MAC: Mines and Communities

London Calling on Albanese's ignominious new role in Vedanta

Published by MAC on 2014-03-07
Source: Nostromo Research

If Tom Albanese's reputation could get damaged further - following his unceremonious dismissal from Rio Tinto last year - it's surely happened now.

On 5th March, he was appointed the Chief Executive Officer (CEO) of Vedanta Resources plc.

There's some justification in the view that this able, but prickly, Alaskan was treated cavalierly by his former employers and scapegoated by Rio Tinto for its descent into massive indebtedness during the years he acted as that company's CEO.

However,adopting the self-same role at Vedanta Resources alongside Anil Agarwal - among the most ruthless and self-serving leaders of any global mining company - can't been excused.

Albanese clearly has no serious intention to address the "legitimacy" issues (to put it mildly) which have made Vedanta synonymous with the worst behaviours of the mining industry in recent times.

Just last month, MAC published a  report on some of the latest of these (see: Vedanta on the ropes as scandals build and shares fall).

What's important to realise is that these delinquencies have occurred since Albanese was already in place as the chair of Vedanta Holding, supposedly acting as an advisor to the company.

According to the 6 March 2014 Financial Times, Albanese claims that, even though he's now to be made CEO of Vedanta Resources itself, his buddy Anil "will be in[the] executive chairman role when it comes to M&A and strategy...The chairman and I have a very clear understanding of our vision for the business . . . We want to use this partnership between the two of us to make this business improve."

The suave Alaskan fails to acknowledge that the British Financial Services and Markets Act of 2000 stipulated that the posts of CEO and Chairman of companies should be separated - a principle which was backed in October 2013 by the UK's Financial Conduct Authority.

Bear in mind, too, that Mr Agarwal owns the vast majority of Vedanta Resources plc  and has purchased significant tranches of the company's shares over recent weeks.

But perhaps this omission is deliberate on Albanese's part: if Vedanta's reputation declines
even further (could it get much worse?) Albanese can shift the blame to Agarwal.

The short life of Brian

Albanese may recall that, since listing Vedanta on the London Stock Exchange (LSE) in late 2003, Captain Agarwal has run through a number of non-Indian shipmates, brought in to improve Vedanta's reputation, but who jumped overboard in unseemly haste.

Most noteworthy was high-flying Brian Gilbertson, without whose backing Vedanta almost certainly wouldn't have secured the largest initial share flotation of any company registered on the LSE that year.

Agarwal recruited Gilbertson swiftly after he, too, had been junked by a Top Ten mining outfit - in this case BHP, whose merger with Billiton he engineered, turning it into the world's number one miner.

But, just seven months after Gilbertson gave his massive hand-up to Agarwal and Vedanta, he had a spat with Agarwal - full details of which were mutually concealed - and was forced to resigned in July 2004 [see: London Calling! July 9 2004]

This happened almost a decade ago when Vedanta was still barely in the public eye.

Ten years on, and Vedanta's litany of odious and illegal acts are now clear for all to see -
except, it seems, through the eyes of Albanese himself.

Just before Albanese announced his new relationship with Agarwal, the Norwegian government Pension Fund - the world's biggest of its kind - re-affirmed the original exclusion of Vedanta from its portfolio in 2007.  (See: Mining company excluded from the investment universe of the Norwegian Government Pension Fund).

It's also now ejected Agarwal's Indian -based investment vehicle, Sesa Goa, from its "investment universe".

The Norwegians have thus effectively condemned Vedanta as a "serial offender" on many fronts.

And now  Mr Albanese has consented to join Agarwal in conducting  his quasi-criminal enterprise.

[London Calling is published by Nostromo Research. Views expressed in this column do not necessarily represent those of any other group. Reproduction is welcomed under a Creative Commons licence].

Vedanta Resources appoints Tom Albanese as new CEO


6 March 2014

Vedanta Resources Plc has appointed Tom Albanese as chief executive, pinning its hopes on the former Rio Tinto Plc head to transform the India-focused miner into a global resources giant.

Albanese, 56, will take the helm on April 1. He will replace Mahendra Singh Mehta, whose departure had already been announced.

London-listed Vedanta said it also intended to recommend Albanese as chief executive of Sesa Sterlite Ltd, which groups most of the company's Indian assets.

Albanese, who held the top job at Rio Tinto for almost six years, left in January 2013 after the company revealed a $14 billion writedown almost entirely on the value of his two most significant buys: Alcan and Mozambican coal company Riversdale.

Rio Tinto bought Alcan for $38 billion in 2007, a bruising, top-of-the-market deal made when the company was under pressure from rivals to bulk up or be bought.

Albanese was one of several top mining chief executives who took the blame for their companies' relentless pursuit of growth during the boom years that ended in 2011, and for acquisitions that soured and turned into billions of dollars of writedowns.

Ousted Rio Tinto chief set to head under-fire Vedanta

Jim Armitage


7 March 2014

Tom Albanese left Rio in January last year after the company booked a $3bn (£1.8bn) hit on the value of coal assets in Mozambique that he had bought just two years earlier. He resigned amid a total of $14bn writedowns.

He was just one of several chief executives caught out by the industry's downturn who quit their giant companies, including Cynthia Carroll at Anglo American and Marius Kloppers at BHP Billiton.

At Vedanta, he will work under the watchful eye of hands-on founder Anil Agarwal - a factor that analysts said could severely crimp Mr Albanese's freedom to control the company.

He will be tasked with turning around a business that has been at the heart of environmental rows and corruption investigations in India for years.

The Church of England famously sold its stake in the company in 2010 amid concerns about the way it was treating tribes in eastern India.

Its project in the Niyamgiri Hills, in the eastern Indian state of Odisha, was blocked by local tribes who deem the hills sacred.

Meanwhile, its Sesa Sterlite subsidiary has been fighting corruption allegations in Karnataka, a region of India so rife in such practices that one report by a former supreme court judge into the mining industry in general there claimed: "Huge bribes were paid. Mafia-type operations were the routine practice of the day."

Vedanta and Sesa Sterlite strenuously deny the allegations against their operations and a ban imposed on their work in the region in 2011 was only lifted in December. The ban was imposed on all mining companies in the area until corruption was cleaned up.

But India's Central Bureau of Investigation recently launched a probe into Mr Agarwal's 2002 takeover of the state's 26 per cent holding in another company, Hindustan Zinc.

That deal, too, was run through Sesa Sterlite and the investigators are examining how it was that the privatisation took place without parliamentary approval.

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