War Profiteer of the Month: Glencore Xstrata

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Glencore Xstrata is a multinational commodity trading and mining company headquartered in Zug, a “tax heaven” canton of Switzerland. The company was created through a merger or better said a take over by Glencore of Xstrata on 2 May 2013. As of 2013, it ranked twelfth in the Fortune Global 500 list of the world's largest companies.

Listed on the London and Zurich stock exchanges, it is one of the top producers of resources such as chrome, coal, copper, nickel and zinc. The difference with other mining companies it that Glencore Xstrata is also a mayor commodity trader (including oil but also food). Following in the footsteps of older mining giants such as Rio Tinto and BHP Billiton, Glencore Xstrata has become embroiled in controversies over its labour, environmental and human rights practices.

History

As reported on “The King of Oil: The Secret Lives of Marc Rich” by Daniel Amman"Glencore's history reads like a spy novel". The company was founded as Marc Rich & Co. AG in 1974 by billionaire commodity trader Marc Rich, who was charged with tax evasion and illegal business dealings with Iran in the U.S., but pardoned by President Bill Clinton in 2001. He was never brought before U.S. courts before his pardoning, therefore there was never a verdict on these charges.

Several commodity trading companies, including Trafigura, were founded by former executives of Marc Rich company. As physical commodities traders, along with Trafigura, Glencore's main rivals in 2011 were identified as Vitol and Cargill, amongst a number of others.

In 1993 and 1994, after failing to control the zinc market, losing $172 million, its founder Marc Rich was forced to sell his 51 percent stake majority share in his own company Marc Rich & Company AG to Glencore International.

In 2012 there were several negotiations for a merger between Xtrata and Glencore. During the negotiations there were strong fights between the executives of Xtrata and Glencore, where in the end Gleconre got the uperhand, which meant that more than a merge it was a dr facto take over of Xstrata by Glencore.

In February 2012, Glencore International Plc, agreed to buy Xstrata Plc for GB£39.1 billion (US$62 billion) in shares. Glencore offered 2.8 new shares for each Xstrata share in agreed all-share "merger of equal". It is the biggest mining takeover and after approval for the plan would create an entity with 2012 sales of US$209 billion.

The company's war profiteering record includes: Trading with Apartheid South Africa, the Soviet Union, Cuba, Iran, Israel, etc. The company profited by trading between governments who officially were enemies, or with countries under embargo, thereby making huge extra profits.

Environment and product safety

In 2003 Xstrata admitted that its chrome mines in Kroondal in South Africa were responsible for polluting the Sandspruit waterway. The admission came after the problem was brought to light by an investigation conducted by the NW Eco Forum and Moneyweb.

In June 2008 Xstrata was fined the equivalent of about $60,000 by the Peruvian regulatory agency OSINERGMIN for environmental violations at the Las Bambas copper project.

In Australia, Glencore Xstrata has been facing accusations that its Mount Asa smelter in Queensland is responsible for elevated blood levels of lead in children living nearby. In one lawsuit brought on behalf of a six-year-old girl, the plaintiff’s lawyers successfully pressured the company to hand over internal documents about the matter. The case is pending.

An executive at the Alumbrera copper and gold mine in Argentina controlled by Xstrata was charge but never convicted (case still pending) of criminal charges in connection with contamination of waterways. An appeals court upheld the conviction in 2008 and ordered the seizure of Julian Rooney’s assets, but he was not imprisoned. This was apparently the first prosecution in Latin America for crimes against the environment.

Human rights

Xstrata was one of the companies featured in a 2007 report published by the anti-poverty group War on Want about the role of UK mining companies in human rights abuses in poor countries. The report focused on Xstrata’s Alumbrera mine in Argentina, where peaceful protests carrying out road blocks - which are still taking place - against the construction of the extension project of Agua Rica, which were heavily attacked by the police.

The report also mentions allegations of forced evictions in connection with the El Cerrejon mine in Colombia, where Xstrata has a minority stake, and allegations of mistreatment of protestors at the Bushveld platinum complex in South Africa, where Xstrata has extensive operations.

Colombia

Swiss public television (TSR) reported in 2006 that allegations of corruption and severe human rights violations were being raised against Glencore on account of the alleged conduct of its Colombian Cerrejón mining subsidiary. Local union president Francisco Ramirez was reported to have accused Cerrejón of forced expropriations and evacuations of entire villages in order to enable mine expansion, in complicity with Colombian authorities. According to TSR, a representative of the local Wayuu Indians also accused Colombian paramilitary and military units, including those charged with Cerrejón mining security, of forcibly driving the Wayuu off their land, in what she described as a "massacre".

Glencore/Xtrata's "huge coal operation in Colombia, Prodeco, was fined a total of nearly $700,000 in 2009 for several environmental violations [running in earlier years], including waste disposal without a permit and producing coal without an environmental management plan."

A BBC investigation in 2012 uncovered sale documents showing the company had paid the associates of paramilitary killers in Colombia. In 2011, a Colombian court had been told by former paramilitaries that they had stolen the land so they could sell it on to Glencore subsidiary Prodeco, to start an open-cast coal mine; the court accepted their evidence and concluded that coal was the motive for the massacre.

Bolivia

Through its Bolivian subsidiary, Sinchi Wayra (which it acquired in 2005), Glencore operates six businesses in Bolivia that mine and process tin, silver, gold and zinc.; notable among these has been Empresa Metalurgica Vinto, reportedly the world's largest privately run smelter complex, located in the department of Oruro, which was seized and nationalized by Bolivian President Evo Morales on February 9, 2007. At the time of the seizure there were no plans to compensate Glencore.

Ecuador

"In Ecuador, the current government has tried to reduce the role played by middle men such as Glencore with state oil company Petroecuador" due to questions about transparency and follow-through, according to Fernando Villavicencio, a Quito-based oil sector analyst.

Zambia

"Officials in Zambia believe pollution from Glencore's Mopani mines is causing acid rain and health problems in an area where 5 million people live."
Investments in the Democratic Republic of the Congo

The company's Luilu copper refinery uses acid to extract the copper. For three years after taking over the mine it continued to allow the waste acid to flow into a river. The chief executive, Ivan Glasenberg, was interviewed for Panorama by John Sweeney and said 'It was impossible to remedy any way faster'

They have also come under scrutiny for acquiring illicit "conflict minerals"

Glencore has acquired stakes in the Kansuki mine in Congo’s southern Katanga Province: Congo’s government transferred a 75 per cent stake in Kansuki mine in secret and at vastly undervalued prices in July 2010 to a company in which Dan Gertler, who is a close friend of President Joseph Kabila, has an interest. Just a month later in August 2010, Glencore took half the shares of the company that acquired that 75 per cent stake, becoming the operator of the mine. Glencore is financing the entire development of the Kansuki mine, thereby carrying the costs for its other partner companies which are associated with Mr Gertler.

Glencore has a 50 per cent share in SAMREF Congo SPRL, a Congolese registered company holding 80% of the Mutanda mine. SMREF Congo SPRL recommended on 1 March 2011 that Congo’s state-run company Gecamines, holding the other 20% share in the Mutanda Mine, sell this share to Rowny Assets Limited, an entity associated again with Dan Gertler. The state-owned share was sold in secret and undervaluated. Glencore has been designated operator of the Mutanda Mine.

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