The Indonesian mining scandal at the heart of UK capitalPublished by MAC on 2012-06-19
What happened last week at Bumi's AGM
The Indonesian mining scandal at the heart of UK capital
A London Calling Special Report
17 June 2012
Let's cut straight to the chase.
Or - as the illustrious Sir Julian Horn-Smith would have it when rudely interrupting four protesting shareholders last week - avoid the "ranting" and get to the "substance" of the arguments.
In fact, there were several important points these shareholders wanted to raise about the woeful behaviour of Bumi plc, at its London annual general meeting on June 14th.
Campaigners, inside both Indonesia and the UK, have been gravely concerned about Bumi's bad behaviour since its original owners, the Bakries, took over Rio Tinto and BP's massive Kaltim Prima coal mines in 2003.
Understandably they considered that the company's first AGM was an appropriate - indeed crucial - forum at which to air their concerns.
Alas, that was not to be.
As soon as the four "dissidents" tried exposing Bumi's abuses against workers, its egregious pollution of agricultural land and waterways, and forced removal of villagers, Horn-Smith lifted his metaphorical lance and cut all discussion stone dead.
It's true that Sir Julian - Bumi's deputy chairman and senior independent director - offered private "engagement" as a substitute for open debate.
However, any director who thinks this tactic will wash in these days of enhanced "corporate social responsibility" is living in cloud-cuckoo land.
Of course, Rio Tinto, BHP Billiton and Anglo American also offer meetings behind closed doors to hear accusations against them.
But, ever since the mining industry's standard-setting body, ICMM, morphed out of the Global Mining Initiative ten years ago, no company representative has dared dismiss serious criticisms made at an AGM. in the cavalier fashion displayed by Horn-Smith a few days ago.
A star is BORN!
From the meeting's outset, Bumi's board was on its collective back-feet.
None of its members could plead ignorance of the tortuous route by which today's outfit was spun out of Vallar plc in 2011, then listed on the London Stock Exchange as the world's largest thermal coal exporter.
In November last year, Vallar co-founder Nathaniel Rothschild had been forced to resign as Bumi chairman, after daring to task his partners from Indonesia' Bakrie dynasty for their lack of good corporate governance.
Only four months later, in March 2012, Indra Bakrie himself was ousted from Bumi in a "palace coup" mounted by Mr Samin Tan, who bought up the Bakries' debt and is now the company's chairman.
As the owner of PT Borneo Lumpung (aka BORN), and a banking magnate in his own right, there's a lot that could be said about the agile, highly intelligent, Mr Tan.
And certainly it should be said - before he manages to inveigle any further cash for Bumi from global financial institutions.
Those investors currently include Black Rock Inc and the UK firms Schroder Investment Management Ltd and Taube Hodson Stonex Partners LLP, which between them hold around 13% of Bumi's voting share capital.
Unfortunately, hardly anything about Mr Tan, his home grown enterprises or his intended future game plays, was divulged at last week's meeting.
As the formal business of the meeting opened, one shareholder pointed out that Bumi's former chairman, Indra Bakrie, told shareholders on page 7 of the 2011 Annual Report that his eponymous firm held a joint 47.6% stake in the company with PT Borneo.
But, some 60 pages later, the Report omits reference to the Bakries having any voting power whatever over the London-listed company. Instead, Mr Tan's BORN conglomerate is now recorded as holding the 29.99 % of voting shares which the Bakries exclusively enjoyed until earlier this year.
Why hadn't this major change not been publicly announced? Ah, responded Mr Tan, it was arranged between the key Indonesian stakeholders when they set up two holding companies in Singapore. No need to divulge this fact since it was simply an internal affair.
Deplorable though Tan's obfuscation may be, equally - if not more - troubling are the utterly supine positions adopted by Bumi's directors in the face of it.
Nathaniel Rothschild obviously now considers muteness to be the better part of his own Vallar - he said nothing at the AGM, nor indeed outside it. Other board members, with the exception of Horn-Smith, followed suit.
(Coincidentally, only 24 hours after this display of craven subservience to the king on Bumi's throne, Vedanta Resources' chairman Anil Agarwal was effecting a structural re-organisation of his own subsidiary enterprises at another London City venue.
Yet, although this didn't involve essential changes to the company's asset ownership, Vedanta couldn't escape the duty to its own shareholders of hosting a General Meeting in order to okay the changes).
Charges of the heavy brigades
In March this year, an Indonesian military brigade, allegedly serving the interests of a contractor for PT Bumi Resources, allegedly severely beat up twenty of the company's workers, causing them to be hospitalised.
The men were protesting against the company's failure to implement an agreement, negotiated last October at the company's Kaltim Prima mines. The leading global mineworkers' union, ICEM, issued a strong protest at these events in April 2012. See: Indonesian mine workers bludgeoned by state security forces
The charges were re-iterated last week at the Bumi AGM by Graciela Romero, International Programmes Director for War on Want, and Andrew Hickman of Down To Earth, the UK Campaign for Ecological Justice in Indonesia.
So much for Julian Horn-Smith's contention that this, and other allegations against Bumi, hadn't been made public before. (Or, at any rate, that he hadn't been aware of them - which some of us may consider even more negligent).
As to those many other accusations against Bumi and the Bakries, and which the company refused to entertain last week, these have filled websites and figured in authoritative reports over several years. See: Kaltim Prima & Bumi Resources.
They also include ones levelled in an influential report released to the UK Parliament earlier this year - UK-Listed Mining Companies & The Case for Stricter Oversight: Case Studies And Recommendations [London Mining Network, February 2012] See: http://londonminingnetwork.org/2012/03/report-calls-for-stricter-regulation-of-uk-mining-companies-2/
The absent coal account
The Bumi board's failure to confront the damages for which it's responsible (as well as the considerable reputational risks it runs) is a highly serious matter.
Arguably, just as disgraceful is the company's failure to even mention the manifold impacts of operations at Kaltim Prima Coal (KPC), its most vital mining complex, which is 65% owned by Bumi plc's Indonesian associate, PT Bumi Resources.
As stated on page 6 of its Annual Report, Bumi plc considers that its "interests in PT Berau and PT Bumi ... have created, on a 100% basis (sic) the largest thermal coal producer in the world".
Yet, not a single word is said about KPC's responsibilities for Health, Safety, Environment and Communities, in the six pages devoted to these topics.
Why (as one shareholder had the temerity to ask) is the company stunningly silent about such vital issues - ones which could, and should, have been addressed at the meeting?
At this point all the directors, including the redoubtable Horn-Smith, suddenly went quiet, and Mr Tan merely offered a weak: "Your point is noted".
There's clearly a lot that the new Bumi chairman should learn if he's to make his way through an increasingly stressed financial "environment" , and in the teeth of escalating civil society demands for tighter corporate regulation.
On present showing, Mr Tan won't get much encouragement in this direction from fellow board members who, to a man (there are no women), appear demonstrably afraid to stand up to him and his money.
Bumi to Bust?
An urgent challenge for human rights and climate change campaigners - apart from the fearless four already mentioned - is to take up the fight against the world's largest supplier of deadly coal, and do so in the UK itself.
They certainly have the mandate for this from communities and NGOs in Indonesia.
On 15 June, a coalition of European groups fielded a well-organised multi-cultural demonstration outside the London Stock Exchange and the London Metal Exchange.
This "Carnival of Dirt" aimed to expose not only the environmental depredations caused by indiscriminate mining, but the toll in associated human rights abuses - highlighting murders of the industry's opponents. See: London activists expose corporate greed
At last week's AGM, Bumi reported the fatalities of four of its own workers in 2011.
And there's no escaping the fact that its entire business poses imminent danger for many other employees, as well as further degradation of livelihoods for those around its operations.
The burning of Bumi's coal also significantly contributes to the ill-health and premature deaths of hundreds of thousands of others around the world. Not to mention that it exerts massive adverse impacts in terms of an increase in global greenhouse gas emissions.
We eagerly look forward to an early rallying of the troops (including the "ranters" among them), pledged to bring Bumi to its knees before the company wreaks even more damage on its home ground, and ultimately upon our planet.
Postscript: Fair play !
Bumi is not the only London-listed coal mining company under fire for its activities in Indonesia.
Churchill Mining plc has been accused of filching licences in East Kalimantan which are rightly in the hands of a highly-suspect domestic oligarch. If Churchill has its way, the case will go to international arbitration.
We can't resist quoting what the Indonesian regional ruler who revoked Churchill's licences told the New York Times on 6 June this year. Describing Churchill as "arrogant", he claimed the British bulldog had "not developed a good working relationship with the local government".
Added Mr Noor: "They are Englishmen. They should obey regulations, not violate them when they come here" .
Shouldn't Indonesian citizens do precisely the same when they ensconce themselves on a foreign shore?
[London Calling is published by Nostromo Research. Views expressed in this column do not necessarily represent those of any other author or party. Reproduction is welcomed, under a Creative Columns license].
Mining firm Bumi accused of human rights abuses
Indonesian miner founded by Nat Rothschild faces allegations of polluting coral reefs and mistreating workers at heated AGM
By Simon Neville
14 June 2012
Indonesian mining company Bumi, founded by financier Nat Rothschild, was on Thursday accused of human rights abuses at a heated annual general meeting.
Campaigning shareholders raised concerns over the alleged dumping of coal and chemicals into coral reefs, the mistreatment of workers and the company's lack of transparency.
But they were left disappointed after the board, which had co-chairman and biggest shareholder Indra Bakrie missing from the meeting, accused the representatives of "grandstanding" and "ranting".
After the meeting the campaigners, who go to around 20 mining AGMs a year, said Bumi's was one of the most poorly organised and least transparent they have attended. It lasted just 42 minutes.
Rothschild recently called on the company's chief executive, Ari Hudaya, for a "radical clean up" of the firm's complex ownership structure which involves some of the biggest businessmen in Indonesia.
During the AGM in London - the first time the FTSE-listed firm has held the shareholder meeting in the UK - Roger Moody from Nostromo Research was accused of "ranting" by the company's senior non-executive, Sir Julian Horn-Smith.
Moody raised concerns over the company's transparency but, in heated exchanges, he was told by Horn-Smith: "I will not be lectured to about human rights but will hear specific substantive points that you feel should be investigated.
"These are important questions, by the way, so don't misunderstand me because I'm not being dismissive, but let's do it in a way where we can engage and do something about it and address the points, rather than grandstanding."
He added: "I think you have come here with a policy of not wishing to engage with us. If you wish to engage with me I am happy to engage with you and any other shareholder who has a matter of such seriousness. We are not here to have a debate about human rights that will go on for several hours."
Chairman Samin Tan added: "The transparency is exactly why we are here. Things cannot be changed overnight."
Andrew Hickman, from Down to Earth, raised concerns over recent reports of coal and chemicals being dumped in a coral reef in Indonesia by the company.
He said: "This happened at various times and we'd like to know what is the credibility of the company if that is allowed to happen?"
Graciela Romero from War on Want added: "I understand from March 2011 there were workers who were mistreated after striking in order to have collective bargaining."
But the board said it was the first they had heard of the allegations and therefore could not respond immediately and would be happy to meet to discuss them in private.
After the meeting Hickman said: "I am quite shocked. The fact Bakrie doesn't take the time to come here is disgraceful. You'd have thought he would have faced up to the questions."
Richard Solly, from the London Mining Network,said: "The AGM was unique for its level of discourtesy and obfuscation. I've been to many mining AGMs and the thought that they would not have an answer to our questions is ridiculous. Bumi's refusal is unacceptable.
To suggest they don't know about the issues we raised, despite press reports and mentions in parliament, is ridiculous."
The company, which floated in 2010, had started trading at £10 a share and raised $1.1bn. On Thursday it closed at £3.15.
It was set up through a cash shell launched by Rothschild to fund acquisitions in the mining industry, but has been criticised for its complicated structure which involved the Bakrie family.
It led to Rothschild writing to the chief executive last year calling for reforms of its balance sheet.
But rather than take the advice, the board instead attempted to oust Rothschild as co-chairman. In the end the financier stepped down as co-chair, but maintains a position on the board.
At Thursday's meeting he sat at the far end of the long table laid out for the board at the Institute of Directors and afterwards declined to discuss his previous misgivings. He said: "It would be inappropriate for me to comment."
A spokesman for company said: "We listened to the points raised and will be happy to engage." He added that Bakrie was unable to attend the proceedings because of other business commitments in the Far East.
Bumi bid to repair image undermined by key no-show at protest-hit AGM
By Tom Bawden
15 June 2012
Bumi, the Indonesian coal miner that has been at the centre of a storm over corporate governance, took a significant step towards improving its reputation yesterday when the chairman, Samin Tan, and co-chairman, Indra Bakrie, waived their joint 29.9 per cent voting block at the company's annual general meeting.
But the impact of the move - intended to sidestep criticism that the company's top executives are wielding too much shareholder influence - was undermined immediately by the fact that the co-chairman did not turn up to the meeting. Mr Bakrie, who was Bumi's chairman until a board shake-up in March, was called away on urgent business in the Far East a few days ago, a company spokesman explained.
Speaking at the AGM, Andrew Hickman, a shareholder and campaigner for anti-corruption group Down to Earth, said: "I find it quite surprising and disappointing that Mr Bakrie isn't here," adding that he'd wanted to address most of his questions to the co-chairman.
Tom Powdrill, of the shareholder advisory group Pirc, added: "It's fairly standard to expect board members to attend AGMs as it is the principal point at which formal contact is made with shareholders.
"It may not be a red-card offence, but if you're a director of a company it is your business to attend - especially if you hold a large stake in that company," he added.
Nat Rothschild, the financier who created Bumi a year ago by reversing two Jakarta-based coal miners into a London-listed cash shell, was keeping a low profile at the meeting in Mayfair yesterday.
Mr Rothschild, a non-executive director of Bumi with a substantial minority shareholding, was ousted from the co-chairman's seat in March after falling out with the Bakrie brothers and Mr Tan. The dispute erupted after a letter Mr Rothschild sent to then chief executive Ari Hudya criticising corporate governance at the company was leaked to the press.
After greeting members of the audience with a handshake on entering the room, Mr Rothschild sat on the edge of the scene and was silent throughout the meeting.
Answering accusations that Bumi was conducting the AGM in an non-transparent manner, Mr Tan said: "Transparency - that's exactly what we're here for. I know there have been some problems in the past...but things cannot be changed overnight, they take some time."
However, four shareholders separately accused the Bumi board of failing to engage with their concerns in a grumpy meeting. At one point, Sir Julian Horn-Smith, the former Vodafone chief executive who is Bumi's senior independent director, said of one shareholder claim: "Frankly speaking, this is the first we've heard of it."
He added that he would be perfectly happy to discuss specific points of substance with shareholders, except that he hadn't heard any made. The shareholders, whose grievances included concerns about the environment and Bumi's treatment of its workers, were unimpressed.
"It's sounds to me as if you don't care," said Roger Moody, one of the shareholders.
A spokesman for Bumi said: "It's unfortunate that these shareholders made no attempt to engage with us [before the meeting]. We would be very happy to engage, it would achieve a lot more. If there are detailed allegations, come and talk to us, we are not hiding behind anything."
Rothschild's baby called to account for ethical failings
By Marcus Leroux
15 June 2012
The Indonesian mining company introduced to the London Stock Exchange by Nataniel Rothschild emerged to face criticism of its governance and ethical record yesterday at its first annual meeting.
Mr Rothschild floated Bumi in 2010 via a cash shell in a move that gave Indonesia's influential Bakrie family exposure to the London markets. But the scion of the banking dynasty fell out with his Indonesian partners and was ousted as co-chairman earlier this year after promising to raise governance standards.
Bumi is one of a number of foreign-dominated natural resource groups dogged by corporate governance concerns after floating a minority of its share capital on the London market.
At the AGM of the company he founded yesterday, Mr Rothschild was a peripheral figure. He did not speak and declined to comment when asked later about governance. Indra Bakrie, the co-chairman, angered activist shareholders by failing to attend.
Andrew Hickman, a ecological campaigner with Down to Earth, raised questions over Bumi's environmental record in Indonesia. He said afterwards: "Nathanial Rothschild has landed this company in London. There are a lot of benefits to being in London, not least access to major capital markets and pension funds and guaranteed investment. But linked to that, there have to be obligations and standards".
He said that Mr Bakrie's absence was "disgraceful".
Samin Tan, Mr Rothschild's successor as chairman, acknowledged that there had been governance problems in the past. He bought a stake from the Bakries after the family fell into default on loans secured against Bumi shares, which have fallen sharply in value.
"We know there were problems in the past, but things cannot be changed overnight. It takes time," he said.
Sir Julian Horn-Smith, the senior independent director, accused pressure groups of failing previously to have raised allegations of labour rights and environmental violations. "We're very happy to be engaged with you, not to be lectured at about human rights, but to hear specific points that you feel should be investigated," he said.
Bumi's utterly extraordinary AGM
By Richard Solly
London Mining Network
14 June 2012
I have been to many mining company AGMs but never to one as ineptly run as Bumi's first London AGM, held this morning at the Institute of Directors in Pall Mall. It even made Vedanta's notorious AGMs look good.
AGMs are supposed to be occasions where a company's shareholders hold the Board to account. Bumi's Board made that a pretty difficult task.
For a start, Indra Bakrie, who only resigned as Chairman in March this year - and was therefore Chairman for the period being considered at the AGM - did not turn up, despite the fact that he was standing for re-election as a Director.
Then there was the Board's refusal to answer questions about the company's impacts on human rights. Those who raised them were told that the AGM was not the correct forum for dealing with these matters and that they should ‘engage' with the company instead - presumably meaning meeting company officials privately, away from other shareholders and the press. When critics objected that the AGM was precisely the place for such issues to be dealt with, Sir Julian Horn-Smith, Deputy Chairman and Senior Independent Director, accused them of ‘ranting' and ‘grandstanding'. At one point Sir Julian appeared to have taken over chairing the meeting as Chairman Samin Tan sat quietly while his deputy insulted dissident shareholders.
Horn-Smith attacked critics for not drawing allegations to the Board's attention before the AGM, claiming that this was the first time they had heard about them. If that's true, the company's level of ineptness is staggering.
These allegations have been in the public domain for months, including in the Indonesian press, the Financial Times, in London Mining Network's report published earlier this year, on the Down to Earth website , the Mines and Communities website and in press releases from ICEM (the International Federation of Chemical, Energy, Mine and General Workers' Unions). If the Board is so uninformed about allegations made publicly over a period of months, what does this say about its general competence?
Some of the Board's behaviour was to be expected: for example, it tried to dodge responsibility for alleged attacks on mine workers on the grounds that they were subcontracted. But in response to some questions, it did not even attempt an answer.
Samin Tan responded to one question by explaining in great detail the changes in voting rights among the largest shareholders and was asked why there was no information about this vital matter in the annual report. No answer.
Another question was about risk assessments: given the growing possibility of financial and legal sanctions against the biggest contributors to greenhouse gas emissions, had the company conducted an assessment of the risks to shareholders of being so heavily dependent on coal?
Clearly not. Chief Executive Officer Nalin Rathod simply said that the company has the approval of the Indonesian Government for the volumes of coal it is producing. Why was there nothing in the Annual Report about problematic health and safety at the massive Kaltim Prima Coal mine? No answer: simply "point noted" from the Chair.
When questions dried up, Chairman Samin Tan announced that we would move on to considering the resolutions. Even when, as at this AGM, voting is to be by poll at the end of the meeting, these are usually read out one by one and the Chair waits a few moments to see if there are any questions on them.
Not at this AGM. He simply announced that the voting was by poll and that the results would be announced later via the London Stock Exchange and on the company's website, then closed the meeting.
Every large mining company AGM I have attended has taken at least two hours. This one was all over in 45 minutes, bar the shouting - and there very nearly was some shouting, when Sir Julian Horn-Smith approached the company's critics once more to invite them to ‘engage' privately with the company and got angry when they declined.
If AGMs are meant to be about openness and accountability to shareholders, Bumi's efforts today were pathetic. Even if you don't agree with those of us concerned about the company's environmental, human rights and workers' rights impacts - is this any way to run a company?
Richard Solly is Co-ordinator of The London Mining Network