Rio Tinto attacked from all sidesPublished by MAC on 2009-04-20
Source: London Mining Network & other sources (2009-04-17)
London Mining Network & other sources
The following are summaries and news articles from this year's Rio Tinto AGM. The initial summary is from Richard Solly of London Mining Network, and the second from the 'riotintoagm2009' blogspot
Yesterday’s Rio Tinto AGM was full of dissatisfied shareholders, and not only the usual suspects.
Objections were raised to the proposed bailout by Chinalco, the level of executive pay, the clash of the AGM with that of Anglo American, the failure of the Board to plan for the economic slowdown and the massive increase in payments to auditors to over $160 million. As well as this, objections were raised in relation to the Eagle project in Michigan, USA, the Grasberg joint venture project in West Papua, involvement with the Muriel Mining Corporation in Colombia and the Ranger mine in Australia.
Chairman Paul Skinner excused the Board for failing to foresee the severity of the economic slowdown on the grounds that nobody else foresaw it either. But other than that, the Board appeared convinced of its own near infallibility, and invited shareholders simply to trust it.
Andy Whitmore, representing London Mining Network member group PIPLinks, said:
“The Chair’s Statement in the Annual Report(1) suggests that he and the Board were right to resist the BHP Billiton bid, right about the Alcan deal, right about the current Chair staying on temporarily (when the Chairman Designate resigned after a month, for what appears to be no reason, in February 2009) and – of course – right about the Chinalco deal. It is breathtaking how the view of the Board seems to differ so much from that of pretty much everyone else. With this level of spin it is no surprise that such a large number of shareholders wished to express their annoyance with both the performance of the company and the arrogance of the Board. The Board seems to be living in another world, like Alice in Wonderland.”
On the issues of most pressing importance for London Mining Network member groups (2), both Paul Skinner and CEO Tom Albanese avoided giving straight answers to simple questions.
Repeatedly, they responded to issues of Indigenous Peoples’ rights by stating that some people were opposed to the projects in question, others in favour, that they would create jobs and that they would therefore go ahead with them. They refused to deal with the underlying issue of contention – the pursuit of mining projects on Indigenous land against the express wishes of Indigenous communities.(3)
On the issue of climate change, Albanese said that the company believes it is a serious problem and that each division of the company is coming up with ways of reducing greenhouse gas emissions. But the company continues producing enormous quantities of coal and sees continuing growth as the only answer to the world’s economic problems – despite the fact that the current model of economic growth has led to the current financial crisis and brought the planet to the brink of ecological and climate catastrophe.
2) Groups represented at the Rio Tinto AGM were Colombia Solidarity Campaign, Down to Earth (the campaign for ecological justice in Indonesia), Partizans (People Against Rio Tinto and its Subsidiaries) and PIPLinks (Philippine Indigenous Peoples Links).
3) In the case of the Grasberg mine in West Papua, where such serious human rights violations and environmental damage have been substantiated that the Norwegian Government’s state pension fund disinvested from Rio Tinto last September, Albanese suggested in conversation after the meeting that we should be grateful for Rio Tinto’s involvement because it was a benign influence on the operator, Freeport McMoran. He took a similar view of the company’s involvement with Muriel Mining Corporation in Colombia, which is accused by Embera Indigenous people of violating sacred sites and bringing about the militarization of the area, with associated human rights abuses. The principle seems to be to work together with companies with appalling records so that Rio Tinto can look good by comparison, rather than choosing to avoid association with such companies.
Revd Jon Magnuson, a Lutheran Pastor from Michigan and Executive Director of the Cedar Tree Institute, brought a statement of objection to the Eagle Project (in the State’s Upper Peninsula) signed by 100 regional faith leaders. He pointed out that these leaders were not opposed to mining – indeed, most had parishioners involved in mining – but that they were opposed to this project. He said that the company had shown a cavalier disregard for the Keweenaw Bay Indigenous Community, whose religious rights were being violated by the restriction of access to sacred sites. He gave the CEO a letter from the tribe calling for the company to reconsider the project. Gabriel Caplett from North Woods Wilderness Recovery in the Upper Peninsula accused the company of fraud and incompetence in the design of its proposed Eagle Mine, which he said would run a grave risk of collapse.
Rio Tinto Annual General Meeting Report
16 April 2009
London, England - A beleaguered Rio Tinto board defended itself from criticisms coming from a number of shareholders at the company’s annual general meeting (AGM) Wednesday, in London, England. High on shareholder’s minds was the proposed $19.5 billion deal to sell access to a number of key company assets, including Kennecott, to the Chinese government-owned Chinalco as part of what many speakers described as offensive to existing shareholders and a direct result of poor investment and management decisions made by the company over the last several years.
At the meeting, Lutheran pastor, Jon Magnuson, from Marquette, Michigan, presented a document signed by one hundred faith leaders of ten faith traditions in Marquette, Baraga and Keweenaw counties. Magnuson said that the document was part of a petition that collected roughly ten thousand citizen’s names in opposition to Rio Tinto’s Eagle Project nickel and copper mine, located on the Yellow Dog Plains, in Marquette County.
“Many of our parishioners and members of our faith communities are . . . involved in the mining industry,” said Magnuson. “But on this particular project we have taken a very strong position - in this place, at this time, for these specific reasons. And one is the massive environmental damage that is threatened to the Great Lakes and the second and most prominent concern is that, what we perceive and experience is a cavalier dismissal of the claims of one of the major Indian tribes in Michigan, the Keweenaw Bay Indian Community.”
In response, company CEO Tom Albanese said that Rio Tinto is “not unmindful of the questions and the controversy” and claimed that Rio Tinto Copper CEO Bret Clayton “visited the site and met with a number of the stakeholders as a result of requests of some of the questions that came up in last year’s AGM.”
While Clayton did visit with a number of parties sympathetic to the mine’s development, including the local Chamber of Commerce and various local politicians yet made no attempt to meet with Michigan citizens and tribal representatives while in the area.
Gabriel Caplett, from Skandia, Michigan, spoke to a lack of competence and care in designing the Eagle Project mine.
“I’m just wondering if other shareholders are curious as to why this project hasn’t been brought on line yet and I think there’s a very simple reason for that and it lies within the mine design itself,” said Caplett. “The mine as designed could be charged with fraud under Michigan’s metallic mining law. The mine, as designed, would collapse - the crown pillar holding up the mine ceiling would collapse. Many technical experts have agreed on that.”
Caplett explained that Dr. David Sainsbury, a rock mechanics expert hired by the State of Michigan to review the mine’s mine structure inquired with Rio Tinto if anyone at the company had rock mechanic’s expertise. “He didn’t receive a response,” said Caplett. Sainsbury, who was transferred to work overseas after continually reporting to the State that the company’s conclusions regarding the crown pillar’s stability were “not defensible,” told a mine engineering colleague that the Eagle application, produced by Golder & Associates and Foth & VanDyke, was equivalent to “high school level” work.
Caplett asked the Rio Tinto board if, “after deferring the Eagle Project mine are you willing to waste any more shareholder money on this project or will you ultimately abandon it instead of pursuing this project.”
Two shareholders addressed concerns regarding Rio Tinto’s continued involvement in the controversial Grasberg Mine, in West Papua. According to shareholder Andrew Hickman, last year the government of Norway divested roughly $800 million in shares, calling the company’s record in West Papua “grossly unethical”. Hickman said that mine officials have acknowledged to paying the Indonesian military “less than” $1.6 million to guard the facility and repress local opposition to the mine.
Other shareholders addressed the recently acknowledged leakage of roughly one-hundred thousand liters of contaminated tailings water at Rio Tinto’s Ranger uranium mine, in Australia; as well as concerns regarding the company’s joint venture arrangement with Muriel Mining Co. in Colombia that has forced the relocation of an indigenous community and occupied a sacred mountain.
The Reverend Magnuson and Caplett have also met with representatives at the Church of England’s Pension Board and Ethical Investment Advisory Group and will be meeting with the United Kingdom’s Department for Business Enterprise and Regulatory Review on Friday.
Rio Tinto investors vent fury at $20bn Chinalco stake
Rio Tinto board told at annual meeting they were 'selling the family silver'
By Tim Webb, Guardian
15 April 2009
Private investors in Rio Tinto vented their anger at the mining group's annual meeting in London today over the board's decision to pursue a $20bn (£13.3bn) bailout from the Chinese government.
John Farmer, a shareholder, said the deal with state-owned firm Chinalco "could be construed as selling part of the family silver".
"Why have you got us into this mire?," he asked. "You are mortgaging part of Rio Tinto to China. It's something you will regret."
Outgoing chairman Paul Skinner did not rule out a compromise deal to appease shareholders angry at being shut out from the fundraising.
He also admitted "some regrets" about the deal to buy Canadian aluminium firm Alcan for $38bn, almost entirely in debt, at the height of the metals boom.
Rio must pay back $19bn on the deal by October next year, but the slump in commodity prices has forced the company to try to raise the money from Chinalco instead.
"There are aspects of the future reading of aluminium prices which we did not get entirely right," Skinner said.
The Chinalco deal, which requires shareholder approval, would allow the Chinese company to double its Rio stake to 18% and buy large stakes in its best mines in return for a cash injection of up to $19.5bn. Private and institutional shareholders are angry because the deal ignores their pre-emption rights – they should have first refusal on any new shares issued – and would dilute their stakes.
Earlier, Skinner had defended the large number of non-executive directors retained by the company – many of them recruited from outside the mining industry. He said they brought outside industry expertise and perspective to board meetings. This prompted the question, which raised laughter: "So how did you miss the financial crisis coming?"
The company also said it had raised $3.5bn by issuing bonds, the first time the credit crunch had allowed it to do so since last summer. Rio had to agree a coupon of almost 9% to get the sale away.
One elderly shareholder, a former chartered accountant who said he had held shares in Rio since 1962, responded: "I get 0.1% interest from my Barclays ISA, I would be more than happy to get 9%." Another shareholder said: "If such a loan stock was offered to existing shareholders and as an open offer in the UK you would have your arm taken off."
Andrew Hickman, another shareholder, criticised the practice of dumping tailings – water containing waste minerals and chemicals – directly into rivers at the Grasberg mine, in a remote forest region of Indonesia. Rio holds a stake in the mine, one of the world's largest copper and gold deposits. Skinner said there was nowhere else to dispose of the tailings. He said Rio did not operate the venture but had many suggestions about how to improve the mine's environmental impact.
The Government Pension Fund of Norway, one of the world's largest pension funds, does not invest in Rio or its joint venture partner Freeport because of environmental damage caused by the mine.
Shareholders have a dig at board
Paola Totaro - Syndey Morning Herald
16 April 2009
SHAREHOLDERS at Rio Tinto's annual general meeting in London have raised angry objections to the mining giant's planned $19.5 billion alliance with Chinalco, describing it variously as "crazy and misguided" and "deeply unfortunate".
More than 300 shareholders attended the meeting at the Queen Victoria Conference Centre in Westminster yesterday, making clear their anxiety at several major financial decisions by the board, including multimillion-dollar bonuses paid to key executives.
The chairman of Rio Tinto, Paul Skinner, and the chief executive, Tom Albanese, fielded a series of questions and criticisms, ranging from debt management and the resignation of chairman-elect Jim Leng over the Chinalco deal to its rejection of a 98.5 billion ($201 billion) bid from BHP last year. Heated environmental concerns about US, Canadian and West Papuan operations were also raised.
The meeting, which ran for more than three hours, saw one well-spoken elderly English man suggest that arms should be torn off over the board's management of the crippling 26 billion debt pile created by the purchase of the Canadian aluminium producer Alcan at the top of the market two years ago. The miner has been stymied, too, by falling commodity prices stymieing cashflows and the stall of planned asset sales.
Another shareholder likened the proposed sale and partnership with Chinalco to selling the family silver and mortgaging parts of Rio Tinto to China.
"I really don't see why if you foresee demand for iron ore and commodities increasing in the long term, why you can't negotiate with the Chinese without mortgaging the company's prime assets," he said.
"It is analogous to the panicked sales seen in property and householders . . . please, please retain a route to a rights issue and please don't get us into this strategic mire . . . you will regret it," he said to rousing applause.
A woman shareholder who waited for almost two hours to be given the microphone also won applause when she demanded to know why the BHP Billiton offer last year had not been accepted "when we would all be better off now" and asked the board to explain in detail why one of its directors, Dick Evans, should be paid a bonus of 1 million for his management of the troublesome Alcan deal.
At a media conference after the meeting, Mr Skinner expressed some regret at the Alcan deal, although he insisted they were happy overall. "There are some regrets, but not about the assets or the quality of the asset."
The meeting was held within hours of Rio's announcement of a $US3.5 billion bond raising which its chief financial officer, Guy Elliott, described as business as usual. The chairman earlier told the meeting he would be replaced by Jan du Plessis after the annual meeting of Rio's Australian arm in Sydney on Monday.
He said the company faced "very difficult markets and weak demand conditions" and that China would release its first-quarter gross domestic product figures overnight, too.
"It is true that economic growth rates in China have fallen as a result of a sharp slowdown in its Western export markets."
He said it was difficult to predict when global economic activity would recover, but when it did, metals and minerals demand could pick up "quite rapidly" so customers can rebuild stocks.
Executives at Rio face wrath of investors
By Adam Jones, Financial Times
April 15 2009
Rio Tinto executives treated disgruntled shareholders on Wednesday with conciliatory attention as they indicated that compromises were not out of the question on the terms of the miner’s fund-raising deal with Chinalco .
Rio had redoubled efforts to listen to shareholders, said Paul Skinner and Tom Albanese, chairman and chief executive respectively, during three hours of questioning that included shareholders accusing Rio of “selling off part of the company silver”, being “totally unreasonable to agree to forget investors’ pre-emption rights” and dragging the group into a “strategic mire”.
Rio’s shareholder base remains divided two months after the company proposed to raise $19.5bn from Chinalco.
It will receive part of those funds by selling asset stakes to Chinalco, and another part by offering Chinalco a bond that the Chinese group will later convert to shares, enhancing its position as Rio’s largest shareholder.
A point of contention for many UK shareholders remains their exclusion from the bond, which not only converts to equity but pays a 9 per cent coupon.
Asked if there was room for compromise with shareholders on the bond offer, Mr Skinner said it was too early to speculate. But he added: “We hope to be in a position to offer something that pleases everyone.”
Any changes to the deal terms would require assent from Chinalco. A person close to its thinking has indicated that the Chinese miner is more flexible on bond terms being altered than asset stakes being changed.
Rio executives implied there would be a concerted effort to listen to shareholders in the months before the Australian government rules on the Chinalco deal this summer, a precursor to Rio shareholders voting to approve or reject it in a special meeting.
The softened tone was new to Mr Skinner, who will soon leave the chairmanship. The commodities boom made Rio very profitable and inspired it to pay $38bn for aluminium maker Alcan.
However, this created a debt burden when commodities prices slumped last year, leading Rio’s board to consider Chinalco’s $20bn offer.
The miner revealed that first-quarter production of iron ore had fallen 15 per cent year on year.
Rio also priced $3.5bn of bonds to help refinance existing debt. It is the latest miner, after Anglo American and BHP Billiton, to tap the bond markets which Guy Elliot, Rio finance director, said were “open for business”.