UK-LISTED MINING COMPANIES & THE CASE FOR STRICTER OVERSIGHT

Case Studies And Recommendations

London Mining Network February 2012

1 UK-LISTED MINING COMPANIES & THE CASE FOR STRICTER OVERSIGHT

Case Studies And Recommendations

London Mining Network February 2012

2 CONTENTS // 1. INTRODUCTION

1. Introduction and 5 London Mining Network (LMN) Finance Corporation (IFC, a member of recommendations is an alliance of 27 human rights, the World Bank Group), Organisation development and environmental groups for Economic Co-operation and 2. UK-listed mining companies: 7 concerned about the impacts of the Development (OECD) and other adverse impacts and risks activities of mining companies listed on international standards, as well as 3. Case studies 11 the London Stock Exchange (LSE) or convictions in non-UK courts, should financed by London-based institutions.1 necessarily be included in corporate 3.1 African Barrick (FTSE 250 11 In April and September 2011, LMN reports. listed) submitted comments2 to the UK Treasury’s consultations on the proposed LMN is now publishing this report, 3.2 Brinkley Mining (formerly 14 new UK securities regulatory framework. including an updated and expanded AIM listed) version of the comments and case 3.3 and 3.4 African Minerals 17 The proposed reform includes studies submitted to the Treasury (AIM listed) and London Mining transference of the functions of the in April and September 2011, as (AIM listed) UK Listing Authority (UKLA) from an advocacy briefing for the UK the Financial Services Authority (FSA) Government and other stakeholders 3.5 Vedanta Resources (FTSE 21 to a new body, the Financial Conduct to show the need for very significant 100 listed) Authority (FCA). Based on knowledge reforms of the way the UK regulates of the social, environmental and human listed companies, with a particular focus 3.6 Glencore (FTSE 100 listed) 31 rights impacts of mining around the on the mining sector. 36 world, LMN considers that the proposed 3.7 GCM Resources (AIM listed) new body needs to be equipped with 3.8 Bumi (LSE Main Market 40 the authority, expertise, personnel and Recommendations for the proposed listed) funding to enable it to exercise vigilance new FCA over all UK-listed companies – not only If the FCA is to function effectively Endnotes 42 financial services companies – in a way as the UK’s new listing authority, its that has been lacking in the past. Reform operational objectives must include Acknowledgements 50 of securities regulation must result in enforcing good conduct on all UK-listed much stricter oversight, particularly companies. As the case studies in this of companies involved in mining and report demonstrate, even obedience trading in minerals. to UK law has not in the past been

effectively enforced by the UKLA. Cover: Bumi’s Kaltim Prima Coal mine in Kalimantan, Indonesia - Present regulation of both the LSE’s see case study 3.8 on p. 40. Photo: JATAM Main Market and its Alternative 1. London-listed companies and Investment Market (AIM) sub-market their directors must obey the law is not sufficiently rigorous to prevent in the UK and in the countries harm, as shown by the case studies in where they operate and face this report, and should be upgraded. appropriate sanctions when they The current regulatory system does not do not obey the law. This must adequately operationalise the limited include compliance with national demands on corporate reporting regulations concerning biodiversity, contained in the Companies Act 2006. ecological and environmental For example: findings against companies protection. of non-compliance with International

4 5 2. UK-listed companies should be and other financial data on a 2. UK-LISTED MINING COMPANIES: legally required to note in their country-by-country and project-by- ADVERSE IMPACTS AND RISKS corporate reports all findings of project basis. EU rules should be non-compliance with IFC and at least as comprehensive as listing OECD standards, and of UK and requirements for mining companies non-UK regulation concerning on the Hong Kong Stock Exchange biodiversity and environmental and those proposed under the US protection, as well as convictions in Dodd-Frank Wall Street Reform UK and non-UK courts. and Consumer Act.4 The case studies in this report reveal whose profits mainly derive from the recent instances where UK-listed exploitation and trading of minerals; and 3. The FCA should have powers to 7. Present regulation of AIM is not companies’ operations have had Bumi (case study 3.8), the world’s second enforce the corporate reporting sufficiently rigorous to prevent serious adverse impacts on workers’ biggest extractor and exporter of thermal 7 requirements relating to harm and should be improved to health and safety, individuals’ and coal, the dirtiest of fuels. environmental and social impacts ensure that AIM-listed companies communities’ human rights, developing contained in section 172 of the fully comply with the human country economies, and the quality and Zijin and Monterrico: a tale of two 5 Companies Act 2006, with sanctions rights, social, cultural, labour and availability of natural resources. While regulatory regimes not all mining firms commit equally for failure to comply. environmental laws, regulations In March 2011, environmental non- disturbing acts, and some companies and conventions noted above. governmental organisations (NGOs) genuinely try to observe the benchmarks 4. The FCA should ensure that called on the Hong Kong Stock for good governance already in place, UK-listed companies recognise 8. The FCA’s governing body needs to Exchange (HKEx) to ensure that there is persuasive evidence that such and respect international human include people with expertise not China’s leading gold-copper mining benchmarks are ignored with impunity rights and environmental standards only in financial matters but also in company, Zijin, fully disclose material by others. None of the companies to which the UK is a signatory, human rights and environmental risks associated with one of its most critiqued in this report has been ousted including the Universal Declaration protection if it is to exercise its controversial overseas projects, the Rio from the LSE Main Market or AIM of Human Rights, the International function in a competent manner. Blanco Mine in Peru which it had taken or been subject to a thorough official Covenant on Economic, Social and over in 2007. The NGOs claimed that examination of their alleged misdeeds. Cultural Rights, the UN Declaration 9. People and organisations with the mine project had involved ‘failure on the Rights of Indigenous well-founded concerns about to obtain community authorisation’, The report pays special attention to Peoples and the Convention on the conduct of UK-listed ‘breaches of environmental law’ and the Vedanta Resources, which is emblematic Biological Diversity, and implement companies should be able to ‘torture and killings of local people’. of multiple failures prevailing under the highest environmental, social, make their concerns known to The NGO letter raised concerns that the FSA’s regulatory ‘light touch’ of cultural, labour, and health and the FCA through an accessible ‘Zijin has an obligation to report to 3 recent years. Vedanta may not be the safety standards. and transparent procedure. The shareholders the non-financial risks worst environmental and human rights FCA should take account of, and posed by its Rio Blanco Mine and other offender in every respect. (The company 5. The FCA’s oversight needs to respond to, these concerns, in overseas projects.’8 extend beyond the financial compliance with legal obligations, has not been accused of complicity in the shooting down of citizens by security services sector to include vigilance and respect guidelines concerning The NGOs’ initiative came soon after forces: an accusation levelled in May over the behaviour of all companies meaningful public participation in China’s worst gold mine tailings (waste) 2011 against African Barrick – case listed on UK-registered investment decision-making. disaster in 2010, for which the same study 3.1.) Nonetheless, charges against exchanges. This will require company, Zijin, was found responsible. Vedanta continue to mount, lending sufficient funding for the FCA to In this case, Chinese environmental urgency to the debate on whether there be able to call on the expertise groups had already urged the HKEx to should be a UK definition of a corporate necessary. ensure the company properly report ‘bad actor’ – and one going beyond that the financial implications of the spill, outlined in the US Dodd-Frank Act.6 6. The UK Government should back and Zijin’s trading on the exchange had Some of Vedanta’s worst offences have strong reporting rules for EU-listed been halted several times in advance of been committed in the past two years. and EU-based unlisted mining and announcements of fines and penalties other extractive companies. These associated with the event. The company Among other mining companies rules should be based on current was delisted for a short period in March included in the case studies are: European-level proposals requiring 2011 after contending that two of its Glencore (case study 3.6), the LSE’s extractive companies to publicly subsidiaries, rather than the parent largest-ever new entrant (in May 2011), report payments to governments company, should be held responsible for

6 7 causing the deaths of 22 people and the claims; and the company’s historical on the Main exchange, or for companies campaign in India between 2005 destruction of 523 homes in the south- experience of dealing with concerns of domiciled overseas which also raise and 2010, assisted by the Norwegian eastern province of Guangdong.9 local governments and communities on capital in London. The compliance Finance Ministry’s decision to delist the sites of its mines and exploration requirements set by other bodies (such Vedanta from its sovereign wealth fund Why is the case of Zijin relevant in the properties.14 as the World Bank/IFC and OECD) are portfolio in 2007, followed by UK- UK, five thousand miles from Hong often breached by UK-based mining based NGO Survival International’s Kong? For three reasons. First, Zijin’s companies, but they are not required to successful complaint before the UK Rio Blanco mine in Peru is technically Mining and the flouting of standards announce such breaches under existing National Contact Point under the owned by a UK-registered company, UK rules. OECD complaints mechanism, and a Extractive companies are much Monterrico Metals; and the most detailed examination of the impacts more likely than banks, retail or serious human rights abuses committed The risks posed by investing in this of the company’s existing alumina services companies, for example, to during its operations were made when notoriously cyclical sector are directly refinery by NGO Amnesty International be directly responsible for significant Monterrico was under British control, related to the performance of the in early 2010, that this issue achieved environmental derelictions, such as the soon after it was accepted for trading on players in the sector. For example, an an international high profile. These environmental release of toxic metals, the LSE in 2005.10 extra year added to a mine development initiatives led directly to the cancellation chemicals and gases, which can have plan because of resistance by a local of the mining project by India’s Ministry serious impacts on thousands of citizens. Second, although guilty of causing huge community, or a change of government, of Environment and Forests in mid-2010. harm in its home country of China (and can bring down a company. When an While big global mining companies may fined US$1.4 million for the Guangdong international campaign is launched Civil society organisations should not report their conformity to a number of disaster, with five employees sent to jail against a particular project, all be burdened with sole responsibility benchmarks (particularly ones set by for up to four years),11 Zijin has been investors (not only ‘ethical’ ones) for determining whether UK-listed the Global Reporting Initiative, GRI), more circumspect over its obligations need to be forewarned of the possible companies violate, or are complicit the majority of mid-cap or small-cap to local people and the environment in consequences; otherwise they might fail in violating, international human mining companies do not.15 Nor do these Peru than its predecessor management, in their fiduciary duty to their clients. rights standards. Nor should they necessarily sign on to several initiatives and arguably more transparent. A civil alone be relied upon to determine of the past ten years relating primarily society investigation of the Rio Blanco Although investment institutions whether mining company practices to activities in the minerals sector, project, reporting in March 2007, found regularly, and increasingly, employ fail to meet ‘best possible’ criteria or such as the EITI (Extractive Industries that Monterrico Metals, while in British independent agencies to make social risk jeopardising the Precautionary Transparency Initiative), the Kimberley hands, had made inaccurate statements, and environmental assessments of Principle. The UK Companies Act 2006 Process (aimed at staunching supply of especially in claiming overwhelming a company’s performance and the sought to clarify directors’ duties, inter ‘conflict diamonds’) and the UN Global support for the project from local risks posed, the most substantial such alia to divulge the impacts of company Compact. people.12 Later that year, more than information often derives from NGOs operations on the community and the 90% of these communities, on turning and to a lesser extent journalists. environment – thus (in theory) leading There is a noticeably heavy weighting out for a referendum, voted to reject However, these civil society groups to an abatement of the worst such of mining companies on the LSE. the mine.13 In April 2011, the Chinese and individuals are customarily under- activities. As pointed out in a March 2011 Nonetheless, little or no special regard chairman of Monterrico Metals agreed resourced, and their lobbying power is assessment of the implementation of for the unique propensity of mining that his company had still not obtained minuscule compared to the companies the Act by the Corporate Responsibility companies to do harm has been paid by the consent to operate it required from they may be criticising. Furthermore, Coalition (CORE), this obligation is the FSA since its inauguration in 1997. those communities. while NGO reports are frequently shared embedded in the concept of creating Nor is this propensity reflected in due with banks and other investors, they are ‘enlightened shareholder value’. But diligence procedures referred to in pre- Third, and most relevant here, often ignored or considered implicitly the UK Government, says CORE, launch prospectuses, especially on the the HKEx requires that minerals biased by such institutions. has interpreted the term as excusing observance of human rights, required companies comply with specific listing company directors from having to before these enterprises may be listed requirements that as yet have no For example, three well-documented take any course of action which may on the LSE. counterpart in the UK. These include suits against Vedanta’s Lanjigarh project materially favour communities or the disclosure of: environmental, social, were submitted to India’s Supreme environment should the directors The FSA has claimed that regulatory and health and safety issues; impact Court in 2004. These were occasionally consider it not to be in the interests of standards set on the Main exchange are on sustainability of mineral and/or registered outside the country but, their shareholders.17 unrivalled, but many would question exploration projects; claims that may even when noted by investment or this. And it certainly does not apply to exist over the land on which exploration credit agencies, were largely dismissed The 2008 UK Combined Code on the markedly lower bar set for listing on or mining activity is being carried by them.16 It was thanks only to the Corporate Governance (now known as AIM, or for standard (secondary) listings out, including ancestral or native relentless continuation of a civil society the UK Corporate Governance Code)

8 9 also sought to ensure not only ‘good Disproving the idea that, by having 3. CASE STUDIES housekeeping’ at company board a few ‘independent’ directors on level but also that no one group or board, a company can counteract the shareholder could exercise overweening potentially malign influence of one influence when decisions are taken by or more of its leading shareholders, the board. It should therefore be of Vedanta is again a prime example. considerable concern that, in the case of Appointed executive chairman of the several UK mining companies, this rule company in 2005, Vedanta’s founder 3.1 African Barrick (FTSE 250 listed) has been flouted.18 Anil Agarwal rubs shoulders with five mine, were higher than standards set by fellow board members, only two of the World Health Organisation and by In the case of Brinkley Mining whom can reasonably be described as Barrick Gold Corp of Canada is the the Tanzanian and US environmental (case study 3.2), this breach of rules ‘independent’.20 In defending Agarwal’s world’s biggest gold producer in terms protection agencies. In respect of nickel, contributed to the company’s downfall. role as executive chairman – a clear of mined output. The company’s four lead and chromium, levels in water Among other examples, FTSE 100-listed violation of the UK Combined Code – had become much higher than when main Tanzanian mining operations were 26 Eurasian Natural Resources (ENRC) Vedanta’s 2010 corporate governance spun off by the Canadian parent in observed in 2002. was until recently majority-owned by report notes merely that he ‘has March 2010 when it launched African three oligarchs – Alexander Machkevich, shown continuing commitment to Barrick Gold (ABG) through an initial The report followed an alleged Patokh Chodiev and Alijan Ibragimov developing the Group for the benefit public offering (IPO) on the LSE. poisonous leak from the mine in May – with the Kazakhstan Government of its shareholders. For this reason the Barrick currently holds around 74% of 2009 into the Thigithe river, Rarime apparently holding the upper hand. Board is unanimously of the opinion ABG. Some analysts saw the IPO as an district, which local people claimed had And AIM-listed Archipelago Resources, that his continued involvement in an ‘attempt by Barrick to reduce portfolio killed their cattle, and even some people. embroiled for several years in conflicts executive capacity is vitally important risk’, with one commentator judging it Tanzanian human rights organisations with Indonesian communities, fisherfolk to the success of the Group.’21 Mr simply ‘a marketing thing’.22 called for the mine to be closed until and, at one point, a provincial governor, Agarwal has indeed been developing his an independent enquiry could be held, as it struggled to bring on-stream a company for the benefit of shareholders: Within nine months, the company while Barrick dismissed the accusations. gold project in North Sulawesi, is now Volcan, the trust owned by himself and suffered what Numis Securities No independent enquiry has yet been majority-owned by the huge private his family, controls more than 62% of described as ‘two false starts’, and by organised; nor has Barrick called for one. business conglomerate Rajawali, which Vedanta’s shares. October 2010 its share price had fallen is registered in Indonesia.19 by almost 10%.23 Hedge fund manager In May 2011, Zahra Moloo, a David Einhorn had disposed of his stake correspondent for the Africa-wide in ABG by January 2011, declaring that news service Pambazuka, published an only the rising price of gold ‘prevented account of her investigation into the an even worse outcome’.24 consequences of this disaster. She found what had happened nearly two years African Barrick blamed its poor before still at the forefront of the minds performance mainly on the theft of of local people – but not, apparently, fuel intended for trucks and mining of the minds of those representing the equipment at one of its four mines. The company. When Ms Moloo asked African impression it conveyed was that such Barrick spokesperson Charles Chichester events were all too likely in a country for an interview she was refused, with like Tanzania. Barrick spoke of ‘criminal Chichester reportedly claiming that ‘the Thigithe River incident was no longer an fuel-theft syndicates’ which had ‘widely 27 infiltrated our mining department’.25 issue of concern’.

In June 2009, a report presented to Village chairperson Abel Kereman the Christian Council of Tanzania Nyakiha told Moloo that ‘more than 40 (CCT), researched by a team under Dr people from the three villages of Weigita, Mkabwa Manoko of the University of Nkerege and Nyakunguru have died Dar es Salaam, concluded that nickel, since the spillage occurred in 2009, 20 of them alone in the months between June Bumi’s Kaltim Prima Coal mine in Kalimantan, Indonesia - cadmium, lead and chromium levels in see case study 3.8 on p. 40. Photo: JATAM water sediment and soil samples, taken and October 2010’. Mr Nyakiha added: from the vicinity of Barrick’s North Mara ‘We don’t yet have an official record at

10 11 the village level, but we have asked each Previously, barely nine months after Nonetheless, says Simpson, ABG Just a year before, the Norwegian hamlet to record all the deaths that have ABG’s London listing, evidence ‘mentioned no violence at the mine Government Pension Fund (which is taken place. The problem areas are three provided by an independent journalist in reports describing its social managed by the Ministry of Finance) and these are the areas that are primarily had cast strong doubts on the company’s responsibility record on community had, on the recommendation of its using Thigithe river water in their claim to observe fundamental human relations, health and safety for 2009 and Council on Ethics, removed Barrick everyday life.’28 rights around its North Mara operations. 2010’. The company’s 2010 report simply Gold from its investment ‘universe’. In an unusually harsh critique of the stated: ‘At Barrick, we are committed This followed an investigation of the Nyahiri Ryoba Mwita, a farmer from company’s behaviour, Bloomberg to making a positive difference in the company’s operations at its Porgera mine Weigita, also testified to the loss of journalist Cam Simpson reported in communities in which we work.’ in Papua New Guinea, which yielded 39 heads of livestock due to the spill, December 2010: ‘At least seven people evidence of significant environmental claiming animals continued to die have been killed in clashes with security In a December 2010 written response violations. The Council concluded that later: ‘We have complained, but our forces at the mine in the past two years.’ to questions posed by Bloomberg, Wray Barrick posed ‘an unacceptable risk complaints were not listened to. The (The statement was based on testimony also said that: ‘ABG categorically refutes of contributing to ongoing and future company has never been here to talk to given to Simpson by 28 people he any claim that any persons injured environmental damage’.36 the villagers who have been affected by interviewed.) ‘In at least four cases, or killed were artisanal or small scale the spillage.’29 police acknowledged the shootings miners’ (as if this justified the shooting Thus one European government in contemporaneous press accounts,’ of citizens who may not fall into this made a considered judgment on the In March 2011, Bloomberg reported a said Simpson, while Barrick company category). But, according to Simpson, consequences of continuing finance for board member of the Dar es Salaam documents showed that the company Wray ‘decline[d] to comment on specific a company whose behaviour it could not Stock Exchange saying that ABG ‘pay[s] the Tanzanian government for cases, citing active or potential police condone; nor did it place much faith planned to start trading shares on the federal police protection at the mine and investigations, except for one. He said in the company changing its ways. By East African bourse later in the year.30 employ[s] private armed guards’.33 allegations that mine security inflicted contrast, another European government lethal injuries in that instance are authority, that of the UK, just over a On 23 May 2011, in one of the most Barrick did acknowledge deaths at the “fundamentally untrue”. They were the year later, accepted that same corporate serious recent incidents of its kind North Mara mine during 2008 in its 486- result of a fight between intruders over entity on to its premier stock exchange reported from sub-Saharan Africa, five page UK pre-listing prospectus of March stolen ore.’35 – and maintained it there, even when men (some reports claimed seven) were 2009, stating that: ‘In some cases, those accusations of serious environmental shot dead by security forces at North involved in security incidents have been In the space of little over a year, this pollution (causing the deaths of humans Mara and at least a dozen injured, when injured, sometimes fatally.’ However, UK company, a subsidiary of one of the and animals) and complicity in unlawful several hundred people entered the the company has never admitted most powerful mining corporations on killings swirled around it. mine site in search of gold ore. ABG responsibility for such injuries or deaths. earth, has had a great deal to answer for. issued a statement that: ‘A number of First, according to local people it has What, we may wonder, was the UK intruders sustained gunshot wounds, A year and a half later, in November neglected to take seriously allegations Companies Act of 2006 – with its resulting in seven intruder fatalities and 2010, Barrick announced it had joined of major failures at its largest Tanzanian promise to significantly improve the twelve injuries. African Barrick Gold an international group of extractive project, leading to the poisoning of corporate social responsibility behaviour sincerely regrets any loss of life or injury companies, governments and non-profit people and animals. Second, it is of London-listed businesses – all about? on or near its mine sites. The company organisations that promotes voluntary accused of effectively standing by will continue to support the government standards to foster human rights in while ‘security’ forces guarding its and the community in their efforts to security operations. These Voluntary assets kill and injure those claimed improve law and order and security in Principles on Security and Human to be sabotaging – or ‘invading’ – the the North Mara region.’31 Rights include one which recommends company’s operations. Third, whatever that companies should report credible the truth behind these events, African This was by no means the only event allegations of human rights abuses by Barrick has not joined calls for an of its kind to have impacted on North public security forces to the appropriate independent enquiry; nor has the UK Mara communities and the company authorities.34 FSA demanded one. over the past three years – although it was arguably the worst. One Canadian Andrew Wray, head of investor relations journalist reported: ‘[I]t has tainted for ABG, promised Cam Simpson that Canada’s international mining image, say his company ‘will make a formal request industry observers.’32 to the regional police commissioner’s office for an investigation if it’s made aware of allegations of abuse’.

12 13 3.2 Brinkley Mining (formerly Brinkley’s other major interest at the Sudan – instead turning itself into ‘an the Congo,’ wrote Laurance, going on AIM listed) time was in the Democratic Republic investing company with its main asset to say that ‘since the deal was struck, of Congo (DRC)’s uranium potential, being its cash balance’.41 Shefer was declared persona non grata Before a mining company may be specifically uraniferous deposits in by the government of the Democratic admitted to trading on AIM, an war-torn Katanga Province. In October What had happened to bring Republic of Congo (DRC) last month. independent ‘competent person’ is 2006, Brinkley signed an agreement Brinkley down? The minister who approved the deal has with state-run CGEA (the Congolese been sacked and a civil servant involved required to assess its ‘trustworthiness’, From the outset, pointed questions Atomic Energy Authority) under which in the agreement has been suspended.’ by assembling a wide variety of data should have been asked about the role a new company would be formed, called specific to the industry, such as on the of the company’s executive chairman, SOCIMAR, over which Brinkley would Laurance commented: ‘[T]he company nature, availability, grade, and economic Gerald Holden. He is a financier who have board control. SOCIMAR would be has yet to tell shareholders of the new value of a deposit; the extraction and spent most of his career at Barclays entitled to access and test five areas for developments’; while ‘Shefer’s role in processing technologies to be employed; Bank, for seven years as global head of the presence of uranium, while Brinkley Brinkley’s DRC uranium project has the environmental implications of any mining and metals. Why was Holden pledged to certify ‘export materials with never been disclosed to investors.’ particular project; the legal status of land able to take a position which, in a view to implementing proper controls However, ‘papers seen by The Sunday to be used; and the issue of exploration principle at least, violated a key tenet 37 and to restrict the illicit export of Times show that Brinkley acknowledges or mining permits. (See also Glencore, of corporate governance, as laid down radioactive material’.39 that a key role in securing the deal case study 3.6.) in the 1992 Cadbury Report, which was played by Sentinelle Investments. strongly advocated a separation of CEO The plan seemed practicable and mostly Shefer’s wife’s family trust has been What a ‘competent person’ need not and chairman roles?42 carry out (and is not usually qualified above suspicion. However, there was a major shareholder in Sentinelle. an unusual clause in the agreement, Shefer’s accountant is the company’s to perform) is an assessment of the Mr Holden has never been charged with whereby Brinkley would also be granted sole director.’ wider socio-political risks a company corrupt dealings in promoting Brinkley’s priority rights to any uranium discovered may face. As the example of Brinkley DR Congo ventures, but he was less than through its explorations. The clause is Moreover: ‘The other key Congolese Mining demonstrates, this is arguably circumspect in negotiating them and, at unusual because uranium is a strategic player was Fortunat Lumu, head of the a major omission of what should be a the very least, incompetent in defending mineral whose ownership is usually country’s atomic energy commission. key prerequisite of the pre-admission them. On 16 September 2007, two days restricted to a government authority. He was suspended from his job this process. before the company’s shares dropped to Some of this fissile fuel, included in year after being accused of agreeing an all-time low, and while Holden was the bombs dropped on Hiroshima uranium deals with Brinkley without the SRK Consulting is one of the leading defending the legality of his agreement and Nagasaki, had come from the then authorisation of DRC president Joseph international independent advisory and with the DR Congo’s CGEA, Ben Belgian Congo. Kabila. Science minister Bonane was engineering groups that prepare listing Laurance of the London Sunday Times sacked from the government in July – particulars for mining company IPOs. broke a disturbing story. Among SRK’s recent reports has been Brinkley suffered a pre-tax loss of nearly only days after Brinkley announced in £1 million for the first half of 2007, and London that a deal with the DRC had a resources estimate, performed for Laurance claimed to have established by the end of that year was still awaiting been signed.’44 African Minerals’ Tonkolili venture in that ‘a convicted fraudster played a its prospecting rights from the DRC Sierra Leone (see case study 3.3), and pivotal role in securing uranium mining Government. According to the Financial On 18 September 2007, Holden stuck an independent engineers’ report which rights in the Congo for the British Times, Brinkley’s shares had ‘slumped to up for Brinkley in an interview he gave included ‘an … opinion of projections minerals group Brinkley Mining’. The a new low … in spite of [the company] to Allan Seccombe of miningmx.com. and cash flow forecasts’ for Vedanta alleged criminal, a South African called insisting that mining agreements signed Without naming any specific party, he Resources, prior to its inclusion on the Niko Shefer, had been ‘sentenced to 14 with the [DRC Government] were legally claimed that ‘People have been putting LSE in December 2003. years in jail in the late1980s for his part binding. Reports … suggested the rumours into the market for some in one of South Africa’s biggest bank arrangements were under threat as part months now to damage us and get us SRK prepared a ‘competent person’s frauds. Moreover, a 2002 United Nations of a DRC anti-corruption drive.’40 out of the DRC.’ Holden agreed that report’ for Brinkley Mining’s application report into the plunder of the Congo’s Sentinelle Investments ‘had laid the to trade on AIM in May 2006, where natural resources named him as one of By September the following year, foundations with the CGEA for about it estimated the mineralised potential 54 people who should be subjected to Brinkley had been forced out of DR 90% of the transaction’ although he of the Waterval uranium prospect in travel restrictions and penalties.’43 South Africa: a lease then 49%-owned by Congo, as well as withdrawing from claimed this was ‘before Brinkley bought Chad. In August 2009, the company the deal’. Brinkley through its associate company ‘It has now emerged that a Shefer 38 announced it would dispose of its two Western Uranium. company was instrumental in securing remaining assets in South Africa and the a deal for Brinkley to mine uranium in

14 15 Holden then said that Shefer – the Sunday Times story – ‘planned to … push 3.3 and 3.4 African Minerals convicted fraudster – was ‘extremely Malta Forest aside and form a personally (AIM listed) and London Mining In January 2008, Sierra Leone Diamond well connected in the DRC, making a profitable partnership with Brinkley’.46 (AIM listed) was fined for putting out ‘misleading and valuable consultant’. The former Barclays unrealistically optimistic information’ mining investment chief admitted that On 3 April 2009, the DR Congo African Minerals following statements made by the Brinkley had put some reliance on Government released its examination company in summer 2006 that it had Shefer, although he claimed this was of a host of contracts signed under African Minerals is listed on AIM but is found ‘a significant number’ of rare pink ‘sporadic and likely to become less as the previous regime that raised major a ‘non-UK registered company’ and, as diamonds in Sierra Leone. However Brinkley set up and established its own concerns over their legitimacy, as such, ‘not all fields of data are available – and as the company admitted in networks in the country’. Further: ‘We’ll well as imputing complicity between at this time’ – to quote the formula used December that year – the pink hue got use whoever we need to at different former political leaders and officials by Morningstar/Hemscott, a leading UK ‘washed out’ when put through an acid- times and if Niko can help then we will and overseas mining companies. The investors’ services provider. In fact, its cleaning process.50 talk to him again.’45 Congolese peoples had recently endured registered office is in Bermuda. the most brutal civil conflict in the While Timis made some attempt to A year later, and with Brinkley on recent history of Africa (which is not yet What we do know is that the company correct the official record, it took a year the brink of collapse, this saga might at an end). is effectively controlled by Frank Timis, and a half before the LSE took steps to have been forgotten. Then, among the who was initially its executive chairman. censure the company, and only then by numerous ‘Wikileaks’ released in early The role played by AIM-listed Brinkley This is yet another example of a breach way of a ‘private censure’, accompanied 2011, was a cable, dated 11 September Mining may merit only a footnote of the guidelines for good corporate by a relatively modest £75,000 fine 2007, sent home by Roger A. Meece, US in a future history of the continent. governance set down in the Cadbury (around the price of a genuine 1 carat Ambassador to DR Congo, which cast However, it is clear that the UK Report twenty years ago; see Vedanta and intense pink Rio Tinto Argyle diamond). further light on the affair. regulatory authorities had failed to Brinkley case studies. Timis is a 46-year- Worse, it appears that the public was not Meece was concerned to examine maintain a thorough, ongoing check old Romanian-Australian financier informed about this censure for another allegations that a company called Malta on the company’s activities, even when domiciled in London with a track record two and half years when the Financial Forest, long active in DR Congo, had allegations of impropriety, verging on of disappointing investors. Those who Times divulged it in July 2010.51 been ‘trafficking’ uranium illegally out of corruption, surfaced in the national press. bought shares in his Regal Petroleum the country. The ambassador found no some years ago invested in what seemed African Minerals began testing the compelling evidence that this was true. a promising Greek oil discovery, hyped Tonkolili deposit in Sierra Leone in 2003 But he confirmed that Fortunat Lumu – up by Timis between June 2003 and and judges that it might host a massive the CGEA official named in Laurance’s May 2005, before the find proved to be 10 billion tonnes of ore. The company chimerical (‘commercially unviable’). was finally granted a mining licence in In 2009, Regal was fined £600,000 by July 2009, currently covering an area of the LSE’s AIM – the largest penalty the 52 Bumi’s Kaltim Prima Coal mine in Kalimantan, Indonesia - 227 square kilometres. see case study 3.8 on p. 40. Photo: JATAM market had imposed – when it found that Timis’s company had ‘on 11 separate Some Sierra Leone local citizens claim occasions … failed to take reasonable to have been literally bulldozed by care to ensure its announcements were Timis’s company, while others say they not misleading, false or deceptive, and have been fired upon by ‘security’ forces did not omit material information’.47 protecting his interests. According to Sierra Leone’s Right to Food network: In 2005 Timis bought into AIM-listed ‘Since 2003 African Minerals has Sierra Leone Diamond Corporation, via … promised development, jobs and his Bermuda-registered Timis Diamond better infrastructure. Nevertheless, its Corporation.48 With the acquisition came operations have resulted in bloody some highly prospective diamond fields confrontations … 500 people live in and the even more inviting Tonkolili Kemedugu [where African Minerals and Marampa iron ore projects. On 16 operates], but when we arrived there it August 2007, Sierra Leone Diamond was seemed like a ghost town. Only a dozen renamed African Minerals on AIM.49 inhabitants came out to meet us on the village square, and bullet holes from the last riot were still visible on a number of the houses.’

16 17 The Right to Food network report executive directors, backed by a clutch recover from these traumas, a number of According to panellists at the forum, continues: ‘The protest is said to have of ‘respectable’ investment funds organisations have vigorously struggled while the 2009 Mines and Minerals Act been triggered by the firm’s attempt to (including F&C Asset Management, to recapture the proceeds of mineral ‘has the potential of changing the history conduct surveys regarding the upcoming Schroder Investment Management, wealth in order to ‘rebuild’ the nation’s of mining in the country’, nonetheless construction of a dam. One village Fidelity Investment, BlackRock Inc., the civil society. ‘the continued violation of some of its inhabitant told us, “If they build the Union Bank of Switzerland, Investec and crucial provisions to so-called attract dam, we will lose water for our fields. Barclays Wealth) none of which holds a One of these is Sierra Leone’s Network investors who often turn out to be We are afraid that we will not be able to controlling stake in the company.54 Movement for Justice and Development economic criminals, is undermining the grow enough rice.” (NMJD). At the February 2011 World very act and at the same time treating London Mining has not progressed half Social Forum in Senegal, the NMJD, the laws of the land with disregard’. ‘According to the police a number of as far at its Marampa project as African along with the Association of Journalists young men working for African Minerals Minerals has at Tonkolili. The company on Mining and Extractives (AJME), In this key respect, these two AIM-listed attacked the firm’s headquarters and set did not record any revenue for the past hosted a symposium on ‘Reforms in mining companies, African Minerals and an excavator on fire. The police response two years and in February 2011 reported Mining Regime – Challenges in Sierra London Mining, were singled out for was massive. They stormed the village a pre-tax loss of US$58 million for the Leone’, specifically targeting London indictment. and destroyed a number of houses. fourth quarter of 2010.55 Mining’s operations. The symposium More than eighty people were arrested declared that the West African country and there were numerous injuries, Adding to London Mining’s concerns, ‘since the early 1980s till date, has some of them serious. The majority of in November 2010, Sierra Leone’s produced billions and billions of dollars’ the villagers fled to the nearby forests. environmental protection agency worth of precious minerals, but yet Those who have returned to the village temporarily suspended the company’s remains at the very bottom of the human fear further attacks. As yet African on-site operations, citing its failure to development index and classified as a Minerals has refused to respond to the comply with environmental regulations. least developed nation. request by a member of the alliance ‘Yet by the end of the day the head of for the Right to Food for a statement the agency recanted and the company ‘While structures such as the regarding the incidents. announced work was going on as usual.’56 Presidential Task Force, the Strategic Policy Unit, the Anti Corruption ‘According to the villagers the firm London Mining had already won some Commission, the Income Tax Act of has refused to engage in any dialogue extraordinary concessions from the 2000, the Law Reform Commission with them. They have attempted Sierra Leone Government, allowing it etcetera have been put in place to to communicate with the firm on an 80% reduction in income tax for ten enhance reforms that would ensure innumerable occasions and negotiate years and an 80% reduction in other that the country benefits most from its a compromise involving compensation major revenue streams for no fewer than already hugely depleted mineral wealth, for the land the firm is using – to no 26 years. Its corporation tax was fixed it came out that the said structures avail. The only result has been massive at only 6% (in contrast to the 37.5% set are yet to display much seriousness in police violence … Even though African under Sierra Leone’s 2009 Mining Act); fulfilling their all-important mandates.’ Minerals also talks about infrastructural duty on mining materials at 1% (rather Concerns were raised that ‘political improvements on its website, there is than the official rate of 5%); royalties will seems to be there but that undue no evidence of these in Kemedugu. “We were reduced to 3%, rather than the 4% priority is being given to attracting are afraid that our land will be ruined mandated by state law.57 (For its part, investors of all sorts, rather than striving by African Minerals and we will not be African Minerals also benefited from to change the resource-curse syndrome, provided with any compensation,” says some concessions – its corporation tax thereby meeting the expectations of the [Kemedugu Chief] Musa Turay bitterly.’53 rate was set at 26%.) electorate and the suffering masses’.58

London Mining Sierra Leone is one of the world’s poorest nations, yet endowed with Running parallel with African Minerals’ some of its richest mineral deposits. For forays into Sierra Leone are those of decades its economy has been sacrificed another AIM-listed company, London to what is often called the ‘resource Mining. In contrast to Timis’s dubious curse’ – not to mention the ravages of a corporate vehicle, London Mining is horrendous recent war, centred around driven by an eminent board of non- its mining fields. As the people begin to

18 19 3.5 Vedanta Resources (FTSE examination of Vedanta’s operations, 100 listed) primarily those in the Indian state of Orissa (see below). It concluded that In May 2011, the world’s seventeenth ‘[C]ontinuing to invest in the … largest publicly-listed mining company, company would present an unacceptable 59 risk of contributing to grossly unethical Vedanta Resources, said it soon 63 expected to float its Zambian subsidiary, activities.’ Konkola Copper Mines (KCM), on London’s Stock Exchange. Anil In response to this indictment, the Agarwal, Vedanta’s progenitor, majority Norwegian Finance Ministry sold all the shareowner and executive chairman, had government’s Vedanta shares (valued expressed a similar intention in 2010.60 at around US$13 million). An open Possibly prompted by Glencore’s May invitation had already been extended 2011 IPO, and with copper prices at a by the Council to Vedanta to refute high, the UK-domiciled ‘Non-Resident its findings and, at any future point, Indian’ presumably judged the time ripe demonstrate a radical improvement to attempt a repeat of Vedanta’s LSE in its modus operandi, at which time debut in December 2003.61 the Council would consider reversing its earlier stance. Vedanta has failed to do so, and the company remains Neither a pre-listing prospectus for KCM 64 nor any formal announcement of a float ‘blacklisted’. has yet been issued. Serious allegations have been levelled against KCM’s Norway’s is not the only government behaviour (see below), but whether concerned at allegations of Vedanta’s these will be thoroughly exposed well in behaviour. In the second half of 2010, advance of a listing must be in doubt. Agarwal had inked an agreement (worth around US$9.6 billion) with Cairn That doubt is strongly compounded Energy in order to secure a controlling when we realise just how inadequate – share of the Scottish oil enterprise’s to the point of misrepresentation – was Indian subsidiary. With this deal the prospectus published by Vedanta Vedanta would secure access to India’s itself more than eight years ago. We largest known oilfield, in Rajasthan. have good reason to demand that the Although quickly bankrolled by a company’s appalling record of violations number of UK and other commercial and mismanagement in the succeeding banks, the arrangement raised fears years will be addressed in all its detail within India’s state-owned oil and gas before the UK’s financial regulator producer ONGC (itself holding a 30% admits any of its subsidiaries to public stake of the field) that it would lose trading of their own shares. effective control over a prized national resource, and sacrifice an equitable If Vedanta is indeed an intrinsically share in the project’s future royalties. ‘bad actor’ (a concept soon to be discussed by the US Securities In view of this, prominent ex-civil Exchange Commission as it works on servant E.A.S. Sarma (a former adviser implementing one of the provisions of on energy to India’s government the Dodd-Frank Act),62 what should now planning commission) wrote to Indian be done to prevent the sins of the parent Prime Minister Manmohan Singh, being repeated by the child? questioning the appropriateness of the takeover. Said Mr Sarma: ‘Vedanta’s In 2007 Norway’s Council on Ethics track record so far in mining and power released the results of a two-year sectors has not been satisfactory ... To allow that company to get hold of

Bumi’s Kaltim Prima Coal mine in Kalimantan, Indonesia - 20 21 see case study 3.8 on p. 40. Photo: JATAM a sizeable share in the equity of the Despite the CEC’s forthright company that controls the extraction recommendation, during the succeeding Bumi’s Kaltim Prima Coal mine in Kalimantan, Indonesia - see case study 3.8 on p. 40. Photo: JATAM of hydrocarbons in Rajasthan and five years Vedanta continued battling elsewhere may not be desirable.’ to clear the mining project. Meanwhile many Khonds rose up in vociferous As a result of this intervention, the opposition to what they perceived Indian Prime Minister’s Office called as an unprecedented threat to their for a review of Vedanta’s track record. It land and livelihoods. The strength of was an unusual move on the part of the their campaign attracted the backing government. More importantly, in late of leading Indian human rights 2007, India’s Supreme Court had heard and environmental NGOs and of compelling evidence of contraventions international organisations such as by Vedanta’s aluminium subsidiary Amnesty International and ActionAid.68 (VAL) of state forest and environmental regulations at the company’s costliest In September 2009, the UK-based project to date. tribal peoples’ campaign group Survival International submitted a complaint The Niyamgiri bauxite deposit lies at the about Vedanta’s activities around heart of a thickly forested Kondh tribal Lanjigarh to the UK Government’s area, linked to the nearby Lanjigarh National Contact Point (NCP) for a alumina refinery which serves Vedanta’s ruling under guidelines set by the Jharsaguda smelter, 335 kilometres OECD for the conduct of multinational away – all three situated in Orissa. In corporations.69 The NCP ruled that rejecting Vedanta’s application to access Vedanta ‘did not respect the rights of Niyamgiri, the judges had paid tribute the Dongria Kondh’; did not ‘consider to the weight of allegations against the the impact of the construction of the company, contained in the Norwegian mine on the [tribe’s] rights’; and ‘failed Council of Ethics report.65 to put in place an adequate and timely consultation mechanism’. expansion of its Lanjigarh refinery. ruling. However, following an Orissa Orissa: breaking more than one law The report’s authors concluded: ‘The High Court ruling in January 2012, the The UK Government body concluded The Niyamgiri mountain is regarded by Vedanta Company has consistently expansion has been barred. In April that a ‘change in the company’s local tribal inhabitants as Niyam Raja – violated the FCA, FRA, EPA72 and the and May 2011, mismanagement at the behaviour’ was ‘essential’. Moreover, it roughly translated as ‘Lord of the Law’ Orissa Forest Act in active collusion refinery resulted in two involuntary and criticised Vedanta for ‘fail[ing] to provide or ‘Lord of Dharma’: ample testimony with the state officials. Perhaps the illegal on-site releases of highly alkaline any evidence during the examination’ to the reverence paid by the Dongria most blatant example of it is their act toxic solid wastes, commonly-known – despite repeated requests. According Kondh to a deeply sacred place.66 of illegally enclosing and occupying at as ‘red mud’.75 On several occasions to Survival International, this was ‘the least 26.123 ha of Village Forest Lands between 2007 and 2009, the Orissa State only time a [UK] company has refused to In September 2005, an inquiry by a within its refinery, depriving tribal, dalits Pollution Control Board had criticised participate in an OECD investigation’.70 leading advisory committee to India’s [lowest-caste] and other rural poor of Vedanta for the poor construction of its Supreme Court (the Central Empowered their rights.’73 red mud pond, issuing three ‘show cause’ In February 2010, Amnesty International Committee, or CEC) concluded that inter notices to the company and ordering published detailed allegations about the alia Vedanta had ‘falsified information’ Shortly afterwards, the MoEF minister, that it prevent these wastes entering into company’s social and environmental to obtain environmental clearances for Jairam Ramesh, went on record to the adjacent Vamsadhara river.76 violations in the Lanjigarh area, which the alumina refinery under construction criticise India’s Supreme Court for Vedanta has neglected to answer.71 on plains below the mountain. The permitting construction of the Lanjigarh On 5 April 2011, part of the pond wall company had also destroyed more than refinery in the first place; and he placed burst open, causing many tonnes of Finally, in August 2010, a high-level ten hectares of forest land. The CEC a ban on expansion of the refinery.74 these wastes to cascade into the river for independent report, commissioned by urged the mining venture be rejected on around three hours. Although a video India’s Ministry of Environment and environmental grounds, and also because At the time of writing, Vedanta and its clearly showing evidence of the violation Forests (MoEF), unequivocally rejected it would violate the constitutional rights partner, the state-owned Orissa Mining was swiftly posted on YouTube,77 the the Niyamgiri mining project and also of the Kondh people.67 Company, are trying to overturn this CEO of Vedanta Aluminium denied that urged a halt to Vedanta’s planned sixfold

22 23 there had been any breach of the wall, The Jharsaguda smelter has been under eloquent appraisal of activists like Mr explain how the two power plants for even suggesting the footage was part of a construction since 2005. In the year Samantara, recognising that they play which even trial consent orders were not ‘dirty tricks’ campaign by those opposed April 2010 to April 2011, Vedanta claims a vital role in safeguarding rights and issued remain in operation’.86 to the mining. the plant produced 380,000 tonnes of obligations broadly set out under the aluminium. country’s constitution. Zambia: the toxic river Just six weeks later, on 16 May 2011, the In 2004, Vedanta Resources acquired pond wall broke once again, prompting During this period, the Lanjigarh Said Judge S. Ravindra Bhatt: ‘If a 51% stake in Konkola Copper Mines Amnesty International on 1 June to refinery had been supplying the smelter standing before a special tribunal, (KCM), paying $48 million in cash. issue a statement drawing attention to daily with hundreds of truckloads created to assess impact of projects During the first full three months of what it called a ‘toxic sludge leak’ that of bauxite that travel 335 kilometres and activities that impact, or pose operation, the company posted net ‘threatens rural communities’. Amnesty between the two points.80 These potential threats to the environment, profits of $26 million, provoking a estimated that ‘four to five thousand journeys have significantly damaged or local communities, is construed number of Zambian politicians to ask people in twelve villages are threatened road surfaces, caused a large number narrowly, organizations working for the why the takeover had been allowed in by the leaks, which could worsen during of accidents and stirred up dust and betterment of the environment whether the first place at such a low price. A ‘call heavy monsoon rains’. particulates, the impacts of which will in form of NGOs or otherwise, would option’, secretly negotiated in 2004, also inevitably deepen as output from the be effectively kept out of the discourse enabled Vedanta to exercise a right to It maintained that ‘Local people have smelter mounts.81 that is so crucial an input in such purchase another 28.4% in KCM from protested that they have not been given proceedings.’ The court then ordered Bermuda-registered ZCI, effectively any information by Vedanta Aluminium Prafulla Samantara, a respected Orissa Vedanta to pay 50,000 rupees (about granting Vedanta a 79.4% monopoly.87 or the government about efforts to civil society organiser, in mid-2006 US$1,000) to Mr Samantara by way of a prevent further leaks … Vedanta accused Vedanta of illegally undertaking fine and in meeting his costs.83 Vedanta benefited from an earlier drastic Aluminium denies that there were any construction work on the smelter and privatisation of the country’s once spills from the red mud pond and has its captive coal-fired power plant – In July the same year, the OSPCB issued highly profitable state-owned copper reportedly not repaired the damaged specifically of destroying protected show-cause notices against Vedanta, industry. The labyrinthine process by areas.’ But Amnesty ‘is … not aware of forests, trampling over vegetation and relating to various violations of water which this was engineered, specifically any attempts by the company to assess polluting a stream.82 and air pollution acts at the Jharsaguda in relation to KCM, was exposed in pollution of land and water caused by captive power plant: negligent disposal a November 2001 report by Patricia the reported leaks, or to clean up any In 2007, Mr Samantara secured an order of coal ash, unacceptable emissions from Feeney of Oxfam.88 The report raised damage that has occurred’.78 from the Orissa State Pollution Control the ESP (electrostatic precipitator), and urgent questions over KCM’s record Board (OSPCB) which demanded defects of the smelter’s effluent treatment of environmental pollution and its In addition, the Indian National Human Vedanta cease the smelter construction. plant and in the coal handling area.84 impact on the health of workers and Rights Commission identified 3.66 Yet, within a month, the order had communities. acres of land within the refinery that been withdrawn. Mr Samantara issued More than a year later, thanks to the it said legally belonged to the tribal a vociferous objection to what he diligence of the Hindustan Times in its Ms Feeney’s strictures applied to the Khond, as a result of which the local considered evidence of pressure by the use of India’s Right to Information Act, company’s Konkola operations before administration registered a case of land- company on the OSPCB. When, a year journalist Priya Ranjan Sahu revealed they were sold to Anglo American – and grab against Vedanta.79 later in January 2008, he pleaded for the that ‘two 135 MW captive power units of then on to Vedanta. However, in the light case to be heard before India’s National Vedanta Aluminium’s 500,000-tonne-a- of a later disaster, which occurred when Jharsaguda: in the smelting pot Environmental Appellate Authority year smelter never got any clearance from KCM had been firmly under Vedanta’s (NEAA), he was refused. The NEAA the board’.85 Furthermore, said Sahu: From the beginning of its trajectory control for nearly three years, the report determined that he was not a ‘person ‘[T]he “trial consent to operate” order in Orissa, Vedanta conceived a three- sounded an important warning note: aggrieved’ within the meaning of the OSPCB issued to the smelter and seven pronged design to become one of the ‘Women, men and children on the law, since he was not directly affected other 135 MW captive power plants world’s major aluminium producers, Copperbelt have to live with a range of by the project. expired on March 31 this year [2010].’ and at the cheapest possible cost. environmental hazards. Heavy metals It would build a smelter to receive such as arsenic and lead and other However, on 6 May 2009, in something According to Sahu, the board ‘refused alumina from the refinery it hoped (and industrial chemicals have contaminated of an historic decision, Delhi’s High to renew its consent, citing numerous expected) would be fed by bauxite on streams and the main Kafue River.’ Court recognised that Mr Samantara violations of its guidelines’, and issued Niyamgiri mountain. was indeed ‘aggrieved’, since he four show-cause notices between Although Vedanta took some steps to was an environmentalist with close May and September 2010. Even if the reduce this contamination, its failure connections to communities around company had satisfactorily responded to adopt a comprehensive management the smelter site. The court delivered an to these, Sahu pointed out, ‘that doesn’t

24 25 plan soon became self-evident. By early In November 2010, KCM yet again the lives of at least 41 workers (possibly The NIT found that new layers of the November 2006, KCM’s nine-kilometre- polluted the same Kafue river it had considerably more)98 employed by two chimney were being built before lower long pipelines, conveying slurry for poisoned four years earlier. A court firms contracted to Vedanta’s subsidiary levels had been given time to cure disposal from its copper tailings leaching fined the company and found it BALCO (Bharat Aluminium Company).99 (harden) properly: ‘The compressive plant, had deteriorated to bursting point. guilty of willfully failing to report the failure of the chimney may have taken And burst they did – precipitating a ‘accident’ to the authorities.92 KCM’s It was around 4pm on 24 September place at somewhere in the upper portion flood of highly acidic effluents into the lawyer, Mr Elijah Banda, reportedly 2009 that the 245-metre chimney of the chimney … the upper portion Kafue river. told the court that the company toppled to the ground.100 As local youths may have sunk telescopically down to ‘was remorseful and had undertaken ran towards the clouds of billowing dust the lower portion, exerting enormous The discharges led to a major necessary measures to mitigate the to help rescue workers and pull bodies sudden pressure to the bottom portion.’ disruption of domestic water supply damage caused and to prevent future from the rubble, BALCO officers were to 75,000 residents of the nearby town incidents’.93 This was almost exactly observed fleeing the scene. Three BALCO employees, including of Chingola. The country’s tourism, what Vedanta had promised to do the project leader for the chimney, environment and natural resources following the 2006 disaster. There are no precise records of who Viral Mehta, and one employee of minister, Kabinga Pande, declared in died in this worst Indian industrial subcontractor GDCL, were charged with a ministerial statement to Parliament Readers may note a similarity between accident of recent times. In all the ‘culpable homicide not amounting to on 14 November 2006: ‘The situation these Zambian incidents and recent confusion immediately following murder’. All four were released on bail experienced recently is not accidental events at the Lanjigarh refinery site the event the subcontractors’ on-site after the Supreme Court overturned but is a result of the failure by the (see above); there is also a pattern office was mysteriously burned down – a Korba District Court decision to current mine owners to implement the to Vedanta’s dismissive attitude in whether by company officials (as some withhold it. KCM Nchanga Mine Environment Plan response to them. The Precautionary have alleged) or by incensed workers (EMP) that was inherited from the Anglo Principle places responsibility on the and local people. The office contained The deputy director of prosecutions in American Corporation, the previous party contemplating an action for records of workers’ names and other Korba, J.N. Chandra, is palpably annoyed owners of the mines.’89 proving that that action or practice will details that might have enabled the at the hoops he has had to jump through not cause unacceptable harm.94 At its authorities to understand the causes in securing any kind of justice. He told A detailed examination of Zambia’s refinery in Orissa, and its operations of the accident and exactly how many UK researcher Simon Chambers in minerals industry, published in 2007 in Zambia’s Copperbelt, Vedanta has workers had gone missing.101 April 2011 that ‘there is no likelihood by an alliance of Zambian civil society signally failed this test – and continued of anyone being brought to trial in the organisations, noted that the Kafue doing so. In late March 2011, four Vedanta executive chairman Anil foreseeable future because the accused river had ‘turned blue’ as a result of subcontracted KCM miners at the Agarwal has claimed the tragedy was continue successfully applying for stays the disaster and estimated that the Nchanga open pit in Chingola went to the result of ‘severe thunderstorms and from the Chhattisgarh High Court and discharges raised the river’s raised their deaths after being suffocated by an lightning’ earlier that day.102 However, Supreme Court, which could drag out chemical concentrations to 1,000% of excavated heap of soil.95 an investigation commissioned by proceedings interminably’. acceptable levels of copper, 77,000% of the Korba police and carried out by manganese and 10,000% of cobalt.90 The criminally negligent attitude of the Raipur-based National Institute A judicial enquiry into the disaster, Vedanta to site safety, already warned of Technology (NIT) in Chhattisgarh, the Buxi Commission, has already Later the same year, in a report by of by the three UK NGOs in 2007,96 has challenges this assertion. postponed release of its findings three three UK development NGOs, the not substantially improved. This leads times due (it says) to ‘unavailability of Environmental Council of Zambia us directly to exposing one of the worst The NIT spent two days on-site, sifting witnesses and facts’. According to Mr was cited as declaring that KCM examples in recent years of the fatal through the wreckage soon after the Chandra, most people in Korba see the management had displayed ‘grossly neglect of its contracted workforce by a disaster and analysing the materials it commission as an attempt by the state negligent’ behaviour, resulting in UK-listed company. gathered. Its report states categorically government to appear to ‘at least be rivers used by local communities for that lightning could not be attributed doing something’, when in reality ‘there drinking water becoming ‘significantly Korba: 41 workers buried alive97 as a cause of the tragedy, since there are too many powerful people who want polluted’. The report threw strong doubt were no signs of melted steel rebars, nothing to be done’. One of the concerns mentioned in on KCM’s claims to be ‘corporately nor evidence of burns on the recovered Mr Sarma’s letter to the Indian Prime responsible’ towards its subcontracted bodies. The institute concluded that A senior ex-employee of BALCO, Minister’s Office (see above) was the workers and pointed out that the ‘careless, poor construction practice who left the company in 2003 and September 2009 collapse of a power company was failing to make a fair and and poor workmanship in the did not wish to be named, informed plant chimney, under construction equitable contribution to government construction of piles’ and ‘improper Simon Chambers that, after Vedanta’s at Korba town in the Indian state of from its profits.91 cement content in the concrete mix’ foundation company, Sterlite Industries, Chhattisgargh. The disaster claimed were likely causal factors. took control of BALCO in March 2001,

26 27 company practices changed drastically. proceedings and the dismantling of any In October 2010, Anil Agarwal himself (an LSE Regulatory News Service note), The management was told ‘it should previous constructions. All were ignored was summoned to give evidence at the which clearly sought to underplay the not worry about obtaining approvals by the company.103 Korba District Court in answer to a magnitude of the disaster.106 Vedanta’s from the authorities on pollution, charge of criminal trespass relating to executive chairman, Anil Agarwal, stuck environment and forestry issues’. According to Mr Dewanen: ‘Just a week the previous year’s events. His lawyers to his self-exculpating version of events before [the accident] a team from the successfully applied for a stay from the right through to a statement made to When a town and country planning KMC reached the site and stopped the Chhattisgarh High Court, allowing him shareholders on 5 May 2010 (published notice was served on BALCO in construction work. But the company to remain in London.104 in the company’s annual report for December 2003, ordering a cessation of started the work again.’ BALCO also 2010). Long before then, the ‘act of expansion work, the company retorted: received notices from the Central Numerous official notices from various God’ defence had been demolished by ‘We wish to state that only basic Pollution Control Board and Town and government departments have been sent India’s National Institute of Technology preparatory work like sample excavation Country Planning Department ordering to the BALCO offices over the last four (NIT). But Agarwal compounded earlier and site grading are being taken up work on the chimney to be stopped. years, ordering that various work should apprehension that he was deliberately to ensure timely completion of this stop at the Korba site, each sounding downplaying the tragedy by describing it prestigious project for the State and The families of most of the workers a little more desperate and impotent as ‘an unfortunate accident’.107 people of Chhattisgarh.’ reported dead on that traumatic than the previous one. Just five months September afternoon in Korba have after those 40 and more workers lost The British Safety Council (BSC) The mayor of Korba at the time of the each received Rs5 lakh (500,000 rupees their lives, BALCO began constructing awarded BALCO two international September 2009 disaster was Lakhaniel or around £1,370) compensation from another chimney on the same spot safety awards in 2009. One of these was Dewanen. He is sure that the fatal BALCO, as well as some monies from where the earlier edifice had collapsed. given to the company itself, just four chimney was built illegally, on a 92.84- the Indian subcontractor, Gannon A notice sent to the company by the months before the Korba killings, and acre plot which is still classified as forest Dunkerley, and from the government. Korba Municipal Corporation, dated a second to one of BALCO’s captive land, owned by the State of Chhattisgarh. Nobody representing BALCO or 5 February 2010, declared: ‘You have power plants.108 The awards were not The Korba Municipal Corporation its subcontractors is known to have started construction without submitting withdrawn until almost a year after the (KMC) served a number of ‘stop notices’ contacted the families at any point to the necessary papers. You have not disaster. Even then, the BSC admitted, throughout 2009, threatening legal offer condolences or explanations. obtained permission for construction, this step was taken only because its and we have told you repeatedly to attention had been drawn to the event please submit your papers or we shall by a London Observer analysis of the have to file a case against you.’ deaths of workers at all FTSE 100 mining groups, as recorded in their Clearly there has been official annual reports.109 procrastination in bringing Vedanta to book for its alleged corporate crimes in Although the BSC is a charitable Korba. But arguably worse is the almost association, it is actively supported total neglect in calling the company to by the UK Health and Safety account on the part of UK authorities. Executive (HSE), the UK’s official health and safety watchdog, and It is not the case that the appalling the two work closely together to sift event of September 2009 was ignored safety-related data relating to UK- by international media. There was based companies. As a commentator substantial coverage on the BBC with the International Trade Union News channel and Al Jazeera. On 23 Confederation (representing 175 million September 2009, Dow Jones Newswires workers worldwide) put it at the time: filed notice that ‘Chhattisgarh Chief ‘Th[is] publicity is likely to be a source Minister Raman Singh said in a of embarrassment to both HSE and statement that “a judicial probe has BSC. It would be remarkable if both been ordered” into the accident’ and organisations were unaware of the that ‘a police case had been filed against disaster in Korba, India, which was BALCO’.105 widely reported at the time, and any fatality in the award year automatically Korba chimnery disaster site. The same day, Vedanta issued a curt invalidates an application.’110 statement in the form of an RNS alert

28 29 The independent research and advisory A significant number of investment 3.6 Glencore (FTSE 100 listed) with Xstrata,115 of which it already owned consultancy Pensions Investment funds from the UK, Canada, USA, 34.4%. And rumours that Glasenberg had Research Consultants (PIRC – ‘The Sweden and the Netherlands On 24 May 2011, the world’s largest his sights on a more modest acquisition, voice of responsible shareholders’) have recognised the unacceptable ENRC (Eurasian Natural Resources) commodities trader entered the London 116 issued a statement just before Vedanta’s reputational risks of bankrolling this and Hong Kong stock exchanges with began circulating in June 2011. 2010 AGM. Describing the Korba company. There is steadily mounting two IPOs following the priority issue collapse as a ‘significant indicator of public perception that Vedanta not only of shares to its ‘cornerstone investors’ Don’t touch it with a bargepole [the company’s] poor governance’, operates ‘outside the law’ but is content shortly before. Under its chief executive On 20 May 2011, The Times business PIRC called on Vedanta shareholders to do so, displaying disdain towards its officer, the South African-born, Swiss- editor Ian King voiced little doubt that to oppose the election of three of the critics.113 resident Ivan Glasenberg, Glencore ‘small’ investors at least should steer company’s non-executive directors leapt into the FTSE 100 list of the UK’s clear of taking a stake in this particular (including senior non-executive director Why has only one UK Government premier companies. With a market golden calf. In a robust comment, Naresh Chandra, chair of its health, body, the OECD National Contact Point, capitalisation of around £36 billion, it King damned Glencore as ‘a business safety and environment committee, and ever considered examining any one immediately became the fourth biggest with dubious morals. It trades grain its remuneration committee) ‘because of Vedanta’s many overseas activities? mining company traded on the LSE’s amid food riots and has been accused of their role in the company’s poor Is it right that only cash-strapped 114 Main Market. of profiteering and environmental handling of environmental, social, and voluntary organisations (not to mention offences in numerous poor and war-torn governance issues’.111 individuals) research and present The IPO had tapped the pockets of countries.’ He went on: ‘Most of those evidence of the company’s violations, many investors, including hedge funds, signing up to buy shares in Glencore’s The Norwegian Government is not the rather than an official regulatory body? sovereign wealth funds, so-called tracker flotation are major Middle Eastern only shareholder to sell its Vedanta funds and pension funds. Pension and Far Eastern investors. Few of the stake, finding it incompatible with The Vedanta case illustrates both the portfolio managers would have felt traditional City institutions will touch the the responsible manner in which it inadequacy of company reporting duty-bound to buy a stake on behalf of shares with a bargepole. The question is, should invest its clients’ (or citizens’) provisions under the FSA and the their clients – despite any disquiet that should you?’ funds. When the Church of England absence of binding rules to govern the the clients whose pensions their role sold its Vedanta shares in early 2010, conduct of this and other London-listed is to safeguard might have expressed. Some nine hundred different accounts the chairman of its Ethical Investment mining companies. Nonetheless, the hype, investor road put out the boat for Glencore’s pre- Advisory Group, John Reynolds, shows and glut of media attention IPO. According to Reuters IFR, orders wrote: ‘I am a passionate advocate for preceding this listing (the largest were received from around the world engagement with companies when ever made in the UK) failed to work including the UK, US, Asia, the Middle we have ethical concerns. We have an consistently in Glencore’s favour. East and Brazil. ‘About 10 per cent went excellent track record of getting our to high-net worth individuals and private concerns heard and acted upon by True, this secretive enterprise will now banking clients, about a third to hedge the companies in which the Church enjoy access to sizeable chunks of funds and the rest to institutions and investing bodies hold shares. We are new capital. However, this sprawling sovereign wealth funds. Hong Kong retail grateful to Vedanta’s senior management conglomerate (‘a big Swiss cheese’ as one took just 2.67 per cent of the offering.’117 for making themselves available to meet critic dubs it) was also forced to open us on a number of occasions. However, its books to greater scrutiny than so far There was scepticism on the part of a after six months of engagement, we received in its 37-year history. few funds which would normally have are not satisfied that Vedanta has been expected to join the scramble. shown, or is likely in future to show, Of the 1,600-odd pages in Glencore’s The fund manager for Schroder’s UK the level of respect for human rights pre-launch prospectus, three-quarters equities team, along with Aviva Investors’ and local communities that we expect was devoted to ‘competent persons’’ UK equity manager, warned investors of companies in whom the Church reports on the firm’s Colombian coal to look to other mining companies investing bodies hold shares.’112 assets, on the Mutanda and Mopani with a long history as listed businesses. mines in Zambia, and on Kazzinc, the Commented Aviva’s Chris Murphy: ‘If rising Kazakhstan zinc, copper and gold we want exposure to the mining space miner. Nearly a fifth of what Glencore we can buy Rio Tinto, where we know expected to raise ($2.2 billion) had its track record and have visibility on been earmarked to increase its stake in management. We feel there is more value Kazzinc to 93%. In February 2012, the there than the likes of Glencore.’118 company announced plans to merge

30 31 Old game over? itself ‘from a trader with some resource lead-zinc operation in Peru, where a In 2009 the Environmental Council of production, to a mining house with month before a worker had died by Zambia (see also Vedanta, case study 3.5) ‘Why would a giant secret society like some trading activities … In fact it being crushed under a heap of ore. reported that sulphur dioxide emissions Glencore, with a dark past, want to come would look very much like a BHP The workforce began an ‘indefinite from parts of the plant had reached up into the light of day and relinquish the Billiton, which might be the point.’121 general strike’ to draw attention to their to 70 times the maximum health limit private, backroom-dealing business unmet demands, and another person set by the World Health Organisation. model that made its partners and Indeed, while Glencore’s foodstuffs was killed, with dozens reportedly Webster pointed out that a mineral founder fabulously wealthy?’ This was trading is a key part of its global reach injured, when it barricaded access to expert’s report published in Glencore’s the question raised by US investment (attracting bales of criticism in recent the mine site.125 According to The Times, prospectus confirmed that sulphur guru Shah Gilani on 18 May, and his years), the conglomerate’s biggest Glencore was guilty of causing river dioxide emissions from MCM were answer was a terse one: ‘Because the old profits derive from its exploitation of oil pollution at its operations in Bolivia. In ‘consistently exceeding’ environmental game is over and commodities prices are and minerals. addition, members of the Wutha Native limits: ‘It said that the breaches were about to break down – and in a big way (Aboriginal) Title Claimants Group a “significant risk” because MCM had … By utilizing its newly tapped source of Damage, dirt, deceit and death in Australia had been ‘cheated of an missed even the extended deadline capital – its own stock – the [Glencore] agreement made with Glencore in 1996, for reducing the pollution. Three partners will eventually be able to cash On 19 and 20 May 2011, The Times lashed under which the company guaranteed monitoring stations outside the plant out (they have a lockup provision of four into Glencore with several exposés to employ some of them in return for repeatedly recorded breaches of air to five years).’119 of the company’s current operations mining nickel on their land. (The case pollution limits.’ following a special investigation. (The was settled only recently out of court.)’126 Gilani added: ‘[T]he company will also Guardian followed suit with additional The report ‘described various illegal be able to withstand the coming crash in indictments.) The Times alleged that Century Aluminum of the USA – with discharges of hazardous fluids into commodity prices and then be perfectly a Glencore subsidiary ‘had procured Glencore at 44% its biggest shareholder rivers, including an acid leak that had positioned to buy at the bottom, which is lucrative market-sensitive information – according to the paper, was ‘being contaminated the town’s water supply what it is planning to do.’120 This may or from a European Union “mole’’’, pursued for damages caused by its and resulted in “hospitalisation and may not prove to be the case. The market which, the paper argued, ‘threatens operations, in a string of cases brought treatment of a number of people”’. Thus price of copper and other base metals to undermine the EU’s Common by environmental agencies, local far, however, Mr Glasenberg has ignored did turn downwards just a day before agricultural policy’.122 residents and other companies’.127 the children’s plea, and his company Glencore went public. has done virtually nothing to introduce The paper went on to claim that Pollution and tax evasion in Zambia stringent anti-pollution measures to More importantly, we should ask Glencore’s Colombian subsidiary, the area.129 whether the firm’s move on London Prodeco, has been operating on Glencore’s mining and smelting and Hong Kong was not motivated government-owned land ‘that was operations at its Mopani copper- MCM is co-owned by Glencore and by a somewhat different intent. This forcibly taken from its previous cobalt complex in Zambia seem to another London-listed mining company, would be a reduction of its dependency residents by paramilitaries; at least 18 have provoked the greatest ire during First Quantum Minerals.130 In April 2011, on commodities trading per se, by people were murdered in a six month 2011. In a May 2011 article, entitled five international NGOs filed a complaint increasing its vertical control over oil “campaign of terror” at El Prado, ‘Billionaire ignored children’s pleas to against both companies, alleging they and mining companies beyond what it northern Colombia’.123 stop toxic pollution from mine’, The had violated the OECD Guidelines for currently exercises. Owning minerals Times’s environment editor Ben Webster Multinational Enterprises. The NGOs in the ground, and controlling related In February 2007, residents close to reported that Ivan Glasenberg had, a full based their case on the results of a 2009 infrastructure, is arguably less risk-prone Prodeco’s La Jagua de Ibirico coal mine year before, ‘received a bundle of letters audit, performed at the request of the than sending them across oceans, or in Colombia’s Cesar province set up from children at a school exposed on a Zambian Government, with support tying them down in warehouses. barricades to protest at environmental daily basis to sulphur dioxide pollution from the Norwegian Government, damage and respiratory illnesses they from the nearby Mopani Copper Mines by international accountants Grant As Australian financial commentator claimed had been inflicted by these (MCM) complex’.128 Thornton and Econ Pöyry. Stephen Bartholomeusz wrote a week mining operations. In response, police before the IPO: ‘What has changed attacked the demonstrators, reportedly ‘In the letters … the children described Among the anomalies revealed by within Glencore in recent years has killing one man.124 how clouds of toxic particles made them the report, say the NGOs, were ‘an been the size and contribution of [its] choke, burnt their throats, poisoned unexplained increase in the company’s industrial assets – its interests in mines, Six months later, on 22 September the school’s fruit trees and forced operating costs in 2007 (+$380 million); oil wells, logistics businesses and port 2007, Glencore was accused of teachers to close windows, leaving them stunningly low reported volumes of facilities.’ Bartholomeusz anticipates implementing an aggressive anti-union sweltering in their classrooms.’ extracted cobalt when compared to the conglomerate will now transform policy at its Minera Los Quenuales

32 33 similar mining companies operating in Glencore both before and after the There are certainly checks and The paper went on to warn: ‘This makes the region, and manipulations of copper report’s publication ‘but to no avail’. balances which Glencore is supposed an oligopolistic market structure likely ... selling prices in favour of Glencore to observe under recently ‘tightened’ [whose] cost is borne by consumers the which constitute a violation of OECD’s On being contacted by swissinfo.ch (part UK rules aimed at improving corporate world over.’ “arm’s length” principle …The result of of the Swiss Broadcasting Corporation), governance.137 But they will not, of those various processes was to lower by Glencore denied the allegations. Its themselves, prevent future irresponsible, When interviewed by the FT, Glencore’s several hundreds of millions of dollars spokesperson, Simon Buerk, reportedly if not criminal, behaviour such as that Glasenberg had no scruples about MCM’s net income for the 2003-2008 argued that ‘Some of the environmental recorded here. So long as Glencore defending his conglomerate’s past period.’131 problems revealed in the report are remains a gigantic, globally spread practices, nor boasting that business inherited from Gecamines, a company commodities trader, rooted in the would remain the same after the These actions, declared the NGOs, active in the region for more than 50 wheeling and dealing of a close clique flotation. ‘Unfortunately, God put the ‘are all the more deplorable when one years.’134 of highly paid managers, along with minerals in different parts of the world,’ considers that the Mopani consortium thousands of its proprietary online he said. ‘We took the nice, simple, easy operates in an already attractive fiscal ‘Glencore won’t change the way it traders, manifold opportunities for graft stuff first from Australia, we took it from environment, one highly favourable to operates’ – Glasenberg and corruption will present themselves. the US, we went to South America and foreign investment, and that Mopani also we dug it out of the ground there. Now There is a great deal of ‘unfinished enjoys the effects of a 2000 development On 15 April 2011, five weeks before we have to go to more remote places.’ business’ associated with Glencore’s past agreement with Zambia that provides the IPO, the Financial Times (FT) and continuing operations, only some massive financial and tax exemptions’.132 commented: ‘The ... financial heft Glasenberg added: ‘We are not going to of which can be dealt with here. Many that will result from [Glencore’s] change the way we operate. Any talk that issues, along with the questions they Pollution and rights abuses in initial public offering ... will allow going public will hinder us is not true. raise, were neglected in the company’s DR Congo the company to vertically integrate It will not affect us at all ... Being public pre-IPO prospectus, despite its being through acquisitions, becoming a bigger will have absolutely no effect on the In March 2011, two Swiss NGOs, Bread one of the longest on record. producer in markets in which it trades.’ business.’138 for All and the Catholic Lenten Fund, accused Glencore of a range of human To give one further example: in late 2009, rights abuses, of employing child labour, four men were convicted by a French causing pollution and evading taxes in court of supplying weapons to Angola in the Democratic Republic of Congo. The the midst of its 27-year civil war, and in accusations centred around Glencore’s defiance of an arms embargo imposed operations in the province of Katanga, by the United Nations. Pierre Falcone, where it has a $250 million 77% share in Arcadi Gaydamak, Jean-Christophe Katanga Mining Limited (KML), a major Mitterrand (son of the former president) copper and cobalt producer. and Charles Pasqua were all found guilty, but it was Falcone and Gaydamak According to the NGOs, mining is who had played the dominant roles. ‘driving the locals away from their Falcone was jailed for six years.135 traditional farming activities, which in turn has led to less food on the market Ken Silverstein of the US magazine In …There are often no safety measures These Times reports that, in November in KML sites. Miners are not protected 1993, ‘Falcone and Gaydamak helped from uranium radiation.’ (The radiation arrange the sale to Angola of $47 million allegedly persists in local streams from in small arms. A second deal for $563 earlier mining operations.) ‘Many have million worth of weapons, including short-term contracts and less training, so tanks and helicopters, got under way the accident risk increases.’133 early the following year … Angolans paid for the weapons with oil, which Houses were reportedly damaged by Falcone and Gaydamak sold with the explosive charges and the air polluted by help of Glencore.’136 No response to this emissions from the mining operations. serious allegation appears to have been ‘And all this in total impunity,’ declared made by the company. Photo: JACSES the report. The NGOs say they contacted

34 35 3.7 GCM Resources (AIM listed) gathered in Phulbari to demonstrate against the project. Three people were Long March rally for Phulbari. Photo: Taslima Akhtfer In October 2011, International killed, including a fourteen-year old Accountability Project (IAP), a boy, and over 100 people were injured.’ respected US-based human rights And in February 2007, a leader of organisation, published a spectrum of those opposing the project, Mr S.M. disturbing allegations and concerns Nuruzzaman, was arbitrarily arrested relating to the Phulbari Coal Project and allegedly tortured. Members of the in northwest Bangladesh. The Phulbari Bangladesh Government, says IAP, have project is 100% owned by UK-listed publicly denounced people opposing GCM Resources (formerly Global Coal the project as ‘foreign agents and spies’, Management), and IAP’s publication contributing to the criminalisation of took the form of an open letter legitimate protest. requesting that banks and investors holding shares in GCM divest and Criticising GCM for failing to consult ‘cease provision of all financial and adequately with or address concerns technical services associated with the of affected communities, IAP reports project’. Among the many organisations that the company has failed to and individuals endorsing the open disseminate a draft environmental letter were the Hong Kong-based Asian impact assessment, resettlement plan or Human Rights Commission, national indigenous peoples development plan branches of Friends of the Earth to community members, either in the International, and civil society groups, Bangla language or in a form accessible campaigners and academics from for non-literate people. The company is around the world.139 thereby flouting the project investment provisions of the widely accepted IAP’s online letter presents strong Equator Principles – despite the fact that GCM has pledged to comply with Protest against the Phulbari evidence of a host of human rights project. Photo: Anha F. Khan all Equator Principles in implementing violations and risks arising from the 141 Phulbari Coal Project. Large-scale the Phulbari Coal Project. public protests against the project have reportedly been going on since Bangladesh’s National Indigenous 2006, and protestors have experienced Union (Jatiya Adivasi Parishad, JAP), ‘intimidation, repression, and violence IAP states, estimates that the Phulbari that includes public beatings of project project would ‘displace or impoverish opponents by the police, death threats, 50,000 indigenous people’ belonging arbitrary arrest and detention’. Twice to 23 tribal groups. Requested by JAP during the past year, the Bangladesh to help halt the project, the US-based Government is said to have deployed its human rights NGO Cultural Survival concluded that the project would mean notorious Rapid Action Battalion (RAB) 142 to demonstrations against the project. ‘ethnocide’ for those affected. RAB’s extrajudicial executions of human rights defenders and use of torture Implementation of the Phulbari project in custody have been documented by would involve acquisition of ‘14,660 Human Rights Watch and Amnesty acres of land in Bangladesh’s most International.140 fertile and productive agricultural region’, of which ‘roughly 80 percent Other incidents reported by IAP include is comprised of verdant rice fields and fertile farmlands, which serve as the that, on 26 August 2006, the paramilitary 143 Bangladeshi Rifles ‘indiscriminately nation’s rice bowl’. Yet, despite the fired into a crowd of over 50,000 people area’s importance as a food-producing region, no information or study is

36 37 available that specifically assesses the In seeking to corroborate the In 2007, the Swiss-based World impacts on the future food supplies of displacement figures by checking Organisation Against Torture (OCMT) affected households or consequences online for the original 163-page Report issued emergency appeals and for food security in Bangladesh, where of the Expert Committee of September expressed concern that ‘police and nearly half the population live below the 2006, LMN found that the Bangladesh security forces may again employ nutrition poverty line. Government’s energy division ‘has violence to deal with public opposition’ “lost” the report of a government- to the project, warning that ‘further Nearly half the people living in the formed expert committee which violence, ill-treatment and even deaths Phulbari township are said to lack water found that the … agreement with the may ensue’.152 to meet their daily needs.144 However, government for Phulbari coal field ‘GCM’s dewatering operations at the was illegal and an open pit mine at Despite all the documented human Phulbari coalmine would lower the the field would not be viable’.150 The rights violations and major future water table by 15-25 meters’ across original expert committee displacement risks associated with the Phulbari Coal a large area extending more than 10 estimate now seems to be unavailable. Project, GCM and the Bangladesh kilometres beyond the mine’s footprint. Government appear determined to The Summary of the Report of the Expert Regardless of the potentially vast continue with the project. And the UK Committee (REC) to Evaluate Feasibility numbers of people affected – and listing authorities appear not to have Study Report and Scheme of Development if so, totally misrepresented by raised the least concern. of the Phulbari Coal Project145 (hereafter GCM’s own feasibility study – and the REC) estimates that 220,000 people the suspicious ‘disappearance’ of the would lose access to water as wells official government report, which are and irrigation canals run dry and IAP in themselves matters of real concern, cites expert warnings of ‘potential there would be major worries even desertification of the entire northwest with numbers of people displaced region’146 and of acid mine drainage ‘only’ in the tens of thousands. 80% being ‘likely to contaminate a network of all households in the project area of rivers extending far beyond the depend on subsistence farming, yet Rally to prepare for Phulbari protest, project area, poisoning water resources the company’s draft resettlement 28 March 2011. Photo: Shahriar Sunny and soil for centuries to come’.147 plan states that ‘most households will become landless’, with no guarantees GCM is said to expect the Phulbari of livelihood restoration in one of project to ‘displace and resettle at least the world’s most densely populated 50,000 people’,148 although there are countries. indications that much larger numbers would be displaced. The REC gives ‘the Given the lack of potential replacement actual number of affected people for lands available, IAP says, the displaced this area’ as ‘1,29,417’ [sic] instead of households are likely to experience the 40,000 it says GCM’s own feasibility ‘further impoverishment and serious study mentions. This figure would be risks to physical and mental health’. rendered ‘129,417’ in western usage; As noted above, the Bangladesh but the same summary also states Government’s expert committee warned that ‘A high risk of social unrest and of ‘a high risk of social unrest and conflict is involved in the relocation conflict’ if GCM seeks to evict and of about a million people’ (emphasis relocate affected communities.151 added), indicating that there is some confusion as to the number of people to be displaced. Assuming that the lower figure is correct, it is nonetheless huge.149

38 39 3.8 Bumi (LSE Main Market listed) similar enterprise under the name of Rothschild spent UK£1 million buying In the political arena, the Bakrie family’s Vallares to invest in oil and gas projects more shares in the company.170 The In June 2011, after a ‘reverse takeover’153 record is disturbing also. The family in Kurdistan, together with former BP fact that both Bumi Resources and the with Vallar plc – a shell company set up is linked with cases of bribery and tax CEO Tony Hayward. Bakries are heavily indebted is old news, by the financier Nat Rothschild154 – an evasion, most notably in relation to an which Rothschild would have known Indonesian coal company arrived on investigation into the activities of the A Financial Times article about the before embarking on any business deals Kaltim Prima Coal (KPC) mine and its Bumi coal deal highlights Rothschild’s with them. In the Asian financial crisis the LSE through a deal with the Bakrie 159 155 parent company Bumi Resources. In hunger for making money above all of the late 1990s, the Bakries’ empire business empire. A year previously, 171 Indra Bakrie, the chair of newly named 2010, attempts were made by Indonesian other considerations. ‘You have to make nearly collapsed because of debt. A Bumi plc, had declared an intention Government officials to investigate the hay while the sun shines,’ he said on his recent Reuters report describes the that Bumi should become the world’s tax dealings of both KPC and Bumi initial visit to Indonesia to look at the Bakrie Group as being ‘known for its Resources. This process has been stayed Kalimantan coal mines he was about to acquisitions funded through debt that is biggest exporter of power station coal by 166 2013.156 Ambition and rhetoric were not by the courts thanks to interventions by buy. Given the rapidly disappearing linked to shares in its firm’, commenting in short supply. company lawyers. rainforests of Borneo and the livelihoods that this is a ‘strategy that backfires they provide for local people, there is a when global financial crises hit equity 172 This venture was the outcome of the Recently, an official from the Indonesian certain irony to this remark. Rothschild’s and debt markets’. meeting of two powerful business tax office has claimed that he was ‘hay-making’ is unlikely to benefit bribed by Bakrie-owned companies Kalimantan’s forests and the people In the rush to take advantage of families from West and East: Nat 160 Rothschild, corporate financier and to help them with their tax affairs. whose lives depend on them. Indonesia’s vast natural resources and scion of the Rothschild family, and Indra More worrying has been the resignation the world’s hunger for energy, both Bakrie, youngest of four siblings, owners in May 2010 of Finance Minister Sri Much has been written in financial parties appear to see only money and Mulyani after a long political vendetta columns about the arrival of Bumi plc profit and to give little consideration of the Indonesian business group PT 161 Bakrie & Brothers. by Bakrie. Sri Mulyani was noted for on the LSE. This process has been rapid to impacts on local communities and her anti-corruption campaigning. Two and subject to minimal oversight. It took the environment, let alone the world’s The Bakrie Group has business days after her departure, Bakrie was little over six months from the initial climate, of bulldozing the forests of interests in agriculture (including appointed ‘managing chairman’ of a joint announcement of the US$3 billion deal Borneo for coal. The LSE and financial secretariat to determine government in Jakarta to Bumi’s LSE listing.167 A institutions are now playing a key palm oil), property, media, insurance, 162 banking, trade, shipping, construction, policy. Politics and business continue further six months on from this listing, part in enabling and encouraging this manufacturing and mining.157 Aburizal to be very closely linked. In an article the tangled web of business intrigue is to happen. In this connection it also Bakrie, the eldest son, is currently about the partnership between Bakrie already becoming evident, throwing up appears that the LSE’s reputation is chairman of Golkar, the political and Rothschild, the head of research of a serious questions about the effectiveness starting to be questioned abroad. In party of the Suharto regime, and a foreign brokerage company is quoted as of the ‘due diligence’ process undertaken reference to a Jakarta Globe article about potential presidential candidate for the advising investors to avoid too powerful prior to the company’s launch on 28 June the Bumi deal, one commentator wrote: business groups in Indonesia as they are 2011.168 On 8 November 2011, a letter ‘A question to ask is why very many of Indonesian elections in 2014. In 2006, 163 one of the companies controlled by the often ‘too big and risky to challenge’. from Rothschild in the Financial Times the world’s oligarchs are based in UK Bakrie Group, PT Lapindo Brantas, was surprisingly denounced the corporate ... Arab, Russian, Indian, Chinese, etc. For Nat Rothschild, it appears that governance of Bumi Resources, the Mainly because in the City of London responsible for an oil drilling disaster 173 in East Java. This caused a mud-volcano the risks and challenges of doing Indonesian partner company of Bumi anything goes.’ business with the Bakries are (or were) plc, and called for the repayment of that has engulfed thousands of homes 169 and displaced some 30,000 families, outweighed by the potential profits that debts by connected parties. Have the regulators simply given up? is blamed for the death of 14 people, Indonesian coal offered. Indonesia is The head of the UKLA was quoted and continues pouring out mud to currently the world’s largest exporter Whether Rothschild is genuinely last autumn as saying: ‘We don’t this day.158 In what could be seen as an of thermal coal, and demand for coal concerned about the corporate see our role as one to ensure or from China and India is prompting governance of Bumi Resources and its underwrite best practice in relation to attempt to avoid paying compensation 164 to the thousands of victims of this more growth. The business model debts has been much debated in the the combined code, nor do we have ongoing disaster, Energi Mega Persada, employed by Rothschild has been to financial media. Most ascribe more powers to do so.’ He continued weakly: create London-listed shell companies cynical reasons for the letter. The Bakries ‘The role of shareholders is greatly the Bakrie-owned company controlling 174 the majority of shares in PT Lapindo as investment vehicles for mining are reported to be investigating their underestimated.’ Does this mean that Brantas, twice attempted to sell this companies and oil and gas companies new partner for trying to manipulate the UKLA is expecting Indra Bakrie and around the world. In July 2010, the the price of shares in order to gain a Nat Rothschild to regulate themselves? company for US$2 to an offshore 165 company. IPO for Vallar raised US$1.1 billion. bigger stake in the company. Indeed, Since then, Rothschild has launched a soon after the letter was published,

40 41 ENDNOTES // carbon emissions is not yet mandatory in 23. Financial Times, 15 October 2010. the UK. In May 2011, a study by the UK 24. Foster Wheeler, 20 January 2011. Environment Agency of 500 FTSE All-Share companies showed that only a minority 25. Financial Times, 15 October 2010. currently provide environmental statistics in 26. Levels of Heavy Metals and Cyanide in Soil, line with government guidance: http://www. Sediment and Water from the Vicinity of North environment-agency.gov.uk/static/documents/ Mara Gold Mine in Tarime District, Tanzania, Business/Environmental_Disclosures_ report to CCT, Manfred F. Bitala, Charles summary_report.pdf Kweyunga and Mkabwa L.K. Manoko, 2009, 15. This does not mean that the big global mining http://www.Pambazuka.org/images/articles/450/ 1. http://londonminingnetwork.org 4. European Commission, ‘Disclosure of Payments companies – many of which are listed on the ERROR%20FREE%20NORTH%20MARA%20 REPORT%20-%20FINAL.pdf 2. Available on the HM Treasury website on page to Governments’, http://ec.europa.eu/internal_ LSE Main Exchange – always manage to adhere 80 of the pdf file at http://www.hm-treasury.gov. market/accounting/other_en.htm; see also Hong to the guidelines. In its 2010 annual report, 27. ‘Tanzania: killings and toxic spill tarnish Barrick uk/d/consult_finregresponses_jm.pdf and page Kong Stock Exchange listing rules, http://www. the world’s second largest mining company, Gold’, Zahra Moloo, Pambazuka, 19 May 2011. 127 of the pdf file at http://www.hm-treasury. hkex.com.hk/eng/rulesreg/listrules/mbrules/ Rio Tinto, admits to several ‘serious’ breaches. 28. Ibid. Documents/consol_mb.pdf, chapter 18, ‘Equity It also mentions, for the first time, that the gov.uk/d/condoc_finreg_blueprint_responses_ 29. Ibid. ip.pdf. securities - mineral companies’; and US Dodd- Norwegian Government disinvested from Rio Frank Act 2010, http://www.sec.gov/about/laws/ Tinto in 2008 on the grounds of the company’s 30. Bloomberg, 8 March 2011. 3. On companies’ duty to respect human wallstreetreform-cpa.pdf, section 1504. complicity in grave environmental and human rights, and states’ duty to protect, see the UN 31. ‘Seven dead in clash at African Barrick mine’, rights abuses at the Grasberg copper-gold mine ‘Protect, Respect and Remedy’ Framework 5. The case studies cite companies which have Toronto Star, 17 May 2011. in West Papua. for Business and Human Rights, and its listed in London from 2003 onwards. 32. ‘Black eye for Barrick taints Canada critics Guiding Principles, http://www.ohchr. 6. The Dodd–Frank Wall Street Reform and 16. During 2005-8, several banks that were invested say’, Lisa Wright, Toronto Star, 18 May 2011. org/en/Issues/TransnationalCorporations/ Consumer Protection Act 2010 addresses the in Vedanta despatched advisory notes to clients This tarnished image was hardly improved Pages/SRSGTransCorpIndex.aspx. Respect need to stem the trade in ‘conflict minerals’ in which they recognised that delays to this when ABG allegedly refused permission for for environmental standards implies that and in coal and other minerals from operations project and the proposed adjacent Niyamgiri the families of the five killed men to hold a companies: which pose a substantial danger to their mine were partly due to legal action taking memorial service at the mine site: ‘Memorial for • Not undertake activities which have a negative workforces. The Act’s ‘bad actor’ provisions place in India. In one such note Citigroup dead banned at Canadian gold mine in Africa’, impact upon any of the protected areas covered concern financial fraud and related criminal advised investors to hold on to their Vedanta Jocelyn Edwards, Toronto Star, 23 May 2011. shares, despite recognising that the company by the IUCN I-IV categories, UNESCO World activity, some of which will apply to foreign 33. ‘Shooting gold diggers at Barrick African mine might be refused legal permission to proceed Heritage and the Ramsar Convention; private issuers of securities. coincides with record prices’, Cam Simpson, with the project. Citigroup considered that • Ensure that their activities will not have 7. Xstrata, 34.5% controlled by Glencore, declares Bloomberg, 23 December 2010. since ‘this is India’ a way would most likely be a negative impact on the community or that it is the ‘world’s biggest exporter of thermal population level of any species identified on the found around the problem. 34. http://www.voluntaryprinciples.org/files/ coal’. Glencore has a marketing agreement voluntary_principles_english.pdf IUCN Red List; with Bumi for the purchase of the latter’s 17. Directors, Human Rights and The Companies Act: • Ensure that activities will not lead to the Indonesian coal. Is the new law any different?, Hannah Ellis and 35. ‘Shooting gold diggers at Barrick African mine illegal trade of any species listed as endangered Kate Hodgson, CORE, 2011, http://corporate- coincides with record prices’, op. cit. 8. Letter to Hong Kong Stock Exchange, 3 March under CITES; responsibility.org/directors-human-rights-the- 2011, http://www.foe.org/sites/default/files/ 36. http://www.regjeringen.no/upload/FIN/etikk/ • Not produce or trade in any living genetically companies-act-is-the-new-law-any-different/ recommendation_barrick.pdf modified organism except with the approval Letter%20to%20HKSE%20re_Zijin.pdf 18. One of the most recent examples of such of the importing country and as otherwise 9. Reuters, 15 March 2011; Bloomberg 14 March 37. The appointment of a ‘competent person’, a failure to conform to the UK Corporate required under the Cartagena Protocol; 2011. although recommended by the UKLA, is not Governance Code is Gerald Holden at GCM • Provide assessments of the cumulative mandatory for a Main Market listing, although 10. ‘British mining company faces damages claim Resources. Former head of Barclays Capital biodiversity impacts upstream and downstream it is for AIM: http://www.londonstockexchange. after allegations of torture in Peru’, Ian Cobain, metals and mining, who still holds a substantial (including impacts on ecosystems, species and com/companies-and-advisors/aim/advisers/ Guardian, 18 October 2009. In addition, number of shares in the Bangladesh-focused genetic resources); rules/guidance-note.pdf Richard Ralph, the former chair of Monterrico mining company, while purportedly being • Provide and make public ongoing 38. International Mining, May 2007, p. 39. Metals, was found guilty of insider trading even-handed as the company’s non-executive monitoring and reporting of impacts, at least in Zijin shares: ‘Corporate fraud: former UK Chairman. This failure is acknowledged by the 39. Ibid. consistent with the guidelines found in the envoy fined for insider dealing’, Julia Kollewe, company on page 21 of its Annual Report and 40. Financial Times, 17 September 2007. Global Reporting Initiative for reporting Guardian, 14 November 2008. Accounts 2011. on biodiversity, land use and air-and water- 41. Mining Journal, 21 August 2009. In December 11. Mining Journal, 6 May 2011. pollution, emissions and discharges. 19. http://www.minesandcommunities.org/article. 2010, what was left of Brinkley was acquired • Agree to sustainably manage all living natural 12. Prof. Anthony Bebbington PhD et al, php?a=10063; http://moneytometal.org/index. by Australia’s Eurogold, which valued the resources used in its operations, such as forests, Mining and Development in Peru: With Special php/Rajawali_Corp UK company at only a little over £4 million: plants and animals; Reference to The Rio Blanco Project, Piura, Peru 20. Agarwal’s deputy executive chairman at Reuters, 8 September 2010. By April 2011, • Ensure that activities will not involve the Support Group, March 2007, http://www. Vedanta Resources is his brother, Navin. The Eurogold had apparently sold Brinkley and introduction, intentional or unintentional, of perusupportgroup.org.uk/files/fckUserFiles/ company’s CEO, M.S. Mehta, was the CEO of gone out of business itself. invasive alien species; file/FINAL%20-%20Mining%20and%20 Hindustan Zinc, which was incorporated into 42. The Cadbury Report was unequivocal in • Meet the consent and benefit-sharing Development%20in%20Peru.pdf Sterlite in 2000 and which listed as Vedanta warning of the risks of failing to make a clear requirements found in the UN Convention 13. ‘Peru: communities say “no” to mining company Resources in December 2003; Narish Chandra, division of responsibilities at the top level on Biological Diversity regarding activities in vote’, Milagros Salazar, IPS,18 September a non-executive director, was observed at the of UK businesses. Cadbury argued that the involving access to genetic resources; 2007. company’ s 2010 AGM taking over the meeting position of chairman of the board should be • Identify, in consultation with communities, on behalf of Agarwal and hectoring the critical 14. HKEx listing rules, http://www.hkex.com.hk/ separated from that of chief executive, or else NGOs and scientists, what are to be treated as audience. Aman Mehta could be described as eng/rulesreg/listrules/mbrules/Documents/ that there be a strong independent element “no-go zones”, such as HCVAs, endangered independent; the only non-Indian on the board consol_mb.pdf, pp. 391-7, particularly on the board: http://www.ecgi.org/codes/ forests, biodiversity hotspots, river watersheds, is Euan Macdonald. point 18.05; LSE, A Guide to Listing on the documents/cadbury.pdf. On leaving Barclays fish spawning grounds and spiritual sites, and London Stock Exchange, 2010, http://www. 21. Vedanta Resources, annual report 2010, p. 65. in 2005, as well as taking the helm at Brinkley, where necessary exclude activities in those londonstockexchange.com/home/guide-to- Holden was instrumental in putting together areas from development. 22. Financial Times, 19 February 2010. listing.pdf. Even basic reporting of company another controversial AIM-listed company,

42 43 Asia Energy, later renamed GCM Resources 59. Forbes magazine, 5 May 2011, http://www. 74. http://www.minesandcommunities.org/article. ‘short changing’ Zambia, paying royalty fees (case study 3.7), of which he is currently non- minesandcommunities.org/article.php?a=10891 php?a=10346 of just 0.6% on production, as opposed to executive chairman. As noted in the Vedanta 60. In 2009, Mr Agarwal also expressed the desire 75. http://www.minesandcommunities.org/article. the 5% to 10% industry average in developing case study (3.5), Anil Agarwal has also played for a public listing of his company’s Indian php?a=10928&l=1 countries. It estimated that in 2006-7 the both roles – a position he defends as in the Zambian Government would have received aluminium subsidiary (VAL) on LSE or 76. A ‘show cause notice’ allows a person or body interests of the company in which he and his another global stock market. However, during mineral royalties of only US$6.1 million from family trust control 62.21% of the equity. See corporate the opportunity to provide evidence KCM, although the company extracted copper the succeeding year he failed to secure Indian as to why an administrative action should not also footnote 18. Government permission to mine bauxite ore worth over US$1 billion. The report quoted be taken against them; ‘India: toxic sludge claims by some of KCM’s subcontracted skilled 43. ‘Congo purge puts Brinkley deal in doubt’, Ben from Orissa’s Niyamigiri mountain and to leak from Vedanta’s red mud pond threatens Laurance, Sunday Times, 20 September 2007. start a fivefold expansion of the neighbouring labourers that they were paid as little as £37 rural communities’, Amnesty International per month when the average Zambian family 44. Ibid. Lanjigarh alumina refinery. These setbacks statement, Delhi, 1 June 2011; http://www. received significant attention in the UK. is judged to require at least £151 per month to 45. ‘Brinkley hits back in DRC uranium fracas’, minesandcommunities.org/article.php?a=9388 meet basic needs. miningmx.com, 18 September 2007. 61. Vedanta’s late-December 2003 LSE IPO was 77. http://www.youtube.com/watch?v=i_8Tp2skbNM the second largest of the year and marked the 92. http://www.minesandcommunities.org/article. 46. ‘Wikileak reveals a uranium scandal’, first time an Indian company was admitted to 78. ‘India: Toxic sludge leak from Vedanta’s red php?a=10613 11 January 2011, http://www. the exchange. mud pond threatens rural communities’, op. cit. 93. Ibid. minesandcommunities.org/article.php?a=10634 62. On 25 May 2011, the US Securities and 79. http://www.youtube.com/watch?v=cwicLF7s1tE 94. http://en.wikipedia.org/wiki/Precautionary_ 47. In the light of Lord Adair Turner’s claim of Exchange Commission (SEC) ‘proposed a 80. http://www.vedantaaluminium.com/location- principle October 2008 that the days of FSA ‘light- rule to deny certain securities offerings from jharsuguda.htm touch regulation’ were over, the following year 95. ‘4 KCM miners die’, Lusaka Times, 29 March qualifying for exemption from registration 81. Design output of the smelter is currently set 2011. Timis acquitted the FSA of being responsible if they involve certain ‘felons and other for damning his Regal scam. He told the at half a million tonnes per annum (mtpa); 96. Undermining Development?, op cit. bad actors’: http://www.sec.gov/news/ however Vedanta’s original plan was for full Evening Standard that the FSA had ‘made a press/2011/2011-115.htm. As of December 97. LMN is grateful to Simon Chambers for full investigation. I spent eighteen hours with operational capacity more than three times this, 2011, the SEC had still not implemented this at 1.75 mtpa. researching much of the material used here; them, answering their questions, and I am in provision of the Dodd-Frank Act – a supposed he visited Korba in early 2011, conducting 82. ‘Petition submitted by Mr Samantara to the the clear.’ But Timis had no such charity for deadline of July 2011 for implementation interviews and examining numerous documents Chairman, Orissa State Pollution Control AIM, saying: ‘Then AIM looked at it and held a having passed without it being fulfilled. which are not available in electronic form. fucking kangaroo court’: Evening Standard, 10 Board, Nilakanthanagar, Bhubaneshwar, Orissa, January 2010. 63. http://www.regjeringen.no/Upload/ June 5 2006 … drawing your attention about 98. Due to the turmoil following the collapse of FIN/Statens%20pensjonsfond/ the chimney, and the destruction of employee 48. Awareness Times, Sierra Leone, 22 July 2005. the illegal construction work undertaken by RecommendationVedanta.pdf; http://www. M/S Vedanta ltd for its proposed smelter plant records (where these existed), no firm figure 49. By 2005, Timis controlled three firms minesandcommunities.org/article.php?a=8260 and captive power plant at Jharsuguda without of the number of victims is likely to be registered in London, though not on the 64. Personal communication from Norwegian getting environmental clearance’: http://www. forthcoming. Pravin Patel, an NGO coordinator London Stock Exchange: Regal Petroleum, Council of Ethics, August 2010. freewebs.com/epgorissa/vedantasmelter.htm in India, visited the site soon after the collapse European Goldfields and Sierra Leone and reported that bulldozers had moved into Diamond Corporation (SLDC), in the last 65. http://www.minesandcommunities.org/article. 83. http://www.minesandcommunities.org/article. the area, clearing and compounding the debris, of which he was the majority shareholder. php?a=8291; http://www.minesandcommunities. php?a=9245 effectively burying any bodies not recovered Timis became the non-executive chairman org/article.php?a=8291. In a quixotic decision, 84. New Indian Express, 23 July 2009. by then. the Indian Supreme Court promptly endorsed of SLDC in 2004, when African Minerals Ltd 85. ‘No pollution clearance, Vedanta runs 10 handing control of the mine project to 99. BALCO was 51% privatised by the Indian was SLDC’s main subsidiary. As of February units’, Priya Ranjan Sahu, Hindustan Times, 9 Vedanta’s Indian-registered subsidiary, Sterlite Government in 2001, the same year the 2009, SLDC was still listed as an operational September 2010. Zambian Government sold the Konkola company, although ownership and management Industries, and the state-owned Orissa Mining Corporation, provided certain conditions were 86. Ibid. Copper Mine to Anglo American, and which had by then (after August 2007) passed into the was acquired by Vedanta three years later. met. 87. http://moneytometal.org/index.php/Zambia_ hands of African Minerals plc. Anil Agarwal’s Sterlite Industries took charge Copper_Investments_Ltd/ZCI; ‘Copper in 50. Financial Times, 19 July 2010. 66. http://www.minesandcommunities.org/article. of BALCO’s previously state-owned assets, Zambia: charity for multinationals’, Khadija php?a=7777 assuming management of the company. In 2007, 51. Financial Times, 19 July 2010. Sharife, Pambazuka, 2 June 2011, http:// 67. http://www.minesandcommunities.org/article. four years after Sterlite had been incorporated Pambazuka.org/en/category/features/73742 52. http://www.african-minerals.com/Corporate/ php?a=7769; http://www.minesandcommunities. as Vedanta Resources, BALCO began sacking Operations/Tonkolili_Iron_Ore_Project/default. org/article.php?a=7773 88. The Limitations of Corporate Social Responsibility former employees and resorted to employing aspx?id=726 on Zambia’s Copperbelt, Patricia Feeney, 68. The vociferous presence of Kondh contracted labour. A report published that year Oxfam, November 2001, http://www. 53. ‘Merely empty promises?’, 17 December 2010, representatives and their Indian and UK by Delhi’s respected V.V. Giri National Labour minesandcommunities.org/article.php?a=244. http://www.madam-sl.org/?Projects:Right_ supporters at successive London AGMs of Institute found that, under Vedanta/Sterlite’s Patricia Feeney is now Executive Director to_Food; ‘Massive iron ore project brings the company played a significant role in control, BALCO had failed to honour virtually of RAID (Rights and Accountability in mining tensions back to Sierra Leone’, Paige highlighting its unacceptable activities in all the undertakings made previously to its Development, an Oxford-based research and McClanahan, Christian Science Monitor,12 Orissa. labour force: http://www.minesandcommunities. December 2010; ‘After diamonds, iron foments advocacy NGO). org/article.php?a=3876 69. ‘GUILTY: UK government blasts Vedanta in Sierra Leone tensions’, Simon Akam, Reuters, 8 89. ‘Zambia: KCM negligence blamed for unprecedented attack’, Survival international 100. http://www.minesandcommunities.org/article. December 2010. Kafue river pollution’, Times of Zambia press release, 12 September 2009. php?a=9501 (Ndola), 15 November 2006; http://www. 54. Hemscott Premium, accessed 12 April 2011. 101. BALCO apparently did not keep its own 70. http://www.minesandcommunities.org/article.p minesandcommunities.org/article.php?a=7489 55. Dow Jones Newswires, 24 February 2011. hp?a=9543&highlight=Survival,International records of the subcontracted labourers. This, in 56. ‘After diamonds, iron foments Sierra Leone 90. For Whom the Windfalls: Winners & Losers in the itself, is a matter of concern. Under Indian law 71. http://www.amnesty.org.uk/uploads/documents/ Privatisation of Zambia’s Copper Mines, 2007, a company that hires a subcontracting firm is tensions’, Simon Akam, Reuters, 8 December doc_20144.pdf 2010. http://www.liberationafrique.org/IMG/pdf/ also accountable for the behaviour of that firm 72. India’s Forest Conservation Act, Forest Rights Minewatchzambia.pdf in regard to the treatment of its employees. 57. Mining Journal, 22 October 2010. Act and Environment Protection Act. 91. Undermining Development? Copper Mining in 102. Chairman’s statement, Vedanta Resources 58. http://www.minesandcommunities.org/article. 73. http://www.minesandcommunities.org/article. Zambia, joint report by ACTSA (Action for annual report 2010, p. 9. php?a=10732 php?a=10322 Southern Africa), Christian Aid and SCIAF, 29 October 2007. The NGOs accused KCM of

44 45 103. http://www.minesandcommunities.org/article. oversight’. The UK’s largest insurance provider, of $560 million. Kalmin, who worked as a Berne Declaration (Switzerland) and l’Entraide php?a=9500 Aviva, responded to PIRC’s call at Vedanta’s commodities trader in Sydney before heading Missionnaire (Canada). 104. This summons was issued against the ‘owner of 2010 AGM by voting against resolutions on for Switzerland in 2003, was appointed chief 132. Ibid. accepting the annual report and accounts financial officer two years ago.’ Bharat Aluminium Company Limited (BALCO) 133. ‘Contrats, droits humains et fiscalité: comment and others’. J.N. Chandra, deputy director of and the remuneration report, and on the 120. Money Morning, 18 May 2011. reappointment of Naresh Chandra as chair of une entreprise dépouille un pays. Le cas de prosecution, representing the Chhattisgarh 121. Business Spectator, 17 May 2011. Glencore en République Démocratique du Government, said: ‘The order does not the health, safety and environment committee: Reuters, 23 July 2010. 122. The Times, 19 May 2011. Congo’ (‘Contracts, human rights and taxation: mention the owner’s name since the company’s how a company exploits a country. The case ownership deed was not available to the court, 112. http://www.minesandcommunities.org/article. 123. Ibid. of Glencore in the Democratic Republic of but it is well known that the owner of BALCO php?a=9871 124. Colombia’s President Alvaro Uribe Congo’), Bread for All / Catholic Lenten is Anil Agarwal, the London-based chairman 113. A group of European NGOs organised a one- responded by ordering high-level officials Fund, March 2011, http://www.brotfueralle. of Vedanta group.’ According to a report in The day seminar for investors in Vedanta at Amnesty of the ministries of Environment and Social ch/fileadmin/deutsch/2_Entwicklungpolitik_ Times of India, 31 October 2010, ‘other legal International UK’s London offices on 22 Protection to visit the area and ‘take charge allgemein/C_Wirtschaft%20und%20MR/study_ experts suggested the ownership could be September 2009. Investors were invited to hear of the issues that each are responsible for’. glencore_summary.pdf; the complete study is vested in the board of directors and not the personal testimony about much of the evidence A civil society statement issued by labour, only available in French. chairman alone’. of the company’s violations contained in this social and human rights organisations on 10 134. ‘Glencore accused of rights abuses in DR 105. Dow Jones Newswire, 23 September 2009. case study. Around nine leading funds and February 2007 denounced the attacks and Congo’, Stefania Summermatter, Swissinfo.ch, 106. Headlined ‘Incident at the BALCO banks were represented. Vedanta was invited by called on Glencore to immediately desist from 12 March 2011. construction site’, the note read: ‘Vedanta letter and in several phone calls to attend and ‘contaminating’ the area and from contributing to respond to the presentations. The company to an increase in respiratory diseases among 135. Guardian, 1 November 2009; The Times, 28 Resources plc’s subsidiary Sterlite Industries October 2009. India Limited (‘Sterlite’) regrets to announce did not deign to reply, marking yet another the local population, including workers: that a power plant chimney under construction occasion on which it has been discourteous ‘Reparos a un megaproyecto carbonífero de 136. In These Times, 22 December 2010; http://www. at BALCO, Korba collapsed today. The chimney and dismissive towards its critics. Our report Drummond en Cesar’, Herminso Ruiz, El gaucherepublicaine.org/lettres/respublica_ was being constructed by Gannon Dunkerley has already noted a similar attitude displayed Espectador, 10 February 2007, http://www. lettre-655.htm & Co. Ltd for the 1,200 MW CPP, associated by Vedanta to the UK Government’s OECD elespectador.com/elespectador; also http://www. 137. The UK Corporate Governance Code was with the 325 ktpa aluminium smelter project. National Contact Point, just two weeks before; minesandcommunities.org/article.php?a=150 updated and changed in eight ‘key respects’ The relief and rescue operations are in full and its failure to respond in any meaningful 125. This mine is owned by Glencore Finance in early 2011. The changes include: that swing with the involvement of the company fashion to the accusations against it contained (Bermuda). The local branch of the Union a company board be now responsible for and the government resources. Activities in the Norwegian Council of Ethics 2007 report. of Mine and Metals Workers claimed on 22 determining ‘the nature and extent of the in the particular area were temporarily 114. On 23 May 2011, BHP Billiton’s market September 2007 that ‘some 190 workers work significant risks it is willing to take in achieving suspended, while the existing operations capitalisation was £127 billion, Rio Tinto’s directly for the company and another 900 work its strategic objectives’; ‘more emphasis on the remain unaffected. A probable reason for the £78.76 billion, Xstrata’s £40 billion and Anglo through the contracting companies … the role of chairman’; an ‘enhanced role for the incident appears to be the excessive rains and American’s £34 billion. company has unilaterally applied unusual work senior independent director’; that ‘Diversity, lightning at Korba. The exact cause for this will 115. http://www.bbc.co.uk/news/business-16907816 shifts of 14 x 7 (fourteen days straight working including gender … be taken into account however be ascertained only after a detailed twelve hour shifts and then seven days rest). for new board appointments’; and that there investigation is concluded’: RNS No. 5734Z, 116. Reuters, 13 June 2011; CITY AM, 14 June 2011. The workers must share rooms and beds [and] be ‘externally facilitated evaluations of the Vedanta Resources, LSE, 23 September 2009. 117. Thomson Reuters, International Financing work in the mine under insecure conditions.’ board at least every three years for FTSE 350 107. Vedanta Resources, annual report 2010, p. 9. Review, 19 May 2011. The union stated that the population of La companies’: http://www.grant-thornton.co.uk/ Jagua de Iberico-Cesar ‘has for several years pdf/corporate_governance.pdf 108. A search of the BSC’s website reveals no 118. Reuters, 23 May 2011. Aviva also voted against three resolutions at Vedanta’s 2010 AGM: on been suffering from contamination produced 138. Financial Times, 15 April 2011. information about either award. The second by mining operations and transport of coal in was almost certainly made to one of two accepting the annual report and accounts, 139. ‘Investors out of Phulbari’, 19 October on the remuneration report, and on the the mines of Glencore A.G. and Drummond functioning BALCO captive power plants at … and from unemployment, pulmonary 2011, http://accountabilityproject.org/article. Korba, not to the plant under construction reappointment of the board member chairing php?id=668, on which this case study is based. the health, safety and environment committee. illnesses of children, misery and the military- when the September 2009 deaths occurred. paramilitary presence … Because of this, two Led by experienced advocates, the International Aviva’s representative, Steve Waygood, insisted Accountability Project includes among its 109. Observer, 29 August 2010. The newspaper that the board should ‘open up lines of days ago the residents decided to carry out a recorded that, among the FTSE 100-listed peaceful protest to block the roads which enter funders the Open Society Institute, the Sigrid communication with investors and begin a Rausing Trust and the Wallace Global Fund. mining companies, Vedanta was responsible for dialogue with organisations that raise important and exit the town.’ by far the highest number of workplace deaths matters of social and corporate governance’: 126. The Times, 19 May 2011. 140. ‘Bangladesh: broken promises from government (67), followed by Anglo American with 20, to halt RAB killings’, May 2011, http://www. Guardian, 28 July 2010. See also Vedanta, case 127. Ibid. Kazakhmys with 17 and ENRC with 12: http:// study 3.5. hrw.org/news/2011/05/10/bangladesh-broken- www.minesandcommunities.org/article.php?a 128. The Times, 20 May 2011. promises-government-halt-rab-killings; 119. Those principally profiting from Glencore’s =10358&highlight=British,Safety,Council. The 129. Guardian, 20 May 2011. ‘Bangladesh: UK-trained security forces must deaths continue: in November 2011 a contract newly tapped capital (primarily as a result of stop extrajudicial executions’, January 2011, 130. MCM is 73.1% owned by British Virgin worker died, and another was seriously injured, the London IPO) are its 485 owner-partners http://www.amnesty.org.uk/news_details. Islands-based Carlisa Investments, itself after being sucked into a duct at Vedanta’s and 2,700 associated traders. In theory the asp?NewsID=19210 81.2% owned by Bermuda-based Glencore highly polluting Tuticorin (Thoothukudi) partners are restricted from cashing out their Finance, a 100%-owned subsidiary of Glencore 141. Equator Principles, ‘a financial industry copper smelter in Tamil Nadu: http://www. shares for another five years. In the meantime, Switzerland. State-owned ZCCM owns 10%: benchmark for determining, assessing and minesandcommunities.org/article.php?a=11313. thanks to the flotation, several of them have become overnight millionaires, while CEO ‘Copper in Zambia: charity for multinationals’, managing social and environmental risk 110. ‘Hey they are only workers, have an award’, Ivan Glasenberg’s private wealth was valued Pambazuka, Issue 532, 2 June 2011, http:// in project financing’, http://www.equator- Hazards magazine, ITUC, Brussels, 3 September at $8.8 billion according to a survey by Pambazuka.org/en/category/features/73742 principles.com; GCM and the Bangladesh 2010. Australia’s Business Review Weekly in early May: Government have equally failed to respect 131. ‘Five NGOs file a complaint against Glencore and protect indigenous communities’ right to 111. Dow Jones Newswires, 20 July 2010. PIRC also http://www.minesandcommunities.org/article. International AG and First Quantum found that Vedanta’s failure ‘to engage with php?a=10948. Australia’s Business Spectator of free, prior and informed consent under the Minerals for violation of OECD guidelines’, UN Declaration on the Rights of Indigenous explicit investor led concerns over the impact 27 May 2011 noted that Glasenberg’s ‘right- MiningWatch Canada press release, 12 April of group activities on the Niyamgiri region’ was hand-man, Steven Kalmin, has … rocketed Peoples. For GCM’s stated policies, see http:// 2011, along with SHERPA (France), Center www.gcmplc.com/corporate-responsibility. evidence of the company’s ‘lack of competent onto the [Australian] rich list with a fortune for Trade Policy and Development (Zambia),

46 47 142. ‘Cultural Survival’s letter to GCM Resources’, a private company so that the private company 166. ‘King Nat’s mines’, Financial Times, 14 January January 2011, http://www.culturalsurvival.org/ can bypass the lengthy and complex process 2011, http://www.ft.com/cms/s/2/3a8cd690-1ebd- node/9711 of going public’, http://en.wikipedia.org/wiki/ 11e0-a1d1-00144feab49a.html#axzz1fbdKC1JW 143. ‘Investors out of Phulbari’, 19 October Reverse_takeover. 167. A precise breakdown of the original deal 2011, http://accountabilityproject.org/article. 154. A shell company ‘serves as a vehicle for is available on the IPO prospectus. One php?id=668 business transactions without itself having other major component to Bumi plc is the 144. Environmental and Social Impact Assessment any significant assets or operations’, http:// incorporation of PT Berau Coal, another (ESIA, Vol. 1, Chapter 8: 63), cited by Roger en.wikipedia.org/wiki/Shell_corporation sizeable Indonesian coal company, into the deal: Moody (2008: 73), “Phulbari Coal: a Parlous 155. For background on international links http://www.downtoearth-indonesia.org/story/ Project,” in Phulbari Coal Project: Studies on to Indonesian coal and the Bakries, see deadly-coal-coal-exploitation-and-kalimantans- Displacement, Resettlement, Environmental ‘Corruption, collusion and nepotism’, Down to blighted-generation and Social Impact, Samhati Publications, Earth, August 2010, http://www.downtoearth- 168. ‘London Stock Exchange welcomes Bumi Plc Dhaka, Bangladesh. (See also http://www. indonesia.org/story/corruption-collusion-and- to the Main Market’, LSE press release, 28 June accountabilityproject.org/downloads/ nepotism 2011, http://www.londonstockexchange.com/ PhulbariCoal_ParalousProject_Nov08.pdf) 156. ‘Indra Bakrie lauds Bumi’s London move’, about-the-exchange/media-relations/press- 145. http://www.accountabilityproject.org/ Jakarta Globe, 19 November 2010, http://www. releases/2011/bumiplc.htm downloads/Summary%20of%20Expert%20 thejakartaglobe.com/bisindonesia/indra-bakrie- 169. ‘Rothschild calls for clean-up at PT Bumi’, Committee%20Report.pdf lauds-bumis-london-move/407530#Scene_1 Financial Times, 9 November 2011, http://www. 146. ‘Investors out of Phulbari’, 19 October 157. The Bakries’ principal mining company is Bumi ft.com/cms/s/0/05e43ebc-0afb-11e1-b62f- 2011, http://accountabilityproject.org/article. Resources, owner of the huge Kaltim Prima 00144feabdc0.html#axzz1feq45hNp php?id=668 Coal mine in East Kalimantan; for more on this 170. ‘Rothschild raises stake in coal venture Bumi’, 147. On acid mine drainage, see Roger Moody, and the Indonesian coal industry, see http:// Reuters, 17 November 2011, http://uk.reuters. “Phulbari Coal: a Parlous Project,” in www.downtoearth-indonesia.org/campaign/coal com/article/2011/11/17/uk-bumi-rothschild- Phulbari Coal Project: Studies on Displacement, 158. Estimates of the numbers of people affected idUKTRE7AG2DA20111117 Resettlement, Environmental and Social Impact, have varied enormously; figures quoted 171. ‘Politics and business mix in Indonesia’, Asia Samhati Publications, Dhaka, Bangladesh, here are from a 2010 University of Durham Times, 22 July 2006, http://www.atimes.com/ pp 76-78. On potential desertification of the report that blamed drilling as the cause of atimes/Southeast_Asia/HG22Ae01.html northwest, see AKM Shamsuddin, “Phulbari the mud-volcano: ‘Geologists say drilling 172. ‘Debt for Indonesia’s Bakrie Group is business Coal: Hydrogeological environment not caused Indonesian mud volcano’, CBC News, 3 as usual’, Reuters, 12 November 2011, http:// favourable for open pit mining,” The Daily Star, November 2008, http://www.cbc.ca/technology/ www.reuters.com/article/2011/11/13/us-bakrie- September 29, 2007 at http://www.thedailystar. story/2008/11/03/mud-drilling.html; ‘Indonesia rothschild-debt-idUSTRE7AC00E20111113 net/newDesign/news-details.php?nid=5811 mud disaster caused by human error: study’, and AKM Shamsuddin, Pitfalls of open-pit Jakarta Globe, 13 February 2010, http://www. 173. ‘Bakrie coal mining partnership turns mining,” The Daily Star, May 23, 2010 at http:// thejakartaglobe.com/home/lapindo-disaster- sour’, Jakarta Globe, 25 November 2011, www.thedailystar.net/newDesign/news-details. caused-by-human-error-study/358242 http://www.thejakartaglobe.com/business/ php?nid=139587. bakrie-coal-mining-partnership-turns- 159. http://www.downtoearth-indonesia.org/ sour/480788#Scene_1, comment 3.55pm, 26 148. The ‘nearly 50,000’ figure is fromResettlement campaign/coal November 2011 Plan for Asia Energy’s Phulbari Coal Project, 160. ‘State capture: how Bakrie group dodges the Asian Development Bank and Asia Energy, 174. ‘City relaxes its rules to attract the mega deals’, bullet again’, Jakarta Globe, 30 July 2010, http:// Sunday Times, 30 October 2011. December 2006. This source (p. 4-11 and Table www.thejakartapost.com/news/2010/07/30/state- 4-7) states that the project will displace 49,478 capture-how-bakrie-group-dodges-bullet-again. people and 11,247 households. The figure on html 220,000 people who may lose their access to water, with unknown displacement impacts, is 161. ‘Exit Sri Mulyani: corruption and reform in from the Summary of the Expert Committee Indonesia’, East Asia Forum, 9 May 2010, http:// Report, p. 9. The 40,000 figure is currently www.eastasiaforum.org/2010/05/09/exit-sri- posted on GCM’s website at http://www.gcmplc. mulyani-corruption-and-reform-in-indonesia/ com/resettlement. 162. ‘Indonesia’s Bakrie grabs new post’, 149. Summary of the Report of the Expert Committee Asian Correspondent, 12 May 2010, (REC) to Evaluate Feasibility Study Report and http://asiancorrespondent.com/32242/ Scheme of Development of the Phulbari Coal indonesia%e2%80%99s-bakrie-grabs-new-post/ Project, 2007, http://protectresourcesbd.org/ 163. ‘Bakrie coal mining partnership turns article_pdf/2011013124.pdf sour’, Jakarta Globe, 25 November 2011, 150. ‘Bangladesh Govt report which terms Phulbari http://www.thejakartaglobe.com/business/ deal illegal goes missing’, 14 March 2009, http:// bakrie-coal-mining-partnership-turns- www.energybangla.com/index.php?mod=article sour/480788#Scene_1 &cat=CoalSector&article=1644 164. Indonesia’s Coal: Local Impacts – Global Links, 151. Summary of the Report of the Expert Committee, Down to Earth newsletter special issue, August op. cit. 2010, http://www.downtoearth-indonesia.org/ sites/downtoearth-indonesia.org/files/85-86.pdf 152. OMCT action file, ‘Bangladesh: Risk of violent suppression of public opposition to 165. ‘Rothschild plays strongest suit with coal the Phulbari Coal Mine Project, Dinajpur mining deal’, Bloomberg, 1 December 2010, District, Bangladesh’, http://old.omct.org/pdf/ http://www.bloomberg.com/news/2010-12-01/ ESCR/2007/BGD_211207_ESCR.pdf nat-rothschild-plays-his-strongest-suit-with-3- billion-commodities-deal.html 153. A reverse takeover or reverse merger (reverse IPO) is ‘the acquisition of a public company by

48 49 Acknowledgements

Case studies 3.1 – 3.6 in this report were provided by Roger Moody of Nostromo Research. The GCM Resources case study (3.7) is based on material from International Accountability Project (IAP), with assistance from Kate Hoshour of IAP. The Bumi case study (3.8) was provided by Andrew Hickman of Down to Earth. Additional comment was provided by Richard Harkinson. The report was edited by Miles Litvinoff.

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