Glencore’s takeover of Xstrata will make a monster company. Photo: Hasselback, under a CC License.
On Tuesday 20 November, mining and trading transnational corporation Glencore succeeded in its takeover bid for Xstrata, another massive mining company.
But, why should we care?
As we at the London Mining Network pointed out in our February 2012 report, UK-listed mining companies and the case for stricter regulation, even London’s conservative newspaper The Times took a dim view of Glencore when it floated on the London Stock Exchange in May 2011. Business editor Ian King damned Glencore as: ‘a business with dubious morals. It trades grain amid food riots and has been accused of profiteering and environmental offences in numerous poor and war-torn countries.’ He noted that few traditional City of London institutions would purchase the company’s shares.i
The activities of Glencore and its subsidiaries in Bolivia, Colombia, Democratic Republic of Congo, Peru, the US and Zambia have been criticized for association with paramilitary land-grabbing and military repression of protest, air and water pollution, avoiding taxes, destroying agricultural livelihoods and an appalling worker safety record.
But Xstrata’s record is nothing to be proud of either. It has been involved in violent conflict in Peru and the Philippines. It is accused of toxic spills in Peru and of benefiting from unjust removals of agricultural communities in Colombia. Xstrata is also a major shareholder in Lonmin, which hit the headlines in August for the killing of striking workers at its Marikana platinum mine in South Africa.
Then there are the climate impacts of both companies’ massive investment in coal.
Glencore and Xstrata are each already huge companies in their own right. Each is already among the top 10 mining companies in the world by market capitalization. The combined company will rival Rio Tinto as the third largest in the world (after BHP Billiton and Vale).
They are both listed on the London Stock Exchange, the world’s premier market for mining companies, where many institutional investors automatically buy shares in both of them because of their position among the top 100 companies listed there. But they are both headquartered in Switzerland, where they can pay less tax than in Britain while escaping the level of activist scrutiny that other large London-listed mining companies (Anglo American, BHP Billiton, Bumi, Rio Tinto, Vedanta) undergo.
Together, they will combine metals production and metals trading, exerting control all along the mining value chain (particularly in the production and trading of thermal coal). At a time when there are concerns that banks have become too big to fail, mergers within the mining industry are creating beasts of companies who have enough market muscle to exert monopolistic tendencies. In May this year, Glencore’s Chief Executive Ivan Glasenberg talked about how the mining industry can counter growing attempts by developing countries to get a better share of mining tax revenue. How much better a position will the new Glenstrata be in to get its own way?
And it will be Glasenberg in charge of the combined company – the same Glasenberg who, when asked in April 2011 if the company would improve its behaviour after listing on the London Stock Exchange, replied, ‘We are not going to change the way we operate… Being public will have absolutely no effect on the business.’ii
The combined company’s approach to human rights, community rights, worker rights, Indigenous rights, environmental pollution and taxation may be a combination of the lowest standards applied in each company – a real Frankenstein’s monster of a company, but with a less developed conscience.
Richard Solly is the co-ordinator of the London Mining Network. Find out more at their website or @londonmining on Twitter.
i The Times, 20 May 2011
ii Financial Times, 15 April 2011