Anglo under heavy fire
Published by MAC on 2007-04-22
Anglo under heavy fire
22nd April 2007
As the world's fourth largest mining company (by market capitalisation), Anglo American is clearly a force to be reckoned with. - And so it was at this year's annual shareholders' meeting, held in London on April 17, when community representatives from South Africa and the Phillipines mounted a concerted attack on the company's policies and practices.
But these aren't the only quarters from which the attacks are coming (it's up against community critics in Ghana, Colombia and elsewhere). Nor are these the only threats it faces.Speculation has been increasing in recent weeks that Anglo's rivals in the top mining stakes may soon mount a takeover bid.
And Xstrata looks to be the most likely bidder.
Fresh allegations tarnish glittering year for Anglo
It may have made $9bn profit, but the metals mining group stands accused of some base practices, reports Nick Mathiason
The Observer (UK) 22 April 2007
Within the rarefied confines of the Royal Society off Pall Mall in central London last Tuesday, the mood was celebratory. At the home of British science, Anglo American's bosses were regaling shareholders at its annual general meeting with the good news that the world's third-largest mining firm had just enjoyed an 'exceptional' year.
Rocketing commodity prices enabled the firm, inextricably linked with apartheid South Africa, to make record-breaking revenues of £16bn, generating £5bn in pre-tax profits - another all-time high. This allowed the London-listed giant to return a special windfall to shareholders as well as a record dividend.
But campaigners flew in from South Africa and the Philippines to outline concerns which threaten to undermine Anglo's newly won image.Despite the attendence of these spectres at the feast 'The mood was annoyingly self-congratulatory,' said one of the shareholders. And why not? After all, if ever there was a vindication of the strategy put in place by chairman Sir Mark Moody-Stuart, these results were it. The 66-year-old Antiguan-born corporate veteran won his spurs by rehabilitating Shell's battered reputation while he was chairman in the 1990s. Moody-Stuart steadied the oil giant after it was fiercely criticised for its part in the execution of Nigerian Ken Saro Wiwa and eight other activists after they protested against the poisoning of the Niger Delta oil lands.
It was to Moody-Stuart that Anglo American turned in 2002 as it sought a similar rehabilitation. Anglo executives knew which way the wind was blowing. They reached out to ANC leaders well before the apartheid regime fell, and realised that it had to talk the language of community and cohesion with governments if it was to win lucrative licences. Without this and a listing in London, close to northern hemisphere decision-makers and capital, the multi-billion-dollar opportunity that globalisation offered would pass Anglo by.
The strategy worked. Moody-Stuart is feted as a leader of the corporate social responsibility movement. He is convinced that big business can eradicate poverty. A 70-page sustainability document showcases its community projects, including school programmes and free anti-retroviral drugs for workers to combat HIV.
But as the protesters at the AGM made clear, there are problems. Those in South Africa centre on its platinum mining operations. Platinum, used chiefly for catalytic converters in car exhaust systems, has enjoyed a 10-year boom. In the Transvaal in north eastern South Africa * there are allegations that large numbers of people have been relocated and are now living in settlements, built by one of Anglo's subsidiaries, without water or proper sanitation. Other issues centre on community companies funded by Anglo which are said to be unrepresentative of the communities they are meant to act for. Furthermore there are complaints that some of the 7,000 people relocated to make way for an open-cast mine are going hungry as they have been unable to grow crops. Richard Spoor, a white lawyer representing some communities, says mass meetings have been broken up with arrests and beatings.
Phillipos Dollo was one who was arrested. Last week he said: 'Anglo doesn't respect our culture, dignity or human rights. A thousand hectares has been destroyed without consultation.' Anglo vehemently disagrees. The firm says it paid generous compensation packages which include better quality homes and land to grow crops, and that it is endowing communities with a trust fund worth £2m.
Anglo's problems are not confined to South Africa. Two years ago, a Human Rights Watch report claimed AngloGold Ashanti had links with the Nationalist and Integrationist Front (FNI), described as a violent group that helped them get access to gold-rich lands in north-eastern Congo. Anglo says it had little choice but to deal with the group as power was wrestled away from former president Kabila.
The world boom in commodities is set to continue, making Anglo American shareholders and executives ever greater profits. But perhaps Anglo's celebrations should be toned down.
Fight in Philippines
Anglo American is at the centre of an escalating dispute in the northern Philippine region of Cordillera.
Abundant gold and copper attracted firms into the mountainous region dominated by indigenous people who for centuries farmed the rich soil. Indigenous communities twice overwhelmingly voted against Anglo's proposals to mine copper, though many supported the move. Consultation over a third attempt was boycotted by local people. The authorities interpreted this as meaning that opposition had melted away and so permits were given.
Resistance comes against a backdrop of militarisation and rights abuses. Community leaders told The Observer last week that they had received death threats, though not from anyone associated with Anglo. There have been murders linked to mining excavation.
At last year's AGM, Anglo's chairman, Sir Mark Moody-Stuart, made a commitment to meet community representatives. Nothing happened. A meeting arranged was allegedly cancelled by Anglo at the last minute, although the company disputes this.
Tina Moyaen, leader of the Save Apayao People's Organisation in Cordillera, says: 'We are not against development or mining but we want it to help the community.' She points out that indigenous people have been mining in the region for years.
The Philippine government has been pursuing an accelerated extraction policy during the past two years, which is causing widespread concern. Former international development secretary Clare Short led a fact-finding mission to the Philippines last summer. In her report this year, she said: 'I have never seen anything so systematically destructive as the mining programme in the Philippines. The environmental effects are catastrophic, as are the effects on people's livelihoods.'
[* Editorial note: Anglo American/Anglo Platinum's main operations are in fact in north eastern South Africa, primarily Limpopo province.]
Mining giant Anglo American faces wrath of poor in South Africa
Socialist Worker (UK)
21st April 2007
A multinational is attempting to sweep away communities in South Africa that stand in its way, but resistance is growing, writes Charlie Kimber
Phillipos Dolo travelled from South Africa to London this week to confront the giant Anglo American mining corporation at its annual general meeting.
He came with a burning anger at the way the company has treated the people in the area where he lives.
Anglo Platinum, which is 70 percent owned by Anglo American, is creating the world’s biggest open cast platinum mine near Mokopane in Limpopo province.
“The mine bosses are destroying our community, destroying our ancestral lands and turning the whole area into a rural slum,” Dolo told Socialist Worker. “It produces fortunes for them, but terrible poverty for us.
“They come to an area, remove the people and then set up mines which cause terrible environmental destruction as well as destroying farming land. And the wealth goes to the mining company.
“When people resist, they face beatings, fines, jail and constant harassment. “My own family has suffered. We used to have land that my mother, father and two sisters worked on to grow food to survive.
“The company seized this land and gave us no compensation. They ignore the law and sweep away our rights. It is not just happening in my area but in large parts of South Africa’s northern provinces.”
Anglo Platinum claims that “community representatives” have agreed to its activities.
But these representatives are organised in what are called Section 21 companies – fake bodies that have not allowed any elections or popular consultation over the last decade.
Dolo criticised these stooges as “rats and dung beetles” – and was promptly arrested and held in custody for six days. He now faces a court hearing.
Some 17,000 people have now been relocated in the area where Dolo organises, through a mixture of bribes and violence.
Shadow
In February Anglo Platinum’s cronies in two Section 21 companies in the Mapela area (near Mokopane) ensured that 25, mostly older people, were arrested in Sterkwater, and that children were arrested in Mothlohlo.
The children were celebrating the results of an independently organised local poll that rejected Anglo American’s plans.
In Ga-Pila, about 6,000 people were relocated in order to make way for a mine waste rock dump.
But 26 families defiantly refused to move. The company cut off their water and electricity, bulldozed the surrounding roads, and demolished neighbours’ houses to leave vast piles of rubble near where people live.
This community now exists in the shadow of the rock dump.
To prevent similar occurrences in the future, Anglo Platinum now pays compensation for displaced people in two lumps, one upfront and the rest when the last member of the community moves out.
Richard Spoor, Dolo’s attorney, told Socialist Worker, “To say such compensation schemes are an incitement to violence is to underestimate the damage that they cause.
“You have incredibly poor people who have money dangled in front of them – but only if the rest have given up their homes. This will encourage intimidation – and worse. It is criminally irresponsible to push through such measures.”
While the compensation schemes are encouraging intimidation, the company is using the 1982 Intimidation Act against activists.
This law was passed under the apartheid regime for use against protests and pickets.
The ANC government has backed the mining firms in their war against local communities.
The background to the company’s acts is the fantastic profitability of platinum.
The metal is a key resource for the automotive industry and 90 percent of the global reserves are in South Africa. Earlier this year Anglo American reported a 63 percent leap in full-year profits to £4.7 billion.
“We want justice for our communities and a fair sharing of the mineral wealth,” says Dolo. “We will not be intimidated away from the struggle.”
Anglo wants controlling stake in Lepanto mine
Luzi Ann Javier, Bloomberg
17th April 2007
ANGLO American, the world’s second-largest mining company, had offered to buy a controlling stake in Lepanto Consolidated Mining’s copper and gold project in northern Luzon, Lepanto president Bryan Yap said.
Anglo American “is interested in acquiring a majority stake” in Lepanto’s Far Southeast Gold Resources, which has rights to mine the property in the Philippines, Yap said yesterday, without citing a price.
Overseas companies, including Xstrata, the world’s fifth-largest miner, are investing in the southeast Asian nation to tap fresh deposits of copper, nickel and gold to feed rising global demand. The government has said the country may have mineral deposits worth $1-trillion.
“We’re still negotiating the valuations,” Yap said. “No agreement has yet been reached.” Lepanto was also reviewing an offer from China’s Zijin Mining Group, he said.
The Lepanto property has 120-million tons in mineral resources, containing 0,8% copper and 1,5g of gold a ton, based on a study in 1996, Yap said. “We’ve been talking to Anglo for some time now,” Yap said. “We decided to set aside the Far Southeast project until we reach an agreement on the Manila mining project.
“We began serious talks on the Far Southeast project just last year.”
Anglo American agreed last month to spend $20m to explore a copper-gold property of Lepanto’s unit, Manila Mining in southern Philippines, over two to three years, in exchange for a 40% stake in the project.
The London-based miner might spend another $15m-$20m for a final study if the early results were favourable, giving it a further 20% stake in the project and taking its potential holding to 60%, Manila Mining said on March 26.
Manila Mining’s project is located next to a Philex Mining property, also being explored by Anglo American under another joint venture agreement.
The Philex and Manila Mining projects gave Anglo access to a “potential world-class gold-copper prospect”, Natural Resources Secretary Angelo Reyes said in January. Gold mines which are considered world class have at least 1-million ounces of deposits.
Shares in Lepanto, which has been posting annual losses since 2005, were unchanged at 30 centavos in Manila yesterday before the Anglo offer was announced, valuing the company at 9,1-billion pesos (about $190m).
Xstrata best Anglo American suitor, say London analysts
By: Martin Creamer
Creamer Media: 4 Apr 07
The voracious South African-led London-listed diversified mining company Xstrata plc was the most logical suitor for South Africa's iconic Anglo American plc in restructured form, three London analysts concurred on Wednesday.
The greatest logic would exist in a combination of Xstrata and Anglo American, which was achievable for Xstrata in terms of balance sheet and earnings a share impacts, Simon Toyne, John Meyer and Marc Elliott of Numis Securities Limited said.
In a detailed 24-page analysis of the potential attraction of Anglo American to diversified mining majors like Xstrata, BHP Billiton and Rio Tinto, they placed Xstrata in pole position.
The Numis analysts believed, however, that there was potential for additional restructuring of the $75,9-billion Anglo American plc – headed since March 1 by Canadian CEO Cynthia Carroll – beyond the current programme of demerging Mondi and disposing of AngloGold Ashanti. Such additional restructuring would involve the divestiture of Tarmac and the remaining South African-based non-mining businesses.
The residual Anglo American would then consist of Anglo Platinum, which was approaching half of the total value of the remaining diamond, base metal, coal and iron-ore assets.
Details of the Mondi demerger, now considered only a month away, remained unclear, but Anglo guidance was to expect a dual-listed company structure and listing by mid-2007.
Though guidance on the timing and the nature of the AngloGold Ashanti disposal was vague, Numis believed that a number of options were being considered, including a trade sale to a gold major.
Numis said the purchase of the remaining 25% of Anglo Platinum, at a current cost of $9,4-billion at market value, would be logical.
While the platinum producers were more fully valued than diversified miners, elimination of the minorities would save the cost of maintaining a separate listing and would integrate control of Anglo Platinum directly into the Anglo American group.
The main potential problem would be political opposition in Anglo Platinum being the largest stock on the largely foreign-owned JSE and might be met coldly by government leaders, especially if AngloGold Ashanti also ended up being sold to a foreign owned gold major.
Anglo American's coal profit was split evenly between South Africa, Australia, and South America, which was a "very close" geographical fit with Xstrata's coal assets.
A combination of Anglo American with another large group would also create further geographic, asset and project diversity, helping to reduce the cost of capital still further, while giving the combined group control of a greater proportion of the industry project pipeline in certain commodities, ultimately increasing pricing power.
In copper, Anglo American's production was principally in Chile, including 44% of Collahuasi, of which Xstrata also owned 44%. Further, Xstrata had significant potential to grow its southern Peruvian copper business near Tintaya, 500 km from Anglo American's own key copper project.
While Anglo American produced nickel in Venezuela and Brazil, Xstrata already had substantial growth in nickel, which would be boosted by its acquisition of LionOre and its low-cost Activox technology.
While Anglo American had meaningful exposure to zinc, Xstrata was zinc short.
Xstrata's ferrochrome operations were located on the same orebodies as those of Anglo Platinum and Xstrata already had the Mototolo joint venture with Anglo Platinum in which Xstrata operated the mine, and Anglo Platinum the concentrator.
There would be certain synergies in combining their respective chrome and platinum-group metals operations in transport and logistics and the similarity of mining techniques in platinum and chrome, implying that Xstrata would be well placed to operate Anglo Platinum's mines effectively. Xstrata had also expressed a desire to be exposed to platinum.
Anglo American's iron-ore interests were held through Kumba Iron Ore and Xstrata had a desire to gain exposure to iron-ore production.
While Anglo American's diamonds exposure was held through its 45% stake in De Beers, Numis believed that diamonds might be of greater attraction to diamond industry players, or even the Oppenheimer family, which already owned 40%.
Overall, Numis believed Xstrata "clearly" had the best fit and most reason to attempt to acquire some or all of Anglo American.
It placed Rio Tinto in second place and BHP Billiton third in descending order of logic to acquire some or all of Anglo.
On a totally restructured basis - that is, current restructuring plan plus disposal of Tarmac and ferrous metals assets – Numis concluded that Anglo American's market capitalisation would be about $63-billion.
For Xstrata, with a market capitilisation of $48-billion, it would be a reverse takeover, but by issuing about 60% of its market capitalisation to Anglo American shareholders, Xstrata's gearing, after buying Anglo American, would be similar to the level after Xstrata's acquisition of Falconbridge.
Numis concluded that Xstrata could launch a bid for Anglo American with a sensible resultant capital structure and without diluting near-term earnings per share.