local communities that we expectof companies in whom the Churchinvesting bodies hold shares.’ 112A significant number of investmentfunds from the UK, Canada, USA,Sweden and the Netherlandshave recognised the unacceptablereputational risks of bankrolling thiscompany. There is steadily mountingpublic perception that Vedanta not onlyoperates ‘outside the law’ but is contentto do so, displaying disdain towards itscritics. 113Why has only one UK Governmentbody, the OECD National Contact Point,ever considered examining any oneof Vedanta’s many overseas activities?Is it right that only cash-strappedvoluntary organisations (not to mentionindividuals) research and presentevidence of the company’s violations,rather than an official regulatory body?The Vedanta case illustrates both theinadequacy of company reportingprovisions under the FSA and theabsence of binding rules to govern theconduct of this and other London-listedmining companies.3.6 Glencore (FTSE 100 listed)On 24 May 2011, the world’s largestcommodities trader entered the Londonand Hong Kong stock exchanges withtwo IPOs following the priority issueof shares to its ‘cornerstone investors’shortly before. Under its chief executiveofficer, the South African-born, SwissresidentIvan Glasenberg, Glencoreleapt into the FTSE 100 list of the UK’spremier companies. With a marketcapitalisation of around £36 billion, itimmediately became the fourth biggestmining company traded on the LSE’sMain Market. 114The IPO had tapped the pockets ofmany investors, including hedge funds,sovereign wealth funds, so-called trackerfunds and pension funds. Pensionportfolio managers would have feltduty-bound to buy a stake on behalf oftheir clients – despite any disquiet thatthe clients whose pensions their roleis to safeguard might have expressed.Nonetheless, the hype, investor roadshows and glut of media attentionpreceding this listing (the largestever made in the UK) failed to workconsistently in Glencore’s favour.True, this secretive enterprise will nowenjoy access to sizeable chunks ofnew capital. However, this sprawlingconglomerate (‘a big Swiss cheese’ as onecritic dubs it) was also forced to openits books to greater scrutiny than so farreceived in its 37-year history.Of the 1,600-odd pages in Glencore’spre-launch prospectus, three-quarterswas devoted to ‘competent persons’’reports on the firm’s Colombian coalassets, on the Mutanda and Mopanimines in Zambia, and on Kazzinc, therising Kazakhstan zinc, copper and goldminer. Nearly a fifth of what Glencoreexpected to raise ($2.2 billion) hadbeen earmarked to increase its stake inKazzinc to 93%. In February 2012, thecompany announced plans to mergewith Xstrata, 115 of which it already owned34.4%. And rumours that Glasenberg hadhis sights on a more modest acquisition,ENRC (Eurasian Natural Resources)began circulating in June 2011. 116Don’t touch it with a bargepoleOn 20 May 2011, The Times businesseditor Ian King voiced little doubt that‘small’ investors at least should steerclear of taking a stake in this particulargolden calf. In a robust comment,King damned Glencore as ‘a businesswith dubious morals. It trades grainamid food riots and has been accusedof profiteering and environmentaloffences in numerous poor and war-torncountries.’ He went on: ‘Most of thosesigning up to buy shares in Glencore’sflotation are major Middle Easternand Far Eastern investors. Few of thetraditional City institutions will touch theshares with a bargepole. The question is,should you?’Some nine hundred different accountsput out the boat for Glencore’s pre-IPO. According to Reuters IFR, orderswere received from around the worldincluding the UK, US, Asia, the MiddleEast and Brazil. ‘About 10 per cent wentto high-net worth individuals and privatebanking clients, about a third to hedgefunds and the rest to institutions andsovereign wealth funds. Hong Kong retailtook just 2.67 per cent of the offering.’ 117There was scepticism on the part of afew funds which would normally havebeen expected to join the scramble.The fund manager for Schroder’s UKequities team, along with Aviva Investors’UK equity manager, warned investorsto look to other mining companieswith a long history as listed businesses.Commented Aviva’s Chris Murphy: ‘Ifwe want exposure to the mining spacewe can buy Rio Tinto, where we knowits track record and have visibility onmanagement. We feel there is more valuethere than the likes of Glencore.’ 1183031

Old game over?‘Why would a giant secret society likeGlencore, with a dark past, want to comeinto the light of day and relinquish theprivate, backroom-dealing businessmodel that made its partners andfounder fabulously wealthy?’ This wasthe question raised by US investmentguru Shah Gilani on 18 May, and hisanswer was a terse one: ‘Because the oldgame is over and commodities prices areabout to break down – and in a big way… By utilizing its newly tapped source ofcapital – its own stock – the [Glencore]partners will eventually be able to cashout (they have a lockup provision of fourto five years).’ 119Gilani added: ‘[T]he company will alsobe able to withstand the coming crash incommodity prices and then be perfectlypositioned to buy at the bottom, which iswhat it is planning to do.’ 120 This may ormay not prove to be the case. The marketprice of copper and other base metalsdid turn downwards just a day beforeGlencore went public.More importantly, we should askwhether the firm’s move on Londonand Hong Kong was not motivatedby a somewhat different intent. Thiswould be a reduction of its dependencyon commodities trading per se, byincreasing its vertical control over oiland mining companies beyond what itcurrently exercises. Owning mineralsin the ground, and controlling relatedinfrastructure, is arguably less risk-pronethan sending them across oceans, ortying them down in warehouses.As Australian financial commentatorStephen Bartholomeusz wrote a weekbefore the IPO: ‘What has changedwithin Glencore in recent years hasbeen the size and contribution of [its]industrial assets – its interests in mines,oil wells, logistics businesses and portfacilities.’ Bartholomeusz anticipatesthe conglomerate will now transformitself ‘from a trader with some resourceproduction, to a mining house withsome trading activities … In fact itwould look very much like a BHPBilliton, which might be the point.’ 121Indeed, while Glencore’s foodstuffstrading is a key part of its global reach(attracting bales of criticism in recentyears), the conglomerate’s biggestprofits derive from its exploitation of oiland minerals.Damage, dirt, deceit and deathOn 19 and 20 May 2011, The Times lashedinto Glencore with several exposésof the company’s current operationsfollowing a special investigation. (TheGuardian followed suit with additionalindictments.) The Times alleged thata Glencore subsidiary ‘had procuredlucrative market-sensitive informationfrom a European Union “mole’’’,which, the paper argued, ‘threatensto undermine the EU’s Commonagricultural policy’. 122The paper went on to claim thatGlencore’s Colombian subsidiary,Prodeco, has been operating ongovernment-owned land ‘that wasforcibly taken from its previousresidents by paramilitaries; at least 18people were murdered in a six month“campaign of terror” at El Prado,northern Colombia’. 123In February 2007, residents close toProdeco’s La Jagua de Ibirico coal minein Colombia’s Cesar province set upbarricades to protest at environmentaldamage and respiratory illnesses theyclaimed had been inflicted by thesemining operations. In response, policeattacked the demonstrators, reportedlykilling one man. 124Six months later, on 22 September2007, Glencore was accused ofimplementing an aggressive anti-unionpolicy at its Minera Los Quenualeslead-zinc operation in Peru, where amonth before a worker had died bybeing crushed under a heap of ore.The workforce began an ‘indefinitegeneral strike’ to draw attention to theirunmet demands, and another personwas killed, with dozens reportedlyinjured, when it barricaded access tothe mine site. 125 According to The Times,Glencore was guilty of causing riverpollution at its operations in Bolivia. Inaddition, members of the Wutha Native(Aboriginal) Title Claimants Groupin Australia had been ‘cheated of anagreement made with Glencore in 1996,under which the company guaranteedto employ some of them in return formining nickel on their land. (The casewas settled only recently out of court.)’ 126Century Aluminum of the USA – withGlencore at 44% its biggest shareholder– according to the paper, was ‘beingpursued for damages caused by itsoperations, in a string of cases broughtby environmental agencies, localresidents and other companies’. 127Pollution and tax evasion in ZambiaGlencore’s mining and smeltingoperations at its Mopani coppercobaltcomplex in Zambia seem tohave provoked the greatest ire during2011. In a May 2011 article, entitled‘Billionaire ignored children’s pleas tostop toxic pollution from mine’, TheTimes’s environment editor Ben Websterreported that Ivan Glasenberg had, a fullyear before, ‘received a bundle of lettersfrom children at a school exposed on adaily basis to sulphur dioxide pollutionfrom the nearby Mopani Copper Mines(MCM) complex’. 128‘In the letters … the children describedhow clouds of toxic particles made themchoke, burnt their throats, poisonedthe school’s fruit trees and forcedteachers to close windows, leaving themsweltering in their classrooms.’In 2009 the Environmental Council ofZambia (see also Vedanta, case study 3.5)reported that sulphur dioxide emissionsfrom parts of the plant had reached upto 70 times the maximum health limitset by the World Health Organisation.Webster pointed out that a mineralexpert’s report published in Glencore’sprospectus confirmed that sulphurdioxide emissions from MCM were‘consistently exceeding’ environmentallimits: ‘It said that the breaches werea “significant risk” because MCM hadmissed even the extended deadlinefor reducing the pollution. Threemonitoring stations outside the plantrepeatedly recorded breaches of airpollution limits.’The report ‘described various illegaldischarges of hazardous fluids intorivers, including an acid leak that hadcontaminated the town’s water supplyand resulted in “hospitalisation andtreatment of a number of people”’. Thusfar, however, Mr Glasenberg has ignoredthe children’s plea, and his companyhas done virtually nothing to introducestringent anti-pollution measures tothe area. 129MCM is co-owned by Glencore andanother London-listed mining company,First Quantum Minerals. 130 In April 2011,five international NGOs filed a complaintagainst both companies, alleging theyhad violated the OECD Guidelines forMultinational Enterprises. The NGOsbased their case on the results of a 2009audit, performed at the request of theZambian Government, with supportfrom the Norwegian Government,by international accountants GrantThornton and Econ Pöyry.Among the anomalies revealed bythe report, say the NGOs, were ‘anunexplained increase in the company’soperating costs in 2007 (+$380 million);stunningly low reported volumes ofextracted cobalt when compared to3233

similar mining companies operating inthe region, and manipulations of copperselling prices in favour of Glencorewhich constitute a violation of OECD’s“arm’s length” principle …The result ofthose various processes was to lower byseveral hundreds of millions of dollarsMCM’s net income for the 2003-2008period.’ 131These actions, declared the NGOs,‘are all the more deplorable when oneconsiders that the Mopani consortiumoperates in an already attractive fiscalenvironment, one highly favourable toforeign investment, and that Mopani alsoenjoys the effects of a 2000 developmentagreement with Zambia that providesmassive financial and tax exemptions’. 132Pollution and rights abuses inDR CongoIn March 2011, two Swiss NGOs, Breadfor All and the Catholic Lenten Fund,accused Glencore of a range of humanrights abuses, of employing child labour,causing pollution and evading taxes inthe Democratic Republic of Congo. Theaccusations centred around Glencore’soperations in the province of Katanga,where it has a $250 million 77% share inKatanga Mining Limited (KML), a majorcopper and cobalt producer.According to the NGOs, mining is‘driving the locals away from theirtraditional farming activities, which inturn has led to less food on the market…There are often no safety measuresin KML sites. Miners are not protectedfrom uranium radiation.’ (The radiationallegedly persists in local streams fromearlier mining operations.) ‘Many haveshort-term contracts and less training, sothe accident risk increases.’ 133Houses were reportedly damaged byexplosive charges and the air polluted byemissions from the mining operations.‘And all this in total impunity,’ declaredthe report. The NGOs say they contactedGlencore both before and after thereport’s publication ‘but to no avail’.On being contacted by swissinfo.ch (partof the Swiss Broadcasting Corporation),Glencore denied the allegations. Itsspokesperson, Simon Buerk, reportedlyargued that ‘Some of the environmentalproblems revealed in the report areinherited from Gecamines, a companyactive in the region for more than 50years.’ 134‘Glencore won’t change the way itoperates’ – GlasenbergThere is a great deal of ‘unfinishedbusiness’ associated with Glencore’s pastand continuing operations, only someof which can be dealt with here. Manyissues, along with the questions theyraise, were neglected in the company’spre-IPO prospectus, despite its beingone of the longest on record.To give one further example: in late 2009,four men were convicted by a Frenchcourt of supplying weapons to Angola inthe midst of its 27-year civil war, and indefiance of an arms embargo imposedby the United Nations. Pierre Falcone,Arcadi Gaydamak, Jean-ChristopheMitterrand (son of the former president)and Charles Pasqua were all foundguilty, but it was Falcone and Gaydamakwho had played the dominant roles.Falcone was jailed for six years. 135Ken Silverstein of the US magazine InThese Times reports that, in November1993, ‘Falcone and Gaydamak helpedarrange the sale to Angola of $47 millionin small arms. A second deal for $563million worth of weapons, includingtanks and helicopters, got under wayearly the following year … Angolanspaid for the weapons with oil, whichFalcone and Gaydamak sold with thehelp of Glencore.’ 136 No response to thisserious allegation appears to have beenmade by the company.There are certainly checks andbalances which Glencore is supposedto observe under recently ‘tightened’UK rules aimed at improving corporategovernance. 137 But they will not, ofthemselves, prevent future irresponsible,if not criminal, behaviour such as thatrecorded here. So long as Glencoreremains a gigantic, globally spreadcommodities trader, rooted in thewheeling and dealing of a close cliqueof highly paid managers, along withthousands of its proprietary onlinetraders, manifold opportunities for graftand corruption will present themselves.On 15 April 2011, five weeks beforethe IPO, the Financial Times (FT)commented: ‘The ... financial heftthat will result from [Glencore’s]initial public offering ... will allowthe company to vertically integratethrough acquisitions, becoming a biggerproducer in markets in which it trades.’The paper went on to warn: ‘This makesan oligopolistic market structure likely ...[whose] cost is borne by consumers theworld over.’When interviewed by the FT, Glencore’sGlasenberg had no scruples aboutdefending his conglomerate’s pastpractices, nor boasting that businesswould remain the same after theflotation. ‘Unfortunately, God put theminerals in different parts of the world,’he said. ‘We took the nice, simple, easystuff first from Australia, we took it fromthe US, we went to South America andwe dug it out of the ground there. Nowwe have to go to more remote places.’Glasenberg added: ‘We are not going tochange the way we operate. Any talk thatgoing public will hinder us is not true.It will not affect us at all ... Being publicwill have absolutely no effect on thebusiness.’ 138Photo: JACSES3435

3.7 GCM Resources (AIM listed)In October 2011, InternationalAccountability Project (IAP), arespected US-based human rightsorganisation, published a spectrum ofdisturbing allegations and concernsrelating to the Phulbari Coal Projectin northwest Bangladesh. The Phulbariproject is 100% owned by UK-listedGCM Resources (formerly Global CoalManagement), and IAP’s publicationtook the form of an open letterrequesting that banks and investorsholding shares in GCM divest and‘cease provision of all financial andtechnical services associated with theproject’. Among the many organisationsand individuals endorsing the openletter were the Hong Kong-based AsianHuman Rights Commission, nationalbranches of Friends of the EarthInternational, and civil society groups,campaigners and academics fromaround the world. 139IAP’s online letter presents strongevidence of a host of human rightsviolations and risks arising from thePhulbari Coal Project. Large-scalepublic protests against the projecthave reportedly been going on since2006, and protestors have experienced‘intimidation, repression, and violencethat includes public beatings of projectopponents by the police, death threats,arbitrary arrest and detention’. Twiceduring the past year, the BangladeshGovernment is said to have deployed itsnotorious Rapid Action Battalion (RAB)to demonstrations against the project.RAB’s extrajudicial executions of humanrights defenders and use of torturein custody have been documented byHuman Rights Watch and AmnestyInternational. 140Other incidents reported by IAP includethat, on 26 August 2006, the paramilitaryBangladeshi Rifles ‘indiscriminatelyfired into a crowd of over 50,000 peoplegathered in Phulbari to demonstrateagainst the project. Three people werekilled, including a fourteen-year oldboy, and over 100 people were injured.’And in February 2007, a leader ofthose opposing the project, Mr S.M.Nuruzzaman, was arbitrarily arrestedand allegedly tortured. Members of theBangladesh Government, says IAP, havepublicly denounced people opposingthe project as ‘foreign agents and spies’,contributing to the criminalisation oflegitimate protest.Criticising GCM for failing to consultadequately with or address concernsof affected communities, IAP reportsthat the company has failed todisseminate a draft environmentalimpact assessment, resettlement plan orindigenous peoples development planto community members, either in theBangla language or in a form accessiblefor non-literate people. The company isthereby flouting the project investmentprovisions of the widely acceptedEquator Principles – despite the factthat GCM has pledged to comply withall Equator Principles in implementingthe Phulbari Coal Project. 141Bangladesh’s National IndigenousUnion (Jatiya Adivasi Parishad, JAP),IAP states, estimates that the Phulbariproject would ‘displace or impoverish50,000 indigenous people’ belongingto 23 tribal groups. Requested by JAPto help halt the project, the US-basedhuman rights NGO Cultural Survivalconcluded that the project would mean‘ethnocide’ for those affected. 142Implementation of the Phulbari projectwould involve acquisition of ‘14,660acres of land in Bangladesh’s mostfertile and productive agriculturalregion’, of which ‘roughly 80 percentis comprised of verdant rice fields andfertile farmlands, which serve as thenation’s rice bowl’. 143 Yet, despite thearea’s importance as a food-producingregion, no information or study isLong March rally for Phulbari.Photo: Taslima AkhtferProtest against the Phulbariproject. Photo: Anha F. Khan3637

available that specifically assesses theimpacts on the future food supplies ofaffected households or consequencesfor food security in Bangladesh, wherenearly half the population live below thenutrition poverty line.Nearly half the people living in thePhulbari township are said to lack waterto meet their daily needs. 144 However,‘GCM’s dewatering operations at thePhulbari coalmine would lower thewater table by 15-25 meters’ acrossa large area extending more than 10kilometres beyond the mine’s footprint.The Summary of the Report of the ExpertCommittee (REC) to Evaluate FeasibilityStudy Report and Scheme of Developmentof the Phulbari Coal Project 145 (hereafterthe REC) estimates that 220,000 peoplewould lose access to water as wellsand irrigation canals run dry and IAPcites expert warnings of ‘potentialdesertification of the entire northwestregion’ 146 and of acid mine drainagebeing ‘likely to contaminate a networkof rivers extending far beyond theproject area, poisoning water resourcesand soil for centuries to come’. 147GCM is said to expect the Phulbariproject to ‘displace and resettle at least50,000 people’, 148 although there areindications that much larger numberswould be displaced. The REC gives ‘theactual number of affected people forthis area’ as ‘1,29,417’ [sic] instead ofthe 40,000 it says GCM’s own feasibilitystudy mentions. This figure would berendered ‘129,417’ in western usage;but the same summary also statesthat ‘A high risk of social unrest andconflict is involved in the relocationof about a million people’ (emphasisadded), indicating that there is someconfusion as to the number of peopleto be displaced. Assuming that thelower figure is correct, it is nonethelesshuge. 149In seeking to corroborate thedisplacement figures by checkingonline for the original 163-page Reportof the Expert Committee of September2006, LMN found that the BangladeshGovernment’s energy division ‘has“lost” the report of a governmentformedexpert committee whichfound that the … agreement with thegovernment for Phulbari coal fieldwas illegal and an open pit mine atthe field would not be viable’. 150 Theoriginal expert committee displacementestimate now seems to be unavailable.Regardless of the potentially vastnumbers of people affected – andif so, totally misrepresented byGCM’s own feasibility study – andthe suspicious ‘disappearance’ of theofficial government report, which arein themselves matters of real concern,there would be major worries evenwith numbers of people displaced‘only’ in the tens of thousands. 80%of all households in the project areadepend on subsistence farming, yetthe company’s draft resettlementplan states that ‘most households willbecome landless’, with no guaranteesof livelihood restoration in one ofthe world’s most densely populatedcountries.Given the lack of potential replacementlands available, IAP says, the displacedhouseholds are likely to experience‘further impoverishment and seriousrisks to physical and mental health’.As noted above, the BangladeshGovernment’s expert committee warnedof ‘a high risk of social unrest andconflict’ if GCM seeks to evict andrelocate affected communities. 151In 2007, the Swiss-based WorldOrganisation Against Torture (OCMT)issued emergency appeals andexpressed concern that ‘police andsecurity forces may again employviolence to deal with public opposition’to the project, warning that ‘furtherviolence, ill-treatment and even deathsmay ensue’. 152Despite all the documented humanrights violations and major futurerisks associated with the Phulbari CoalProject, GCM and the BangladeshGovernment appear determined tocontinue with the project. And the UKlisting authorities appear not to haveraised the least concern.Rally to prepare for Phulbari protest,28 March 2011. Photo: Shahriar Sunny3839

3.8 Bumi (LSE Main Market listed)In June 2011, after a ‘reverse takeover’ 153with Vallar plc – a shell company set upby the financier Nat Rothschild 154 – anIndonesian coal company arrived onthe LSE through a deal with the Bakriebusiness empire. 155 A year previously,Indra Bakrie, the chair of newly namedBumi plc, had declared an intentionthat Bumi should become the world’sbiggest exporter of power station coal by2013. 156 Ambition and rhetoric were notin short supply.This venture was the outcome of themeeting of two powerful businessfamilies from West and East: NatRothschild, corporate financier andscion of the Rothschild family, and IndraBakrie, youngest of four siblings, ownersof the Indonesian business group PTBakrie & Brothers.The Bakrie Group has businessinterests in agriculture (includingpalm oil), property, media, insurance,banking, trade, shipping, construction,manufacturing and mining. 157 AburizalBakrie, the eldest son, is currentlychairman of Golkar, the politicalparty of the Suharto regime, and apotential presidential candidate for theIndonesian elections in 2014. In 2006,one of the companies controlled by theBakrie Group, PT Lapindo Brantas, wasresponsible for an oil drilling disasterin East Java. This caused a mud-volcanothat has engulfed thousands of homesand displaced some 30,000 families,is blamed for the death of 14 people,and continues pouring out mud tothis day. 158 In what could be seen as anattempt to avoid paying compensationto the thousands of victims of thisongoing disaster, Energi Mega Persada,the Bakrie-owned company controllingthe majority of shares in PT LapindoBrantas, twice attempted to sell thiscompany for US$2 to an offshorecompany.In the political arena, the Bakrie family’srecord is disturbing also. The familyis linked with cases of bribery and taxevasion, most notably in relation to aninvestigation into the activities of theKaltim Prima Coal (KPC) mine and itsparent company Bumi Resources. 159 In2010, attempts were made by IndonesianGovernment officials to investigate thetax dealings of both KPC and BumiResources. This process has been stayedby the courts thanks to interventions bycompany lawyers.Recently, an official from the Indonesiantax office has claimed that he wasbribed by Bakrie-owned companiesto help them with their tax affairs. 160More worrying has been the resignationin May 2010 of Finance Minister SriMulyani after a long political vendettaby Bakrie. 161 Sri Mulyani was noted forher anti-corruption campaigning. Twodays after her departure, Bakrie wasappointed ‘managing chairman’ of a jointsecretariat to determine governmentpolicy. 162 Politics and business continueto be very closely linked. In an articleabout the partnership between Bakrieand Rothschild, the head of research of aforeign brokerage company is quoted asadvising investors to avoid too powerfulbusiness groups in Indonesia as they areoften ‘too big and risky to challenge’. 163For Nat Rothschild, it appears thatthe risks and challenges of doingbusiness with the Bakries are (or were)outweighed by the potential profits thatIndonesian coal offered. Indonesia iscurrently the world’s largest exporterof thermal coal, and demand for coalfrom China and India is promptingmore growth. 164 The business modelemployed by Rothschild has been tocreate London-listed shell companiesas investment vehicles for miningcompanies and oil and gas companiesaround the world. In July 2010, theIPO for Vallar raised US$1.1 billion. 165Since then, Rothschild has launched asimilar enterprise under the name ofVallares to invest in oil and gas projectsin Kurdistan, together with former BPCEO Tony Hayward.A Financial Times article about theBumi coal deal highlights Rothschild’shunger for making money above allother considerations. ‘You have to makehay while the sun shines,’ he said on hisinitial visit to Indonesia to look at theKalimantan coal mines he was about tobuy. 166 Given the rapidly disappearingrainforests of Borneo and the livelihoodsthey provide for local people, there is acertain irony to this remark. Rothschild’s‘hay-making’ is unlikely to benefitKalimantan’s forests and the peoplewhose lives depend on them.Much has been written in financialcolumns about the arrival of Bumi plcon the LSE. This process has been rapidand subject to minimal oversight. It tooklittle over six months from the initialannouncement of the US$3 billion dealin Jakarta to Bumi’s LSE listing. 167 Afurther six months on from this listing,the tangled web of business intrigue isalready becoming evident, throwing upserious questions about the effectivenessof the ‘due diligence’ process undertakenprior to the company’s launch on 28 June2011. 168 On 8 November 2011, a letterfrom Rothschild in the Financial Timessurprisingly denounced the corporategovernance of Bumi Resources, theIndonesian partner company of Bumiplc, and called for the repayment ofdebts by connected parties. 169Whether Rothschild is genuinelyconcerned about the corporategovernance of Bumi Resources and itsdebts has been much debated in thefinancial media. Most ascribe morecynical reasons for the letter. The Bakriesare reported to be investigating theirnew partner for trying to manipulatethe price of shares in order to gain abigger stake in the company. Indeed,soon after the letter was published,Rothschild spent UK£1 million buyingmore shares in the company. 170 Thefact that both Bumi Resources and theBakries are heavily indebted is old news,which Rothschild would have knownbefore embarking on any business dealswith them. In the Asian financial crisisof the late 1990s, the Bakries’ empirenearly collapsed because of debt. 171 Arecent Reuters report describes theBakrie Group as being ‘known for itsacquisitions funded through debt that islinked to shares in its firm’, commentingthat this is a ‘strategy that backfireswhen global financial crises hit equityand debt markets’. 172In the rush to take advantage ofIndonesia’s vast natural resources andthe world’s hunger for energy, bothparties appear to see only money andprofit and to give little considerationto impacts on local communities andthe environment, let alone the world’sclimate, of bulldozing the forests ofBorneo for coal. The LSE and financialinstitutions are now playing a keypart in enabling and encouraging thisto happen. In this connection it alsoappears that the LSE’s reputation isstarting to be questioned abroad. Inreference to a Jakarta Globe article aboutthe Bumi deal, one commentator wrote:‘A question to ask is why very many ofthe world’s oligarchs are based in UK... Arab, Russian, Indian, Chinese, etc.Mainly because in the City of Londonanything goes.’ 173Have the regulators simply given up?The head of the UKLA was quotedlast autumn as saying: ‘We don’tsee our role as one to ensure orunderwrite best practice in relation tothe combined code, nor do we havepowers to do so.’ He continued weakly:‘The role of shareholders is greatlyunderestimated.’ 174 Does this mean thatthe UKLA is expecting Indra Bakrie andNat Rothschild to regulate themselves?4041

ENDNOTES //1. http://londonminingnetwork.org2. Available on the HM Treasury website on page80 of the pdf file at http://www.hm-treasury.gov.uk/d/consult_finregresponses_jm.pdf and page127 of the pdf file at http://www.hm-treasury.gov.uk/d/condoc_finreg_blueprint_responses_ip.pdf.3. On companies’ duty to respect humanrights, and states’ duty to protect, see the UN‘Protect, Respect and Remedy’ Frameworkfor Business and Human Rights, and itsGuiding Principles, http://www.ohchr.org/en/Issues/TransnationalCorporations/Pages/SRSGTransCorpIndex.aspx. Respectfor environmental standards implies thatcompanies:• Not undertake activities which have a negativeimpact upon any of the protected areas coveredby the IUCN I-IV categories, UNESCO WorldHeritage and the Ramsar Convention;• Ensure that their activities will not havea negative impact on the community orpopulation level of any species identified on theIUCN Red List;• Ensure that activities will not lead to theillegal trade of any species listed as endangeredunder CITES;• Not produce or trade in any living geneticallymodified organism except with the approvalof the importing country and as otherwiserequired under the Cartagena Protocol;• Provide assessments of the cumulativebiodiversity impacts upstream and downstream(including impacts on ecosystems, species andgenetic resources);• Provide and make public ongoingmonitoring and reporting of impacts, at leastconsistent with the guidelines found in theGlobal Reporting Initiative for reportingon biodiversity, land use and air-and waterpollution,emissions and discharges.• Agree to sustainably manage all living naturalresources used in its operations, such as forests,plants and animals;• Ensure that activities will not involve theintroduction, intentional or unintentional, ofinvasive alien species;• Meet the consent and benefit-sharingrequirements found in the UN Conventionon Biological Diversity regarding activitiesinvolving access to genetic resources;• Identify, in consultation with communities,NGOs and scientists, what are to be treated as“no-go zones”, such as HCVAs, endangeredforests, biodiversity hotspots, river watersheds,fish spawning grounds and spiritual sites, andwhere necessary exclude activities in thoseareas from development.4. European Commission, ‘Disclosure of Paymentsto Governments’, http://ec.europa.eu/internal_market/accounting/other_en.htm; see also HongKong Stock Exchange listing rules, http://www.hkex.com.hk/eng/rulesreg/listrules/mbrules/Documents/consol_mb.pdf, chapter 18, ‘Equitysecurities - mineral companies’; and US Dodd-Frank Act 2010, http://www.sec.gov/about/laws/wallstreetreform-cpa.pdf, section 1504.5. The case studies cite companies which havelisted in London from 2003 onwards.6. The Dodd–Frank Wall Street Reform andConsumer Protection Act 2010 addresses theneed to stem the trade in ‘conflict minerals’and in coal and other minerals from operationswhich pose a substantial danger to theirworkforces. The Act’s ‘bad actor’ provisionsconcern financial fraud and related criminalactivity, some of which will apply to foreignprivate issuers of securities.7. Xstrata, 34.5% controlled by Glencore, declaresthat it is the ‘world’s biggest exporter of thermalcoal’. Glencore has a marketing agreementwith Bumi for the purchase of the latter’sIndonesian coal.8. Letter to Hong Kong Stock Exchange, 3 March2011, http://www.foe.org/sites/default/files/Letter%20to%20HKSE%20re_Zijin.pdf9. Reuters, 15 March 2011; Bloomberg 14 March2011.10. ‘British mining company faces damages claimafter allegations of torture in Peru’, Ian Cobain,Guardian, 18 October 2009. In addition,Richard Ralph, the former chair of MonterricoMetals, was found guilty of insider tradingin Zijin shares: ‘Corporate fraud: former UKenvoy fined for insider dealing’, Julia Kollewe,Guardian, 14 November 2008.11. Mining Journal, 6 May 2011.12. Prof. Anthony Bebbington PhD et al,Mining and Development in Peru: With SpecialReference to The Rio Blanco Project, Piura, PeruSupport Group, March 2007, http://www.perusupportgroup.org.uk/files/fckUserFiles/file/FINAL%20-%20Mining%20and%20Development%20in%20Peru.pdf13. ‘Peru: communities say “no” to mining companyin vote’, Milagros Salazar, IPS,18 September2007.14. HKEx listing rules, http://www.hkex.com.hk/eng/rulesreg/listrules/mbrules/Documents/consol_mb.pdf, pp. 391-7, particularlypoint 18.05; LSE, A Guide to Listing on theLondon Stock Exchange, 2010, http://www.londonstockexchange.com/home/guide-tolisting.pdf.Even basic reporting of companycarbon emissions is not yet mandatory inthe UK. In May 2011, a study by the UKEnvironment Agency of 500 FTSE All-Sharecompanies showed that only a minoritycurrently provide environmental statistics inline with government guidance: http://www.environment-agency.gov.uk/static/documents/Business/Environmental_Disclosures_summary_report.pdf15. This does not mean that the big global miningcompanies – many of which are listed on theLSE Main Exchange – always manage to adhereto the guidelines. In its 2010 annual report,the world’s second largest mining company,Rio Tinto, admits to several ‘serious’ breaches.It also mentions, for the first time, that theNorwegian Government disinvested from RioTinto in 2008 on the grounds of the company’scomplicity in grave environmental and humanrights abuses at the Grasberg copper-gold minein West Papua.16. During 2005-8, several banks that were investedin Vedanta despatched advisory notes to clientsin which they recognised that delays to thisproject and the proposed adjacent Niyamgirimine were partly due to legal action takingplace in India. In one such note Citigroupadvised investors to hold on to their Vedantashares, despite recognising that the companymight be refused legal permission to proceedwith the project. Citigroup considered thatsince ‘this is India’ a way would most likely befound around the problem.17. Directors, Human Rights and The Companies Act:Is the new law any different?, Hannah Ellis andKate Hodgson, CORE, 2011, http://corporateresponsibility.org/directors-human-rights-thecompanies-act-is-the-new-law-any-different/18. One of the most recent examples of sucha failure to conform to the UK CorporateGovernance Code is Gerald Holden at GCMResources. Former head of Barclays Capitalmetals and mining, who still holds a substantialnumber of shares in the Bangladesh-focusedmining company, while purportedly beingeven-handed as the company’s non-executiveChairman. This failure is acknowledged by thecompany on page 21 of its Annual Report andAccounts 2011.19. http://www.minesandcommunities.org/article.php?a=10063; http://moneytometal.org/index.php/Rajawali_Corp20. Agarwal’s deputy executive chairman atVedanta Resources is his brother, Navin. Thecompany’s CEO, M.S. Mehta, was the CEO ofHindustan Zinc, which was incorporated intoSterlite in 2000 and which listed as VedantaResources in December 2003; Narish Chandra,a non-executive director, was observed at thecompany’ s 2010 AGM taking over the meetingon behalf of Agarwal and hectoring the criticalaudience. Aman Mehta could be described asindependent; the only non-Indian on the boardis Euan Macdonald.21. Vedanta Resources, annual report 2010, p. 65.22. Financial Times, 19 February 2010.23. Financial Times, 15 October 2010.24. Foster Wheeler, 20 January 2011.25. Financial Times, 15 October 2010.26. Levels of Heavy Metals and Cyanide in Soil,Sediment and Water from the Vicinity of NorthMara Gold Mine in Tarime District, Tanzania,report to CCT, Manfred F. Bitala, CharlesKweyunga and Mkabwa L.K. Manoko, 2009,http://www.Pambazuka.org/images/articles/450/ERROR%20FREE%20NORTH%20MARA%20REPORT%20-%20FINAL.pdf27. ‘Tanzania: killings and toxic spill tarnish BarrickGold’, Zahra Moloo, Pambazuka, 19 May 2011.28. Ibid.29. Ibid.30. Bloomberg, 8 March 2011.31. ‘Seven dead in clash at African Barrick mine’,Toronto Star, 17 May 2011.32. ‘Black eye for Barrick taints Canada criticssay’, Lisa Wright, Toronto Star, 18 May 2011.This tarnished image was hardly improvedwhen ABG allegedly refused permission forthe families of the five killed men to hold amemorial service at the mine site: ‘Memorial fordead banned at Canadian gold mine in Africa’,Jocelyn Edwards, Toronto Star, 23 May 2011.33. ‘Shooting gold diggers at Barrick African minecoincides with record prices’, Cam Simpson,Bloomberg, 23 December 2010.34. http://www.voluntaryprinciples.org/files/voluntary_principles_english.pdf35. ‘Shooting gold diggers at Barrick African minecoincides with record prices’, op. cit.36. http://www.regjeringen.no/upload/FIN/etikk/recommendation_barrick.pdf37. The appointment of a ‘competent person’,although recommended by the UKLA, is notmandatory for a Main Market listing, althoughit is for AIM: http://www.londonstockexchange.com/companies-and-advisors/aim/advisers/rules/guidance-note.pdf38. International Mining, May 2007, p. 39.39. Ibid.40. Financial Times, 17 September 2007.41. Mining Journal, 21 August 2009. In December2010, what was left of Brinkley was acquiredby Australia’s Eurogold, which valued theUK company at only a little over £4 million:Reuters, 8 September 2010. By April 2011,Eurogold had apparently sold Brinkley andgone out of business itself.42. The Cadbury Report was unequivocal inwarning of the risks of failing to make a cleardivision of responsibilities at the top levelof UK businesses. Cadbury argued that theposition of chairman of the board should beseparated from that of chief executive, or elsethat there be a strong independent elementon the board: http://www.ecgi.org/codes/documents/cadbury.pdf. On leaving Barclaysin 2005, as well as taking the helm at Brinkley,Holden was instrumental in putting togetheranother controversial AIM-listed company,42 43

Asia Energy, later renamed GCM Resources(case study 3.7), of which he is currently nonexecutivechairman. As noted in the Vedantacase study (3.5), Anil Agarwal has also playedboth roles – a position he defends as in theinterests of the company in which he and hisfamily trust control 62.21% of the equity. Seealso footnote 18.43. ‘Congo purge puts Brinkley deal in doubt’, BenLaurance, Sunday Times, 20 September 2007.44. Ibid.45. ‘Brinkley hits back in DRC uranium fracas’,miningmx.com, 18 September 2007.46. ‘Wikileak reveals a uranium scandal’,11 January 2011, http://www.minesandcommunities.org/article.php?a=1063447. In the light of Lord Adair Turner’s claim ofOctober 2008 that the days of FSA ‘lighttouchregulation’ were over, the following yearTimis acquitted the FSA of being responsiblefor damning his Regal scam. He told theEvening Standard that the FSA had ‘made afull investigation. I spent eighteen hours withthem, answering their questions, and I am inthe clear.’ But Timis had no such charity forAIM, saying: ‘Then AIM looked at it and held afucking kangaroo court’: Evening Standard, 10January 2010.48. Awareness Times, Sierra Leone, 22 July 2005.49. By 2005, Timis controlled three firmsregistered in London, though not on theLondon Stock Exchange: Regal Petroleum,European Goldfields and Sierra LeoneDiamond Corporation (SLDC), in the lastof which he was the majority shareholder.Timis became the non-executive chairmanof SLDC in 2004, when African Minerals Ltdwas SLDC’s main subsidiary. As of February2009, SLDC was still listed as an operationalcompany, although ownership and managementhad by then (after August 2007) passed into thehands of African Minerals plc.50. Financial Times, 19 July 2010.51. Financial Times, 19 July 2010.52. http://www.african-minerals.com/Corporate/Operations/Tonkolili_Iron_Ore_Project/default.aspx?id=72653. ‘Merely empty promises?’, 17 December 2010,http://www.madam-sl.org/?Projects:Right_to_Food; ‘Massive iron ore project bringsmining tensions back to Sierra Leone’, PaigeMcClanahan, Christian Science Monitor,12December 2010; ‘After diamonds, iron fomentsSierra Leone tensions’, Simon Akam, Reuters, 8December 2010.54. Hemscott Premium, accessed 12 April 2011.55. Dow Jones Newswires, 24 February 2011.56. ‘After diamonds, iron foments Sierra Leonetensions’, Simon Akam, Reuters, 8 December2010.57. Mining Journal, 22 October 2010.58. http://www.minesandcommunities.org/article.php?a=1073259. Forbes magazine, 5 May 2011, http://www.minesandcommunities.org/article.php?a=1089160. In 2009, Mr Agarwal also expressed the desirefor a public listing of his company’s Indianaluminium subsidiary (VAL) on LSE oranother global stock market. However, duringthe succeeding year he failed to secure IndianGovernment permission to mine bauxitefrom Orissa’s Niyamigiri mountain and tostart a fivefold expansion of the neighbouringLanjigarh alumina refinery. These setbacksreceived significant attention in the UK.61. Vedanta’s late-December 2003 LSE IPO wasthe second largest of the year and marked thefirst time an Indian company was admitted tothe exchange.62. On 25 May 2011, the US Securities andExchange Commission (SEC) ‘proposed arule to deny certain securities offerings fromqualifying for exemption from registrationif they involve certain ‘felons and otherbad actors’: http://www.sec.gov/news/press/2011/2011-115.htm. As of December2011, the SEC had still not implemented thisprovision of the Dodd-Frank Act – a supposeddeadline of July 2011 for implementationhaving passed without it being fulfilled.63. http://www.regjeringen.no/Upload/FIN/Statens%20pensjonsfond/RecommendationVedanta.pdf; http://www.minesandcommunities.org/article.php?a=826064. Personal communication from NorwegianCouncil of Ethics, August 2010.65. http://www.minesandcommunities.org/article.php?a=8291; http://www.minesandcommunities.org/article.php?a=8291. In a quixotic decision,the Indian Supreme Court promptly endorsedhanding control of the mine project toVedanta’s Indian-registered subsidiary, SterliteIndustries, and the state-owned Orissa MiningCorporation, provided certain conditions weremet.66. http://www.minesandcommunities.org/article.php?a=777767. http://www.minesandcommunities.org/article.php?a=7769; http://www.minesandcommunities.org/article.php?a=777368. The vociferous presence of Kondhrepresentatives and their Indian and UKsupporters at successive London AGMs ofthe company played a significant role inhighlighting its unacceptable activities inOrissa.69. ‘GUILTY: UK government blasts Vedanta inunprecedented attack’, Survival internationalpress release, 12 September 2009.70. http://www.minesandcommunities.org/article.php?a=9543&highlight=Survival,International71. http://www.amnesty.org.uk/uploads/documents/doc_20144.pdf72. India’s Forest Conservation Act, Forest RightsAct and Environment Protection Act.73. http://www.minesandcommunities.org/article.php?a=1032274. http://www.minesandcommunities.org/article.php?a=1034675. http://www.minesandcommunities.org/article.php?a=10928&l=176. A ‘show cause notice’ allows a person or bodycorporate the opportunity to provide evidenceas to why an administrative action should notbe taken against them; ‘India: toxic sludgeleak from Vedanta’s red mud pond threatensrural communities’, Amnesty Internationalstatement, Delhi, 1 June 2011; http://www.minesandcommunities.org/article.php?a=938877. http://www.youtube.com/watch?v=i_8Tp2skbNM78. ‘India: Toxic sludge leak from Vedanta’s redmud pond threatens rural communities’, op. cit.79. http://www.youtube.com/watch?v=cwicLF7s1tE80. http://www.vedantaaluminium.com/locationjharsuguda.htm81. Design output of the smelter is currently setat half a million tonnes per annum (mtpa);however Vedanta’s original plan was for fulloperational capacity more than three times this,at 1.75 mtpa.82. ‘Petition submitted by Mr Samantara to theChairman, Orissa State Pollution ControlBoard, Nilakanthanagar, Bhubaneshwar, Orissa,June 5 2006 … drawing your attention aboutthe illegal construction work undertaken byM/S Vedanta ltd for its proposed smelter plantand captive power plant at Jharsuguda withoutgetting environmental clearance’: http://www.freewebs.com/epgorissa/vedantasmelter.htm83. http://www.minesandcommunities.org/article.php?a=924584. New Indian Express, 23 July 2009.85. ‘No pollution clearance, Vedanta runs 10units’, Priya Ranjan Sahu, Hindustan Times, 9September 2010.86. Ibid.87. http://moneytometal.org/index.php/Zambia_Copper_Investments_Ltd/ZCI; ‘Copper inZambia: charity for multinationals’, KhadijaSharife, Pambazuka, 2 June 2011, http://Pambazuka.org/en/category/features/7374288. The Limitations of Corporate Social Responsibilityon Zambia’s Copperbelt, Patricia Feeney,Oxfam, November 2001, http://www.minesandcommunities.org/article.php?a=244.Patricia Feeney is now Executive Directorof RAID (Rights and Accountability inDevelopment, an Oxford-based research andadvocacy NGO).89. ‘Zambia: KCM negligence blamed forKafue river pollution’, Times of Zambia(Ndola), 15 November 2006; http://www.minesandcommunities.org/article.php?a=748990. For Whom the Windfalls: Winners & Losers in thePrivatisation of Zambia’s Copper Mines, 2007,http://www.liberationafrique.org/IMG/pdf/Minewatchzambia.pdf91. Undermining Development? Copper Mining inZambia, joint report by ACTSA (Action forSouthern Africa), Christian Aid and SCIAF,29 October 2007. The NGOs accused KCM of‘short changing’ Zambia, paying royalty feesof just 0.6% on production, as opposed tothe 5% to 10% industry average in developingcountries. It estimated that in 2006-7 theZambian Government would have receivedmineral royalties of only US$6.1 million fromKCM, although the company extracted copperore worth over US$1 billion. The report quotedclaims by some of KCM’s subcontracted skilledlabourers that they were paid as little as £37per month when the average Zambian familyis judged to require at least £151 per month tomeet basic needs.92. http://www.minesandcommunities.org/article.php?a=1061393. Ibid.94. http://en.wikipedia.org/wiki/Precautionary_principle95. ‘4 KCM miners die’, Lusaka Times, 29 March2011.96. Undermining Development?, op cit.97. LMN is grateful to Simon Chambers forresearching much of the material used here;he visited Korba in early 2011, conductinginterviews and examining numerous documentswhich are not available in electronic form.98. Due to the turmoil following the collapse ofthe chimney, and the destruction of employeerecords (where these existed), no firm figureof the number of victims is likely to beforthcoming. Pravin Patel, an NGO coordinatorin India, visited the site soon after the collapseand reported that bulldozers had moved intothe area, clearing and compounding the debris,effectively burying any bodies not recoveredby then.99. BALCO was 51% privatised by the IndianGovernment in 2001, the same year theZambian Government sold the KonkolaCopper Mine to Anglo American, and whichwas acquired by Vedanta three years later.Anil Agarwal’s Sterlite Industries took chargeof BALCO’s previously state-owned assets,assuming management of the company. In 2007,four years after Sterlite had been incorporatedas Vedanta Resources, BALCO began sackingformer employees and resorted to employingcontracted labour. A report published that yearby Delhi’s respected V.V. Giri National LabourInstitute found that, under Vedanta/Sterlite’scontrol, BALCO had failed to honour virtuallyall the undertakings made previously to itslabour force: http://www.minesandcommunities.org/article.php?a=3876100. http://www.minesandcommunities.org/article.php?a=9501101. BALCO apparently did not keep its ownrecords of the subcontracted labourers. This, initself, is a matter of concern. Under Indian lawa company that hires a subcontracting firm isalso accountable for the behaviour of that firmin regard to the treatment of its employees.102. Chairman’s statement, Vedanta Resourcesannual report 2010, p. 9.44 45

103. http://www.minesandcommunities.org/article.php?a=9500104. This summons was issued against the ‘owner ofBharat Aluminium Company Limited (BALCO)and others’. J.N. Chandra, deputy director ofprosecution, representing the ChhattisgarhGovernment, said: ‘The order does notmention the owner’s name since the company’sownership deed was not available to the court,but it is well known that the owner of BALCOis Anil Agarwal, the London-based chairmanof Vedanta group.’ According to a report in TheTimes of India, 31 October 2010, ‘other legalexperts suggested the ownership could bevested in the board of directors and not thechairman alone’.105. Dow Jones Newswire, 23 September 2009.106. Headlined ‘Incident at the BALCOconstruction site’, the note read: ‘VedantaResources plc’s subsidiary Sterlite IndustriesIndia Limited (‘Sterlite’) regrets to announcethat a power plant chimney under constructionat BALCO, Korba collapsed today. The chimneywas being constructed by Gannon Dunkerley& Co. Ltd for the 1,200 MW CPP, associatedwith the 325 ktpa aluminium smelter project.The relief and rescue operations are in fullswing with the involvement of the companyand the government resources. Activitiesin the particular area were temporarilysuspended, while the existing operationsremain unaffected. A probable reason for theincident appears to be the excessive rains andlightning at Korba. The exact cause for this willhowever be ascertained only after a detailedinvestigation is concluded’: RNS No. 5734Z,Vedanta Resources, LSE, 23 September 2009.107. Vedanta Resources, annual report 2010, p. 9.108. A search of the BSC’s website reveals noinformation about either award. The secondwas almost certainly made to one of twofunctioning BALCO captive power plants atKorba, not to the plant under constructionwhen the September 2009 deaths occurred.109. Observer, 29 August 2010. The newspaperrecorded that, among the FTSE 100-listedmining companies, Vedanta was responsible forby far the highest number of workplace deaths(67), followed by Anglo American with 20,Kazakhmys with 17 and ENRC with 12: http://www.minesandcommunities.org/article.php?a=10358&highlight=British,Safety,Council. Thedeaths continue: in November 2011 a contractworker died, and another was seriously injured,after being sucked into a duct at Vedanta’shighly polluting Tuticorin (Thoothukudi)copper smelter in Tamil Nadu: http://www.minesandcommunities.org/article.php?a=11313.110. ‘Hey they are only workers, have an award’,Hazards magazine, ITUC, Brussels, 3 September2010.111. Dow Jones Newswires, 20 July 2010. PIRC alsofound that Vedanta’s failure ‘to engage withexplicit investor led concerns over the impactof group activities on the Niyamgiri region’ wasevidence of the company’s ‘lack of competentoversight’. The UK’s largest insurance provider,Aviva, responded to PIRC’s call at Vedanta’s2010 AGM by voting against resolutions onaccepting the annual report and accountsand the remuneration report, and on thereappointment of Naresh Chandra as chair ofthe health, safety and environment committee:Reuters, 23 July 2010.112. http://www.minesandcommunities.org/article.php?a=9871113. A group of European NGOs organised a onedayseminar for investors in Vedanta at AmnestyInternational UK’s London offices on 22September 2009. Investors were invited to hearpersonal testimony about much of the evidenceof the company’s violations contained in thiscase study. Around nine leading funds andbanks were represented. Vedanta was invited byletter and in several phone calls to attend andto respond to the presentations. The companydid not deign to reply, marking yet anotheroccasion on which it has been discourteousand dismissive towards its critics. Our reporthas already noted a similar attitude displayedby Vedanta to the UK Government’s OECDNational Contact Point, just two weeks before;and its failure to respond in any meaningfulfashion to the accusations against it containedin the Norwegian Council of Ethics 2007 report.114. On 23 May 2011, BHP Billiton’s marketcapitalisation was £127 billion, Rio Tinto’s£78.76 billion, Xstrata’s £40 billion and AngloAmerican’s £34 billion.115. http://www.bbc.co.uk/news/business-16907816116. Reuters, 13 June 2011; CITY AM, 14 June 2011.117. Thomson Reuters, International FinancingReview, 19 May 2011.118. Reuters, 23 May 2011. Aviva also voted againstthree resolutions at Vedanta’s 2010 AGM: onaccepting the annual report and accounts,on the remuneration report, and on thereappointment of the board member chairingthe health, safety and environment committee.Aviva’s representative, Steve Waygood, insistedthat the board should ‘open up lines ofcommunication with investors and begin adialogue with organisations that raise importantmatters of social and corporate governance’:Guardian, 28 July 2010. See also Vedanta, casestudy 3.5.119. Those principally profiting from Glencore’snewly tapped capital (primarily as a result ofthe London IPO) are its 485 owner-partnersand 2,700 associated traders. In theory thepartners are restricted from cashing out theirshares for another five years. In the meantime,thanks to the flotation, several of them havebecome overnight millionaires, while CEOIvan Glasenberg’s private wealth was valuedat $8.8 billion according to a survey byAustralia’s Business Review Weekly in early May:http://www.minesandcommunities.org/article.php?a=10948. Australia’s Business Spectator of27 May 2011 noted that Glasenberg’s ‘righthand-man,Steven Kalmin, has … rocketedonto the [Australian] rich list with a fortuneof $560 million. Kalmin, who worked as acommodities trader in Sydney before headingfor Switzerland in 2003, was appointed chieffinancial officer two years ago.’120. Money Morning, 18 May 2011.121. Business Spectator, 17 May 2011.122. The Times, 19 May 2011.123. Ibid.124. Colombia’s President Alvaro Uriberesponded by ordering high-level officialsof the ministries of Environment and SocialProtection to visit the area and ‘take chargeof the issues that each are responsible for’.A civil society statement issued by labour,social and human rights organisations on 10February 2007 denounced the attacks andcalled on Glencore to immediately desist from‘contaminating’ the area and from contributingto an increase in respiratory diseases amongthe local population, including workers:‘Reparos a un megaproyecto carbonífero deDrummond en Cesar’, Herminso Ruiz, ElEspectador, 10 February 2007, http://www.elespectador.com/elespectador; also http://www.minesandcommunities.org/article.php?a=150125. This mine is owned by Glencore Finance(Bermuda). The local branch of the Unionof Mine and Metals Workers claimed on 22September 2007 that ‘some 190 workers workdirectly for the company and another 900 workthrough the contracting companies … thecompany has unilaterally applied unusual workshifts of 14 x 7 (fourteen days straight workingtwelve hour shifts and then seven days rest).The workers must share rooms and beds [and]work in the mine under insecure conditions.’The union stated that the population of LaJagua de Iberico-Cesar ‘has for several yearsbeen suffering from contamination producedby mining operations and transport of coal inthe mines of Glencore A.G. and Drummond… and from unemployment, pulmonaryillnesses of children, misery and the militaryparamilitarypresence … Because of this, twodays ago the residents decided to carry out apeaceful protest to block the roads which enterand exit the town.’126. The Times, 19 May 2011.127. Ibid.128. The Times, 20 May 2011.129. Guardian, 20 May 2011.130. MCM is 73.1% owned by British VirginIslands-based Carlisa Investments, itself81.2% owned by Bermuda-based GlencoreFinance, a 100%-owned subsidiary of GlencoreSwitzerland. State-owned ZCCM owns 10%:‘Copper in Zambia: charity for multinationals’,Pambazuka, Issue 532, 2 June 2011, http://Pambazuka.org/en/category/features/73742131. ‘Five NGOs file a complaint against GlencoreInternational AG and First QuantumMinerals for violation of OECD guidelines’,MiningWatch Canada press release, 12 April2011, along with SHERPA (France), Centerfor Trade Policy and Development (Zambia),132. Ibid.Berne Declaration (Switzerland) and l’EntraideMissionnaire (Canada).133. ‘Contrats, droits humains et fiscalité: commentune entreprise dépouille un pays. Le cas deGlencore en République Démocratique duCongo’ (‘Contracts, human rights and taxation:how a company exploits a country. The caseof Glencore in the Democratic Republic ofCongo’), Bread for All / Catholic LentenFund, March 2011, http://www.brotfueralle.ch/fileadmin/deutsch/2_Entwicklungpolitik_allgemein/C_Wirtschaft%20und%20MR/study_glencore_summary.pdf; the complete study isonly available in French.134. ‘Glencore accused of rights abuses in DRCongo’, Stefania Summermatter, Swissinfo.ch,12 March 2011.135. Guardian, 1 November 2009; The Times, 28October 2009.136. In These Times, 22 December 2010; http://www.gaucherepublicaine.org/lettres/respublica_lettre-655.htm137. The UK Corporate Governance Code wasupdated and changed in eight ‘key respects’in early 2011. The changes include: thata company board be now responsible fordetermining ‘the nature and extent of thesignificant risks it is willing to take in achievingits strategic objectives’; ‘more emphasis on therole of chairman’; an ‘enhanced role for thesenior independent director’; that ‘Diversity,including gender … be taken into accountfor new board appointments’; and that therebe ‘externally facilitated evaluations of theboard at least every three years for FTSE 350companies’: http://www.grant-thornton.co.uk/pdf/corporate_governance.pdf138. Financial Times, 15 April 2011.139. ‘Investors out of Phulbari’, 19 October2011, http://accountabilityproject.org/article.php?id=668, on which this case study is based.Led by experienced advocates, the InternationalAccountability Project includes among itsfunders the Open Society Institute, the SigridRausing Trust and the Wallace Global Fund.140. ‘Bangladesh: broken promises from governmentto halt RAB killings’, May 2011, http://www.hrw.org/news/2011/05/10/bangladesh-brokenpromises-government-halt-rab-killings;‘Bangladesh: UK-trained security forces muststop extrajudicial executions’, January 2011,http://www.amnesty.org.uk/news_details.asp?NewsID=19210141. Equator Principles, ‘a financial industrybenchmark for determining, assessing andmanaging social and environmental riskin project financing’, http://www.equatorprinciples.com;GCM and the BangladeshGovernment have equally failed to respectand protect indigenous communities’ right tofree, prior and informed consent under theUN Declaration on the Rights of IndigenousPeoples. For GCM’s stated policies, see http://www.gcmplc.com/corporate-responsibility.46 47

142. ‘Cultural Survival’s letter to GCM Resources’,January 2011, http://www.culturalsurvival.org/node/9711143. ‘Investors out of Phulbari’, 19 October2011, http://accountabilityproject.org/article.php?id=668144. Environmental and Social Impact Assessment(ESIA, Vol. 1, Chapter 8: 63), cited by RogerMoody (2008: 73), “Phulbari Coal: a ParlousProject,” in Phulbari Coal Project: Studies onDisplacement, Resettlement, Environmentaland Social Impact, Samhati Publications,Dhaka, Bangladesh. (See also http://www.accountabilityproject.org/downloads/PhulbariCoal_ParalousProject_Nov08.pdf)145. http://www.accountabilityproject.org/downloads/Summary%20of%20Expert%20Committee%20Report.pdf146. ‘Investors out of Phulbari’, 19 October2011, http://accountabilityproject.org/article.php?id=668147. On acid mine drainage, see Roger Moody,“Phulbari Coal: a Parlous Project,” inPhulbari Coal Project: Studies on Displacement,Resettlement, Environmental and Social Impact,Samhati Publications, Dhaka, Bangladesh,pp 76-78. On potential desertification of thenorthwest, see AKM Shamsuddin, “PhulbariCoal: Hydrogeological environment notfavourable for open pit mining,” The Daily Star,September 29, 2007 at http://www.thedailystar.net/newDesign/news-details.php?nid=5811and AKM Shamsuddin, Pitfalls of open-pitmining,” The Daily Star, May 23, 2010 at http://www.thedailystar.net/newDesign/news-details.php?nid=139587.148. The ‘nearly 50,000’ figure is from ResettlementPlan for Asia Energy’s Phulbari Coal Project,Asian Development Bank and Asia Energy,December 2006. This source (p. 4-11 and Table4-7) states that the project will displace 49,478people and 11,247 households. The figure on220,000 people who may lose their access towater, with unknown displacement impacts, isfrom the Summary of the Expert CommitteeReport, p. 9. The 40,000 figure is currentlyposted on GCM’s website at http://www.gcmplc.com/resettlement.149. Summary of the Report of the Expert Committee(REC) to Evaluate Feasibility Study Report andScheme of Development of the Phulbari CoalProject, 2007, http://protectresourcesbd.org/article_pdf/2011013124.pdf150. ‘Bangladesh Govt report which terms Phulbarideal illegal goes missing’, 14 March 2009, http://www.energybangla.com/index.php?mod=article&cat=CoalSector&article=1644151. Summary of the Report of the Expert Committee,op. cit.152. OMCT action file, ‘Bangladesh: Risk ofviolent suppression of public opposition tothe Phulbari Coal Mine Project, DinajpurDistrict, Bangladesh’, http://old.omct.org/pdf/ESCR/2007/BGD_211207_ESCR.pdf153. A reverse takeover or reverse merger (reverseIPO) is ‘the acquisition of a public company bya private company so that the private companycan bypass the lengthy and complex processof going public’, http://en.wikipedia.org/wiki/Reverse_takeover.154. A shell company ‘serves as a vehicle forbusiness transactions without itself havingany significant assets or operations’, http://en.wikipedia.org/wiki/Shell_corporation155. For background on international linksto Indonesian coal and the Bakries, see‘Corruption, collusion and nepotism’, Down toEarth, August 2010, http://www.downtoearthindonesia.org/story/corruption-collusion-andnepotism156. ‘Indra Bakrie lauds Bumi’s London move’,Jakarta Globe, 19 November 2010, http://www.thejakartaglobe.com/bisindonesia/indra-bakrielauds-bumis-london-move/407530#Scene_1157. The Bakries’ principal mining company is BumiResources, owner of the huge Kaltim PrimaCoal mine in East Kalimantan; for more on thisand the Indonesian coal industry, see http://www.downtoearth-indonesia.org/campaign/coal158. Estimates of the numbers of people affectedhave varied enormously; figures quotedhere are from a 2010 University of Durhamreport that blamed drilling as the cause ofthe mud-volcano: ‘Geologists say drillingcaused Indonesian mud volcano’, CBC News, 3November 2008, http://www.cbc.ca/technology/story/2008/11/03/mud-drilling.html; ‘Indonesiamud disaster caused by human error: study’,Jakarta Globe, 13 February 2010, http://www.thejakartaglobe.com/home/lapindo-disastercaused-by-human-error-study/358242159. http://www.downtoearth-indonesia.org/campaign/coal160. ‘State capture: how Bakrie group dodges thebullet again’, Jakarta Globe, 30 July 2010, http://www.thejakartapost.com/news/2010/07/30/statecapture-how-bakrie-group-dodges-bullet-again.html161. ‘Exit Sri Mulyani: corruption and reform inIndonesia’, East Asia Forum, 9 May 2010, http://www.eastasiaforum.org/2010/05/09/exit-srimulyani-corruption-and-reform-in-indonesia/162. ‘Indonesia’s Bakrie grabs new post’,Asian Correspondent, 12 May 2010,http://asiancorrespondent.com/32242/indonesia%e2%80%99s-bakrie-grabs-new-post/163. ‘Bakrie coal mining partnership turnssour’, Jakarta Globe, 25 November 2011,http://www.thejakartaglobe.com/business/bakrie-coal-mining-partnership-turnssour/480788#Scene_1164. Indonesia’s Coal: Local Impacts – Global Links,Down to Earth newsletter special issue, August2010, http://www.downtoearth-indonesia.org/sites/downtoearth-indonesia.org/files/85-86.pdf165. ‘Rothschild plays strongest suit with coalmining deal’, Bloomberg, 1 December 2010,http://www.bloomberg.com/news/2010-12-01/nat-rothschild-plays-his-strongest-suit-with-3-billion-commodities-deal.html166. ‘King Nat’s mines’, Financial Times, 14 January2011, http://www.ft.com/cms/s/2/3a8cd690-1ebd-11e0-a1d1-00144feab49a.html#axzz1fbdKC1JW167. A precise breakdown of the original dealis available on the IPO prospectus. Oneother major component to Bumi plc is theincorporation of PT Berau Coal, anothersizeable Indonesian coal company, into the deal:http://www.downtoearth-indonesia.org/story/deadly-coal-coal-exploitation-and-kalimantansblighted-generation168. ‘London Stock Exchange welcomes Bumi Plcto the Main Market’, LSE press release, 28 June2011, http://www.londonstockexchange.com/about-the-exchange/media-relations/pressreleases/2011/bumiplc.htm169. ‘Rothschild calls for clean-up at PT Bumi’,Financial Times, 9 November 2011, http://www.ft.com/cms/s/0/05e43ebc-0afb-11e1-b62f-00144feabdc0.html#axzz1feq45hNp170. ‘Rothschild raises stake in coal venture Bumi’,Reuters, 17 November 2011, http://uk.reuters.com/article/2011/11/17/uk-bumi-rothschildidUKTRE7AG2DA20111117171. ‘Politics and business mix in Indonesia’, AsiaTimes, 22 July 2006, http://www.atimes.com/atimes/Southeast_Asia/HG22Ae01.html172. ‘Debt for Indonesia’s Bakrie Group is businessas usual’, Reuters, 12 November 2011, http://www.reuters.com/article/2011/11/13/us-bakrierothschild-debt-idUSTRE7AC00E20111113173. ‘Bakrie coal mining partnership turnssour’, Jakarta Globe, 25 November 2011,http://www.thejakartaglobe.com/business/bakrie-coal-mining-partnership-turnssour/480788#Scene_1,comment 3.55pm, 26November 2011174. ‘City relaxes its rules to attract the mega deals’,Sunday Times, 30 October 2011.48 49

AcknowledgementsCase studies 3.1 – 3.6 in this report were provided by Roger Moody ofNostromo Research. The GCM Resources case study (3.7) is based on materialfrom International Accountability Project (IAP), with assistance from Kate Hoshourof IAP. The Bumi case study (3.8) was provided by Andrew Hickman of Down toEarth. Additional comment was provided by Richard Harkinson. The report wasedited by Miles Litvinoff.London Mining Network,Finfuture, 225-229 Seven Sisters Road,London N4 2DA.Tel: +44(0)7929 023214Email: contact@londonminingnetwork.orgWeb: http://londonminingnetwork.orgDesign by Sara Nilsson50