UK mining companies complicit in abuse of poor - Xstrata, BHP Billiton, Rio Tinto, Vedanta Resources accused.

[Tuesday 20 November 2007] British mining corporations supported by the UK government, such as Vedanta Resources, Rio Tinto and BHP Billiton, are complicit in human rights abuse while making huge profits in developing countries.

This charge is made today by the anti-poverty charity War on Want in a report which attacks these and other UK companies for fuelling conflict and violence against vulnerable people. War on Want launched the report, Fanning the Flames, as the Mines and Money World Congress for the booming industry opens in London today.

Ruth Tanner, senior campaigns officer at War on Want, said: "The British government has championed the cause of UK mining firms across the world. Yet the industry is complicit in a range of human rights abuses and is profiting at the expense of the poor. It is time for the British government to take action to stop these abuses."

The report is launched in the wake of the Norwegian government's decision to drop Vedanta from its global pension fund due to "systematic" environmental and human rights failures. Vedanta's bid for mining rights in the Indian state of Orissa faces mounting opposition from thousands of Dongaria Kandha tribal people who fear the company's plans will damage the fragile ecosystem of the Niyamgiri mountain forest, on which they depend for their livelihoods. According to the report, the Indian Supreme Court heard evidence that people forced to leave their villages to make way for the refinery were beaten.

Dandu Sikaka, a Dongaria tribal woman, said: "How will we survive without Niyamgiri, the mountain? Our streams will dry up. If they mine, it will become a disaster. We will all die if you dig out our forest."

The report pinpoints other Vedanta involvement in abuse in India. At Mettur in Tamil Nadu, the company is accused of seizing land, with discharge from its aluminium plant poisoning farm soil, contaminating water and killing animals, and emissions from the plant and coal-fired power station causing severe health problems for local people. One non-governmental investigation found that male bauxite workers at Mainpat in Chhattisgarh state earned just over 60 rupees, about 80p, for delivering one tonne of ore, with women paid even less. The workers live in small thatched hovels perched over the quarry, denied electricity and adequate water.

Last year Rio Tinto earned $122 million from its stake in the Grasberg gold and copper mine in West Papua, Indonesia, where local people have suffered years of serious human rights and environmental abuse.

BHP Billiton is pressing for new mining opportunities in the Philippines, despite a wave of murders and other human rights violations linked to the extractive industry.

In addition the report cites abuse surrounding operations by UK mining companies Anglo American, Oxus Gold, Global Coal Management, Monterrico Metals and Xstrata in countries such as South Africa, Papua New Guinea, Bangladesh, Peru, Zambia and Colombia.

Here is the full article.

Why China fears the BHP Billiton / Rio Tinto Merger

BANGKOK -- BHP Billiton's bid for rival resources giant Rio Tinto shows how Western mining companies are increasing their clout as the world's commodity boom marches on, a trend that is in stark contrast to developments in the global oil business and one that could put China -- Asia's biggest and fastest-growing minerals consumer -- in a bind.

For all of their big profits, Western oil companies have seen their long-term prospects dim in recent years. That's because much of the world's remaining oil is controlled by foreign governments, which are tightening their grip on supplies even as it gets harder to find new deposits. The national oil companies and governments of countries such as Saudi Arabia and Venezuela have seen their influence grow, often at the expense of the West, as oil prices soar.

The opposite is true in mining, which increasingly is dominated by a handful of Western, publicly traded companies that are consolidating to create global supply juggernauts. BHP Billiton, Rio Tinto, Companhia Vale do Rio Doce of Brazil and Anglo American PLC of the U.K. control many of the world's biggest mines -- notably in Australia, Chile and Canada. And Western capital is funding much of the exploration needed to add supplies in the years ahead.

The trend enhances the earnings potential of Western mining companies. But it also complicates the economic outlook for resource-hungry economies, particularly China's, where high demand has helped drive the global commodity boom.

"A BHP-Rio Tinto merger could cause commodity prices to remain stronger through greater supply discipline and reduced competition for market share amongst the major mining houses," John Meyer, a resources analyst at investment bank Fairfax IS in London, wrote in a note to clients on Friday. If these Western companies move slowly to expand output -- as they have to date during the current commodity boom -- it could put China and other big metals consumers at a disadvantage.

Western market dominance is most pronounced in iron ore, with three companies -- BHP, Rio and CVRD -- controlling roughly 75% of international trade. The companies are also strong players in copper, coal and some other commodities. BHP and Rio already own more than 85% of the world's largest copper mine, the Escondida deposit in Chile, and Western companies are behind the development of many of the largest new sources of nickel, copper and iron ore.

(This is the driving force behind China's hydroelectric project in Gabon, Africa: Chinese 3.5 Billion “Hydroelectric – Iron Mine” complex slated for Africa’s Gabon National Park )

China is especially vulnerable in the case of coal. Although domestic mining companies produce enormous quantities of the commodity, they haven't always kept pace with China's rocketing demand. Earlier this year, the country became a net coal importer, helping push prices to record highs. Unlike oil supplies, much of the coal that China could tap is produced by Western outfits, including BHP.

Here is the full article.

Chinese National Bank buys shares in Rio Tinto Group after BHP Billiton bid

Sunday Telegraph, a London newspaper, reported the CDB had bought less than 1% in Rio Tinto, a tiny stake but significant owing to BHP Billiton's earlier three for one shares offer. The Sunday Telegraph did not name its source.

And in a report by The Times, BHP Billiton is said to be preparing the sale of its petroleum arm to either Chinese or other buyers for at least $40bn, funds that would be used to finance the takeover of Rio Tinto.

"It is the first time a Chinese state-backed group has taken a direct stake in a global miner and will fuel speculation that China may intervene in the bid battle," the Sunday Telegraph said.

Tom Albanese, Rio Tinto's CEO, was on a trip to China, arranged before BHP Billiton's bid was made public.

Rio Tinto's share price rocketed up by a third on November 8 after BHP Billiton confirmed market speculation it had approached Rio to combine their assets worth an estimated $350bn.

A combined company would have iron output similar to that of world number one CVRD and would be in a similar position with copper, rivalling Chile's Codelco for the number one spot. This would be negative for China, which consumes about half of the world's iron ore, because it would given the combined company huge pricing power.
Already, iron ore prices have increased by double digits every year for the last four years and are tipped to increase by 20% plus in current contract negotiations effective from April.

Quoting an Investec report from earlier this year, Miningmx said one possible takeover scenario for Rio Tinto would see the Japanese and Chinese participate in the business. The diversified mining business would retain overall management control, Investec said.

China's efforts to secure its own sources of raw materials are well known with some $5bn in trade surplus earmarked for African investment.

Standard Bank and Industrial & Commercial Bank of China Limited (ICBC), China’s biggest bank by market capitalisation, were planning to set up a global resource fund to target investment in mining, metals, oil and gas, projects, and associated industries anywhere in the world.

Here is the full article.

BHP Billiton's Rio Tinto offer will give BHP a 90% share of Chile's Escondita copper mine, the world's largest

Nov. 8 (Bloomberg) -- BHP Billiton Ltd., the world's biggest mining company, plans to pursue a takeover of Rio Tinto Group after an earlier approach was rejected, in what may become the largest acquisition in history.

A purchase of Rio Tinto, which has a market value of $165 billion, would create a company that controls more than a third of the iron-ore market, supplies the most energy coal and copper, and owns mines and oilfields in six continents. Rio is the third-largest miner behind BHP and Anglo American Plc.

``If the name of the game at the moment is resources in the ground, then why pussyfoot with junior or medium-size miners when you can go to the top?'' said Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe in London. ``This deal will happen, it's just a question of time.''

Rio stock jumped as much as 32 percent in London trading as the company rejected BHP's offer of three shares for each one in Rio. BHP, based in Melbourne and led by Chief Executive Officer Marius Kloppers, said in a statement to the Regulatory News Service it ``recently'' wrote to Rio's board with the outline plan. BHP shares in London slipped as much as 4 percent.

``It significantly undervalues Rio Tinto and its prospects,'' Rio, which has a dual listing in London and Sydney, said in a separate statement. ``The boards have unanimously rejected the proposal as not being in the best interests of shareholders.''

Stock Climbs

Rio Tinto shares rose as high as 5,740 pence, a record, and traded up 23 percent at 5,372 pence as of 2:40 p.m. in London.

A successful bid may eclipse the two biggest takeovers -- America Online Inc.'s purchase of Time Warner Inc., and Vodafone AirTouch Plc's acquisition of Mannesmann AG. For all of 2006, there were 1,145 deals in the mining industry, valued at $176.5 billion.

The combination would raise antitrust issues, particularly in the iron-ore market, said Charles Bailey, an analyst at Brewin Dolphin Securities in London. BHP, Rio and Brazil's Cia. Vale do Rio Doce control about 80 percent of the seaborne trade in the ore.

Rio, the world's second-largest iron-ore exporter after Vale, may now decide it's better to try to combine with its Brazilian rival, according to Ian Henderson at JP Morgan Asset Management in London.

Vale Partner?

``I can't conceive a competing bid from another company coming through,'' Henderson, who manages $7 billion in natural- resource assets, said in a phone interview. ``Rio and Cia. Vale do Rio Doce may throw their arms around one another instead.''

Vale spokesman Fernando Thompson declined to comment.

The offer sparked a rally in mining shares. The only stock in the nine-member Bloomberg Europe Metals and Mining Index to decline so far today is BHP. Anglo American rose 12 percent, Xstrata Plc climbed 11 percent and Lonmin Plc added 8 percent.

``The bid proves that the consolidation in the mining industry is far from over,'' Christer Fredriksson, an analyst at ABG Sundal Collier in Stockholm, said in a note to investors.

A combination of BHP and Rio would include assets such as a stake in Chile's Escondida, the world's largest copper mine(Rio Tinto owns 30%), and the world's second-biggest uranium producer in Australia. The company also would have assets in aluminum, diamonds, silver, lead and nickel.

Here is the full story.

Kyoto ratification crucial in Australian plans for Chile hydro-development – Carbon Offsets purchased in Europe critical to dam construction.

SELLING INDULGENCES: The Kyoto Treaty may have failed to curb the world's carbon emissions but its Clean Development Mechanism still has substantial value to Australian mining and hydroelectric corporations.

Excerpted:

Coalition victory a Chile thought for Kyoto

PACIFIC HYDRO chief executive Rob Grant has good reason to sweat on the prospect of a Labor victory next month. It's a $200 million hydro-electric project the company wants to build in Chile next year. (More about La Confulencia Project here.)

But unless Australia ratifies the Kyoto protocol very soon, it will be very hard for an Australian-based company like Pacific Hydro to qualify for the carbon credits available under the Kyoto scheme. That's a big loss -- given that he expects to earn at least $2-3 million a year from selling these credits on to the European market.

"The timing of it is critical," he says. "If Labor gets in and ratifies Kyoto, it won't be a problem. If Labor loses, we will have to do some serious thinking about what our options are."

Underneath the fevered political rhetoric about climate change in the future, Grant's dilemma represents the complicated reality of doing business for Australian companies right now, particularly in the renewable energy sector.

Plenty are already trying to adjust to the prospect of operating in a global environment where carbon emissions cost real money.

But the Government's refusal to sign the protocol means that it is more difficult for businesses like Pacific Hydro to financially leverage their advantages, either nationally or internationally, in providing alternative energy sources, such as water or wind.

And it also means relatively few Australian companies have had practice in the confusing world of emissions trading that is already well under way and is certain to quickly grow.

This Kyoto system means, for example, that investments by companies based in developed countries can apply for a form of carbon credits for emission reducing projects in developing countries. In the arcane world of Kyoto terminology, it's called the clean* development mechanism (CDM).

*(Clean apparently does not mean the environment: False Environmental Impact Statements induce Regional Environment Commission to Implement Fines. )

Not only are these credits worth cash to companies, the reduction in carbon emissions as a result of the project would also count towards meeting the home country's emission targets. Australian companies have tried to get around this by operating joint ventures. Pacific Hydro, for example, has taken this route with its other hydro projects in Fiji and Chile (With SN Power of Norway on the Tinguiririca River). But now that it wants to own 100 per cent of a new project, it is unlikely to be officially eligible in the absence of Australian ratification.

Nor do similar emission reduction projects in Australia currently qualify either -- whether built by Australian or other international companies. The reason is basically the same. No Kyoto ratification from a government, no internationally recognised -- and internationally tradable -- credits for a company. That goes straight to the bottom line.
------------------

Both Labor and Liberals are now promising to ratify a new international agreement -- as long as developing countries also make commitments to reducing their emissions.

This omission was always the fatal flaw of the 1997 Kyoto protocol and ensured that global emissions have only continued to rise -- and will rapidly accelerate -- no matter what targets the developed countries agreed to a decade ago. And getting agreement on what those future targets should be for everyone will take years of bitter diplomatic negotiations with no guarantees of success.

But leave that wrangling to the various governments. What has been little appreciated in Australia has been the changes going on in the market already, often in advance of the politics. Business often needs certainty and notice of changes in order to plan long-term projects. That's one reason why the Business Council of Australia finally moved a year ago into supporting the idea of developing an emissions trading scheme. After years of resistance, the Prime Minister seized on this shift to start moving too.

But the other issue is whether and how much Australian companies have been affected by not being part of the Kyoto scheme over the last couple of years.

The Prime Minister has always maintained that he would not damage Australian business or jobs by committing Australia to meeting its Kyoto targets while trading partners remained outside. But that logic has evaporated as it has become clear Australia would meet its 2012 targets anyway, even if this is largely due to a reduction in land clearing in Queensland.

On the other side, a study for the Australian Conservation Foundation says that the failure to ratify Kyoto has cost Australia $3.8 billion a year. It argues that $1.24 billion of that is in lost opportunities associated with emission reduction projects in Australia, $2.38 billion through the clean development mechanism in developing countries and $180 million in carbon credit transactions.

Those figures will always be open to dispute and extremely difficult to quantify. But Tony Beck, chairman of the Australasian Emissions Trading Forum and a consultant with Allens, says there is no doubt that Australia has been excluded from the Kyoto system to its cost.

"The international markets are opening up and we're standing on the sidelines," he says. "It is theoretically possible for major Australian companies to work around the restrictions but we are not part of a network that facilitates that, particularly for smaller companies.

"There are over 700 projects approved in developing countries under the Clean Development Mechanism and we should be a natural leader but our market share is negligible.

"We could also have expected to sell environmental credits to countries like Europe and Japan and Canada but that area of trade is cut off from us."

--------------------

BHP Billiton, for example, has a trial operating at its London office where it staples credits to coal deliveries for some customers. (Similar to the one implemented by the Norwegian Government, no doubt.)

Ian Wood, vice-president of community relations, says the company's participation in the European emissions trading system has been an extremely valuable way to get experience for the organisation.

"It's clear we are moving into an era where emissions trading will become a normal part of the operating environment," he says.

The global market is dominated by the European Union's Emissions Trading Scheme, which began operating in 2005 and recorded trading worth over $30 billion last year. Prices of credits fell dramatically due to an initial oversupply of permits but have now rebounded sharply to be worth around $30 a tonne of emissions. Japan has been a big buyer with demand expected to increase.

Here is the full article.