MAC: Mines and Communities

US update

Published by MAC on 2007-02-14

US update

14th Feburary 2007

The largest native American nation, the Navajo (Dine), has for some time voiced strenuous opposition to new uranium mining. Its people have learned, in the hardest possible fashion, the consequences of allowing their territory to be polluted, and their workers radiated, for well over half a century. Even so, they are now having to go to court to try to enforce the ban imposed in 2005.

Last year we ran an urgent appeal by the major US NGO, Rainforest Action Network, directed at banks which are financing the largest combine of coal-fired power plants in the country

See: .

A year before, we noted that RAN welcomed Citigroup's pledge to observe principles of corporate social responsibility.


Now the "engagement" - if not about to be broken - seems to be teetering on the brink of dissolution (disillusion?).

The global "mergers and acquisitions" rumour mill has been running overtime for more than a year. Now, there's speculation that Rio Tinto - or perhaps BHPBilliton - will bid for control of the world's biggest aluminium producer, Alcoa.

It follows the recent announcement that India's Hindalco is to take over US-based Novalis (see this week's India update).

Watch this space - but don't hold your breath.

Navajos Ask Court to Prevent Uranium Mining

The Associated Press

13th February 2007

Navajo tribal members went to court Monday to try to block plans for uranium mining near the Navajo communities of Church Rock and Crownpoint in northwestern New Mexico.

A petition filed in the U.S. 10th Circuit Court of Appeals in Denver asks the court to reverse Nuclear Regulatory Commission orders during the past several years regarding proposals by Hydro Resources Inc. to mine uranium near the two communities.

The petitioners also want the court to revoke the NRC's license to New Mexico-based Hydro Resources.

The petition, which lists NRC rulings dating to 1999, argues that the NRC violated the Atomic Energy Act, the National Environmental Policy Act and its own regulations.

Eastern Navajo Diné Against Uranium Mining, the Albuquerque-based Southwest Research and Information Center, and Grace Sam and Marilyn Morris of Pinedale, near the proposed Church Rock mine, filed the petition after losing their fight to overturn the NRC's uranium mining license to Hydro Resources.

Hydro Resources wants to inject chemicals into the ground to release uranium and pump the solution to the surface in a process called in situ leaching.

Hydro Resources did not immediately return a call seeking comment on the petition.

The Navajo Nation banned uranium mining and processing on its land in 2005, but companies have been trying to revive mining in the area as uranium prices soar.

Cibola and McKinley counties have passed resolutions supporting uranium mining, pointing to its potential to create jobs.

Last week, the U.S. Environmental Protection Agency ruled that a 160-acre parcel near Church Rock is "Indian Country" -- meaning Hydro Resources must apply for an underground injection control permit from the EPA, not the state of New Mexico as it previously had done.

Tribal officials have said they want the EPA to make the determination, rather than the state, because the United States has a higher obligation to protect American Indian interests than states do.

Statement from Rainforest Action Network (RAN),


14th February 2007

Today, RAN's Executive Director Michael Brune and our Global Finance team met with Chuck Prince, the CEO of Citigroup. For several years, we have been urging Citi to develop a climate change policy that would guide its investments. Citi has dragged its feet long enough. We need Citi to get serious about global warming and enact a policy that will stop supporting projects like the TXU coal power plant project. Please join us by signing this petition:

In Jan. 2004, Citi became a world leader in environmentally and socially responsible banking by developing strict policies that guide its project investments. To see the policy click here:

This was the result of years of protest and pressure by all of you and other organizations. However, Citi never developed a comprehensive policy that addressed global warming and climate change. Over the past three years, we have urged Citi to accept its responsibility as the world's largest bank and leading lender to the oil, coal and gas sectors to join the fight against climate change.

Not only has Citi refused to commit to a modern climate change policy, but the bank is involved in one of the dirtiest energy projects in North America: Texas utility company TXU's plan to build 11 new coal-fired power plants. The plants will emit more than 78 million tons of carbon into the atmosphere annually as long as they are active -- in pollution terms, that's the equivalent of putting 14 million new cars on America's roads every year for the next fifty years. Citi is one of three major banks lining up financing for the massive TXU power plant project, along with Merrill Lynch and Morgan Stanley.

The greenhouse gases from this project will affect everyone, whether you live in the remote rainforests of Brazil, the Arctic tundra, or anywhere else on the planet. The impact these plants will have on the air quality and health of surrounding communities will be severe. The environmental devastation caused by mining the coal for these plants is irreversible. We urge you to join the people of Texas in demanding that Citi rededicate itself to our environmental and economic future by writing a climate change policy that will help reverse global warming.

This is why we met with Citi on this Valentine's Day. Will Citi break our hearts and ignore the demand from investors, scientists, citizens, business leaders, mayors, NGOs and activists? We hope not. We hope that rather than continuing to fund climate change, Citi will start banking on the future.

Thanks for your support,

Japhet, Debra, Julie, Scott
Grassroots Organizing Team
Rainforest Action Network

Metal Merger Mania

Paul Maidment, Forbes magazine

14th February 2007

Whether or not BHP Billiton or Rio Tinto buys Alcoa for $40 billion as the stock-market rumor machine has it, a deal of that scale in the metals industry is a question of when, not if.

The same forces of consolidation that drove the oil industry's megamergers in the late 1990s are at work today. The $73.7 billion merger of Exxon and Mobil, announced in 1998, which created the world's largest public company, was the apogee of that wave of M&A, creating the world's first truly global oil company. Metals and mining will have their match.

It looked for a while as if the marriage between Mittal and Arcelor to create the world's largest steelmaker would be the one, even if the courtship was stormy and prolonged. It has been the steel industry leading the way in this round of metals industry mergers, which has been running since at least 2004.

The steel business is highly fragmented. But industrialization in eastern and central Europe, Latin America and the Asia-Pacific region, and especially China, has driven this wave of acquisitions aimed at building vertically integrated companies, as the oil industry did before them.

Steelmakers want to gain market scale so they can have a stronger hand when negotiating with customers such as the automotive industry. They also have been buying coal and iron ore mines to control raw materials costs. (The mining companies, too, have been consolidating to strengthen their countervailing pricing power.)

While Europe, the U.S. and Asia have all seen domestic and regional consolidation, the Mittal-Arcelor deal had a global span and vertical integration unmatched in previous deals.

How much further this has to go in the steel industry in this round is a moot point. The gap between low stock valuations and high earnings from a four-year bull run in commodities markets that has financed the merger binge is starting to narrow. The valuations of steel companies are catching up again with those of their industrial peers, and the bloom is starting to come off the commodities boon.

The closing of that gap is lagging in the mining industry, if not by far. Both BHP Billiton and Rio Tinto have had the strong earnings in recent years to keep their M&A war chests well filled. Like the steel industry, natural resources giants want to control supplies to offset price fluctuations and strengthen their vertical integration.

A tie up with either BHP Billiton or Rio Tinto would give Alcoa access to millions of tons of bauxite and alumina, the mineral used in making aluminum. The benefit in the opposite direction is that 70% of Alcoa's revenue comes from its downstream business, rather than from basic production of the metal and mining-- just as oil companies have found it cheaper to buy reserves, other companies have found [it better] rather to explore for it, especially when it is in cheap-to-extract places.

It is the same rationale that drove the Rusal-Sual-Glencore merger last year: Rusal has access to cheap hydropower (a third of the cost of aluminum is accounted for by the electricity used to smelt it), Sual has bauxite, and the Swiss company downstreams operations.

A similar strategy lies behind the proposed $5.9 billion merger between India's largest aluminum producer, Hindalco Industries, and Canada's Novelis, the biggest producer of flat-rolled aluminum products, whose customers include Coca-Cola, Anheuser-Busch and General Motors .

With its own cheap supplies of bauxite and coal, the purchase of a downstream producer like Novelis, which was spunoff from Alcan after its former U.S. parent bought Pechiney of France in 2004, would make Hindalco the same sort of integrated producer that many oil companies strove to be in the 1990s.

Each deal puts pressure on competitors to grow bigger in response. The Mittal-Arcelor merger was followed by Tata Steel buying the Anglo-Dutch steelmaker Corus, itself the product of a 1990s merger of former state-owned British Steel and Dutch steelmaker Hoogvens in an earlier round of European consolidation. The Exxon Mobil tie-up followed a merger between BP and Amoco and was followed by one between Texaco and Chevron .

For its part, Alcoa was relegated from first- to second-largest aluminum producer by the Rusal-Sual-Glencore merger. * A deal with either BHP Billiton or Rio Tinto would be needed restore it to first place.

And as Exxon Mobil's recent record-breaking profits attest, first place is a good place to be.

* Forbes has jumped the gun here: the merger has not yet taken place


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