London Calling - November 18 2002Published by MAC on 2002-11-18
London Calling! November 18 2002
London and Australia-based BHPBilliton (BHPB) is cock-a-hoop at its new deal with little-known diamond junior, Dwyka Diamonds (registered in Perth, Australia and also on the London AIM). It could see the Big Australian (should it now also be dubbed the Little Londoner?) opening up a new gem field in the Indian state of Andhra Pradesh.
For the world's biggest mining company, this may provide more than just another feather in its expanding cap. Indeed, the headgear has been getting slightly threadbare of late, as traditional sectors haven't been so hot. But, if not for ever, then diamonds may certainly may provide the opportunity for quick returns on relatively little outlay - as BHPB's glittering triumphs in northern Canada have recently shown.
However, the company may not have such a smooth ride as its publicity suggests. It faces fierce competition from its closet rivals - Rio Tinto and Anglo American-De Beers, which have also been prospecting across the central adivasi (tribal) belt of India for the past few years, notably in the autonomous indigenous states of Chhattisgarh and Jharkhand.
What's more, all three companies are confronted by the implications of India's constitutional provision, known as Schedule Five, which forbids the transfer of Indigenous lands to non-tribal, or non-government entities.
Ironically, the terrible trio, though mighty exponents of community-framed sustainable development, have centred their current efforts on one mineral which - under well-crafted democratic circumstances and with relatively little training - can be extracted by local people themselves. Of course, that's if they so choose.
Meanwhile, at a Kimberley Process meeting held in London, attended by an impressive number of governments and mining outfits, international moves continue to stem the flow of "conflict" or "blood" diamonds from Africa. But, once again, the opportunity to expose the sale of gems purloined from Indigenous territory, cut and polished by impressed labour (as in India), or which profit illegal occupation (such as Israel's over Palestine) was lost. Hardly surprising, considering the extent to which the Kimberley process, as currently constructed, depends on the cooperation of companies which are only too happy to see the market skewed directly in their favour
The Xstrata Factor
Swiss-origin Xstrata has had its wings clipped several times, since its boast last year that it could soon become the world's fourth biggest mining outfit, by registering on the London Stock Exchange.
Depending to such a large extent on its coal reserves in South Africa , it didn't endear itself to investors when the government's new Mining Charter, with its threatened asset-transfer under "black empowerment", was introduced last summer. Then, in September, the Japanese threatened to impose a tax on coal-engendered GHG (Greenhouse gas emissions). Xstrata's biggest single customer is Japan, and its share price fell by nearly 10% over a couple of days.
This followed the release in August of a Friends of the Earth (England, Wales and Northern Ireland) report indicting Xstrata for failing to register its climate-change related liabilities, when it got accepted on the LSE.
Poor Xstrata! As a new kid on the blocks (and with such a ridiculous moniker, too!) it's got the hard end of a whip which, by rights, should be applied to considerably bigger companies. (For example, London Calling doesn't know of any analyst who's downgraded Rio Tinto, for relying so heavily on coal supplies from its Wyoming mines which, according to the USEPA, are unacceptably high in mercury).
But at least the Big X can comfort itself that its one really scandalous association hasn't yet hit the limelight. Its biggest single shareholder is Glencore, the world's most profitable private company, whose assets - if not directly acquired from the outrageous and discredited Marc Rich - have been filched at bargain-basement prices from the citizenry of numerous countries.
So long as northern NGOs concentrate on climate change, rather than the human costs of resource acquisition as the key issue around using coal, Xstrata and Glencore will have a comparatively easy ride.
[Sources: Mining Journal, 8/11/02; The Age (Melbourne) 7/11/02; Environmental Finance, October 2002]
[London Calling is published by Nostromo Research, London. The opinions expressed do not necessarily reflect those of any other individual, organisation or editors of the MAC web site. Reproduction is encouraged with full acknowledgment
Apologies, too, for the hiatus in posting this column over the past few weeks. Normal service should resume in December]