Nov 09 2011
This post is also available in: Icelandic
From Siberia to Iceland: Century Aluminum, Glencore and the Incestuous World of Mining
Glencore are the majority shareholder of Century, the owner of one operational and one half-built smelter in Iceland, it’s key operations for aluminium smelting. But who are Glencore and what are the implications for Iceland? This comprehensive article profiles the world’s biggest commodity broker, who’s only comparable predecessor was Enron. The profile covers the reach and grip of Glencore’s domination of metal, grain, coal and bio-oils markets, allowing it to set prices which profit very few and are detrimental to many. It shows the tight web of connections between the major mining companies and Glencore through shared board history and shared ownership of assets, cataloguing key shareholders (and board members) who’s stakes make them larger shareholders than institutional investors in ownership of Glencore. These connections include Rusal’s co chair Nathaniel Rothschild, a financier with a $40m investment in Glencore, and a personal friend of Peter Mandelson (former EU trade commissioner and British politician) and George Osborne (UK Chancellor).
On the surface, Glencore’s wealth comes from the buying and selling of the world’s commodities (see below for more detail), specialising in grain and metal markets. However, what is unusual for a commodity broker is that it invests heavily in the very companies whose produce it is trading. Its interests are global, from the breadbaskets of Russia, to zinc mines in Kazakhstan, copper and cobalt interests in Congo and Angola, and aluminium in Iceland.
The result is a private network of personal ties and business relationships so tight that what matters to Century also matters to Glencore. The Icelandic government may be doing deals with Century, but Glencore is always present in the background, bringing unsavoury alliances to this particular bed. There are a lot of unanswered questions over how and with whom Glencore chooses to invest. One only has to look at its principle partners and deals to see it does not shy away from exploitation of war torn countries or making alliances with men whose fortunes carry with them heavy taints of corruption. Despite all the exuberance in financial circles at the profits to be made by the Glencore share offering, a few more level-headed traders and journalist are wondering if there should be more caution, especially given how little is known about the inner workings of the company and just how manages to pull off so many exceptionally profitable deals.
It is also worth noting that the last time the world saw such a commodity broker dominate a market to this extent ended up going very sour – that commodity broker being Enron.
Century is a company that specialises in smelting aluminium. It was founded in 1995 when various interests controlled by Glencore were brought together. In 1996 it was spun off as a public company.1 As well as its Icelandic sites, which it owns outright, it owns or has a share in aluminium plants at Ravenswood, West Virginia, at Hawesville (100%), Kentucky (80% owned with the rest owned by Glencore), and at Mt. Holly, South Carolina (50%, the other half owned by Alcoa Inc). In the past it has had interests in the Congo. As a global player it is the 10th largest producer.
Its ownership remains dominated by Glencore at 44%, with the majority of the other shareholders being held in relatively small amounts by US institutional investors (hedge funds etc.).2 It is clear from Century’s website that Iceland is a major part of their business and strategy and three executives of its Icelandic operations are listed as key management.
Gunnar Gudlaugsson, Plant Manager of Nordural Grundartangi
Joined Nordural in 2008, from Straumsvik, the Rio Tinto Alcan smelter, where he had served for over ten years.
Ragnar Gudmundsson, Managing Director of Nordural
Nordural is the holding company for the Icelandic interests of Century. Previously Chief Financial Officer of Basafell, prior to which he was a senior manager at Samskip, both leading companies in Iceland.
Joined Century in 2007, having previously been with Sual in Russia (it was Sual, Rusal and Glencore’s Russian aluminium interests which merged to form UC Rusal). Has also worked for Kaiser and Rio Tinto.
Peter Jones, Director
2001-2006 was President & Chief Operating Officer of Inco Ltd. Former President & CEO of Hudson Bay Mining & Smelting Co (retired at the end of 2009).
David J. Kjos, Vice President of Operations in Iceland
Former manager of Cygnus Inc, an aerospace manufacturing company; prior to that was with the United Development Co & Kaiser Aluminium & Chemical Co.
Joined November 2005. Before Century, from 2003 he had been a leading executive at Inco, the large nickel mining company where he over saw operations in the Asia / Pacific region, including the Goro Nickel operation in New Caledonia and other projects in Indonesia, remaining as a director of the Indonesian subsidiary P.T. Inco (Inco has since been acquired by the Brazilian nickel miner Vale). He has also served as head of Anglo American’s operations in Chile (2002-03) and as CEO of the Hudson Bay Mining & Smelting Co in Canada (1998-2002).3 He is also a director of Amcoal which over sees the South African coal interests of the mining giant Anglo-American.
From 2009 CEO of Minerals and Metals Group; former CEO & Managing Director of OZ Minerals. Both firms are leading Australian mining companies. Minerals & Metals Group is a subsidiary of Minmetals Resources Ltd, a Hong Kong based company with significant aluminium interests in China.
John P. O’Brien, Chairman of the Board
Chairman since January 2008. His background is in business management and restructuring.
Chairman of Glencore and of Xstrata (see below under Glencore).
Jack E. Thompson, Director
Also serves a director for a number of other mining companies including Anglo-American and Centerra Gold (largest Western-based gold producer in Central Asia), among others.
Though there are 4 other directors who appear to represent general institutional investors, it is clear from the above that the board is dominated by mining executives who share considerable common history. There is much more that is not obvious just from this board of directors. For example, Century and Noranda purchased from Kaiser Aluminium the bauxite mine at St. Anns, Jamaica and factory at Gramercy, Louisiana, though Noranda has since bought out Century. Noranda is a spin off from Xstrata who originally purchased it in 2006 when it took over the Falconbridge mining company.
Other links of note are:
Xstrata and Anglo-American Chile are joint owners of the Collahuasi copper mine, the world’s third biggest such mine and which in 2010 saw violent action against striking miners.4
Centerra Gold has acquired the Kumtor mine in Kyrgyzstan from the government there. Given that the deal saw little benefit to the people of that country, it has, as a result, played an important political role there.6 Jack Thompson, board member of Century and of Anglo-American sits on Centerra’s board also.
UC Rusal, the world’s single largest aluminium producer is controlled by Russian oligarch Oleg Deripaska through his En+ Group which he chairs. En+ is the controlling interest in a large number of other extractive and power generation businesses, mostly based in Siberia.8
Xstrata has large interests in Australia where it has been criticised for sharp business practices11, run roughshod over indigenous people at the McArthur River site12 and is subject of a campaign due to its environmental destruction at it Mangoola opencast mine.13
It is hard to single out any firm within the incestuous world of mining conglomerates as being better than the other. All have issues with relationships with indigenous people, suppression of union activity and environmental damage, however the ease at which these accounts can be found in the collective past and present of Century’s key people and directors is telling.
Marc Rich & Co
The origins of Glencore are in the trading firm controlled by commodities baron Marc Rich, a controversial figure over the last few decades. Rich built up a commodities trading empire by making deals with the likes of Ayatollah Khomeini to trade Iranian oil while a US embargo was in place. At the same time he was linking himself to Mossad, the Israeli secret service.
The networks of control associated with Glencore are vast. In terms of its position in the world, it controls huge amounts of the addressable global market in copper (50%), zinc (60%), aluminium (38%), lead (45%), cobalt (23%), ferrochrome (16%), thermal coal (28%), wheat (10%), and one quarter of the worlds barley, sunflower and rape seed.14,15 What this means is that it can effectively set prices for these commodities.
Addressable: the amount of a commodity accessible to a market. For example, many mines are owned by larger concerns who have acquired them entirely for their own use rather than for trading the ore/products on the open market. Thus the percentages quoted are for the volume of the global market rather than the total amount if all production is taken into account.
Leading Business Interests16
Glencore has a vast number of interests around the globe. The following is a brief on some of its leading assets and their problems, and it is certainly not exclusive. Many of the other mines it has a controlling interest in are open cast, with all the attendant problems, such as habitat destruction and pollution of the environment.
The AR Zinc Group, acquired in 2005 operates the Aguilar mine, the Palpala smelter and a sulphuric acid producer, Sulfacid S.A. in the heavily mined north-western state of Jujuy, Argentina. These operations are part of a group of mines and related industries that have caused significant environmental damage and health problems to the various indigenous peoples of the region – demonstrations and protests against the presence of the mining companies have been held, including AR Zinc.17, 18, 19
Glencore have a 40% stake in Minara Resources (formerly Anaconda), which runs the Murrin Murrin mine. Willy Strothotte, Ivan Glasenberg and others connected with Glencore sit on Minara’s board.20 Both Murrin Murrin and Mt Isa Mines, which is controlled by Xstrata, were cited in 2009 as among the worst polluters in Australia.21
Glencore owns the Sinchi Wayra mining company that operates five mines. There has been an ongoing dispute with workers over attempts to increase working hours and on pay. The workers have called on the government to nationalise the company.22 In the past it has been criticized for mass lay-offs as a cost cutting tactic.23
The El Cerrejon Norte mine, jointly owned with Anglo American & BHP Billiton has been described as “a continuing horror story of forced relocations of indigenous people, human rights violations, environmental destruction and other assorted injustices”, in particular against the Wayuu people. Union organisers have received death threats from paramilitaries.24 Similar allegations are made in relation to its coal mine at La Jagua, which Glencore’s subsidiary Prodeco purchased from Xstrata.25,26,27 Prodeco also operates an open cast coal mine at Calenturitas, La Loma.
Glencore acquired control in 2008 of the financially troubled Katanga Mining28, one of Africa’s biggest copper and cobalt producers. It is situated in a highly troubled region where militias have funded their struggles by selling off resource rich land. There are reports of water contamination and poor working conditions at its mines.29 Swiss NGOs have been highly critical of Katanga Mines, with Bread For All and The Swiss Catholic Lenten Fund publishing a report accusing Glencore of involvement with of human rights abuses, child labour, pollution and tax evasion in the region30, which has lead to a campaign against the company. 31 Glencore also owns the new mine at Mutanda, also in Katanga province. Glencore’s minority partner in Katanga is the Israeli magnate Dan Getler who specialises in investments in the Congo and who has links to blood diamonds and to right-wing Israeli politicians, in particular Avigdor Lieberman.32
Glencore has partnered with Kazakhstan private investment company Verny Capital to take control of the Kazzinc, which has extensive mining and smelting interests throughout that country. Currently 51% owned by Glencore, that stake is expected to rise to 93% following Glencore’s floatation. Verny is controlled by the controversial Utemuratov family, which is close to President Nazarbayev, who is also believed to have a stake.33 Under Nazarbayev there has been large-scale transfer of the nation’s mineral wealth into private hands and Glencore has been integral to that process.
Glencore owns the Iscaycruz & Yauliyacu mines (Los Quenualos), which have been accused of unsafe working conditions and subsequent anti-union activities.34
Xstrata’s proposed Sagittarius mine at Tampakan, Mindanao threatens indigenous peoples and important rainforests. On 9th March, 2009 a leading opponent of the project, Eliezer “Boy” Billanes, was assassinated.35 Mines in Philippines, such as this one, have also been linked with threats to food security, partly due to the particular nature of the ecology they work in.36
UC Rusal37, the Russian aluminium giant; controls the world’s largest deposits of bauxite (the ore from which aluminium is obtained) and is the second biggest producer of global alumina (aluminium refined from bauxite) with a 14% of global production. Controlled by oligarch Oleg Deripaska, the firm was created by a merger of Rusal with the smaller SUAL and Glencore aluminium interests. There remain strong links between Glencore and UC Rusal with Glencore owning 8.7% of UC Rusal, and a friendship between Deripaska and Glasenberg.38
As well as UC Rusal, Glencore has numerous other business interests in mineral wealthy Russia. Some of these date back to when Glencore was swift to do deals to take control of Russian state assets following the collapse of the USSR. Though it has been edged out of some of these companies who prefer to sell direct to consumers in China, etc, it does have deals with Russian producers of coal, oil and grain, in part through EN+, Deripaska’s company. There are rumours that it is trying to exploit links into the zinc, nickel and lead producers. Other deals and their relations to Glencore remain murky39, but another major partner is the independent oil refiner Russneft.40
In 2011 Glencore signed an agreement with Mwana Africa to acquire nickel from the Trojan mine at Bindura in Zimbabwe – notable for its links with Morgan Tsvangirai. Mwana’s is a South African based miner with copper operations at Katanga in the Congo and gold mines in Ghana.
Other global interests
Glencore owns the PASAR copper smelter in the Philippines, the Sherwin Alumina smelter in Texas (cited for hazardous chemical releases44,45) and the Portovesme lead and zinc smelter on Sardinia. It also owns 70% of the South African coal miner Shanduka. As owner of the Moreno sunflower oil company, one of the biggest in the world’s largest suppliers of sunflower oil, Glencore is heavily involved in the producing and selling of genetically modified products.46 It controls 270,000 hectares of agricultural land and has various grain processing sites around the world which aid its interests in these markets.
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