Archive

Posts Tagged ‘sustainability’

Xstrata retains leadership in Dow Jones Sustainability Index

September 20, 2011 Comments off

“The main sustainability issue facing the mining industry is that of declining ore grades, which implies that over time, more mineral ore needs to be extracted and processed in order to produce the same amount of metal. This is likely to exacerbate many of the environmental and social issues facing the mining & metals industry going forward. Some of the prominent environmental issues include mineral waste management, as well as the management of key inputs such as energy and water. Social issues are mainly centered around the health & safety of workers and general labor conditions. Issues such as land rights, population relocations, the use of private security forces to protect mining assets, and mine closure also remain very controversial. As with other extractive industries, the mining space is particularly susceptible to corruption, bribery and other breaches of the Codes of Conduct”

Source: Dow Jones Sustainability Index Review 2011, September 2011

Observations:

  • Xstrata tops the Dow Jones Sustainability Index for the basic resources sector for the second year in a row.
  • Most important changes of the index for the mining industry are the inclusion of Newcrest and Kinross, and the removal from the index of ArcelorMittal and Goldcorp.
  • Assessment criteria include economic, environmental, and social topics. Full list of criteria can be found here.

Implications:

  • Inclusion in the DJSI is mainly a marketing issue; it does not have direct operational or financial consequences. Many countries do require foreign investors to adhere to global reporting initiatives to ensure a certain level of sustainability, but DSJI requires a much broader set of policies.
  • Xstrata especially scores higher than industry average in terms of climate strategy, mineral waste management, human capital development, and standards for suppliers. The benchmark report will certainly be used by some companies to prioritize areas for improvement.

©2011 | Wilfred Visser | thebusinessofmining.com

Glencore reveals mine fatality figures

September 8, 2011 Comments off

“Glencore recorded more deaths at its industrial operations last year than any of the other “big five” London-listed miners. The world’s largest commodities trader listed the deaths of 18 employees and contractors in its first disclosure of safety and environmental information.

Among its closest peers in the mining sector, there were three deaths at Xstrata, three at Rio Tinto, five at BHP Billiton and 14 at Anglo American, according to data published by the companies. Among FTSE 100 mining companies, only Kazakhmys and Vedanta recorded more fatalities with 26 each. Glencore, which raised $10bn (£6bn) in May in one of the largest ever initial public offerings in Europe, has until recently published little information on its industrial and trading operations.”

Source: Financial Times, September 7 2011

Observations:

  • Together with an extensive half-year results report and presentation, Glencore published its first sustainability report this week.
  • Glencore’s fatality frequency rate (FFR: fatalities per million hours worked) was 0.1034 in 2010, down 25% compared to the previous year. The All Injury Frequency Rate for mining activities was 3.45, down 17% from a year earlier.

Implications:

  • The comparison with other large miners as made by the Financial Times is rather shortsighted. Risks at any type of operation are unique and cannot be compared easily. With the nature of Glencore’s assets (Kazzinc, Katanga, Mutanda, Mopani, Los Quenuales, etc.), which are often located in developing countries and/or operated by local companies, it is obviously harder to manage safety than in large centralized operations in Western countries. However, it is a good sign that Glencore reports the figures and indicates it wants to manage safety at a global level.

©2011 | Wilfred Visser | thebusinessofmining.com

Vedanta Resources raises dividend

May 6, 2011 Comments off

“Vedanta Resources is banking on robust metal consumption in Asia to drive growth in 2011 as it announced a bumper dividend on the back of higher commodity prices in its full-year results. The FTSE 100 listed resources company anticipates ‘continued growth’ in zinc and copper demand from India and China in particular as it announced a final dividend of 32.5 cents per share for the year ending 31 March 2011. That brings the total dividend to 52.5 cents, up 16.7 per cent on the year before.

A year ago Vedanta announced it would boost its operations with the $1.5bn acquisition of Anglo American’s mostly African zinc assets. Vedanta declined to give specifics on the timing of a planned London flotation of its Zambian copper business. The business increased earnings by 190 per cent to $440m last year.”

Source: Financial Times, May 5 2011

Observations:

  • Vedanta’s fiscal year ends on March 31. EBITDA increased from $2.3bln in 2009-2010 to $3.6bln, mainly driven by increased iron ore and zinc income. The full profit increase was price-driven, with a small volume increase offset by an operational cost increase.
  • Zinc production in India still is the key pillar for Vedanta’s operations, contributing over 1/3 of total EBITDA. The Zinc India operations are controlled via Sterlite Industries, in which Vedanta holds a 55% interest.

Implications:

  • Vedanta lists 3 strategic priorities: growth; long term value; and sustainability. After completion of the Cairn India acquisition growth will mainly need to come from organic growth while debt is reduced. The company hopes to create long term value by cutting costs and rationalizing the complex group structure.
  • Sustainability has become a hot theme for the company after it was criticised heavily for social and environmental practices. An independent review by Scott Wilson was done at the end of 2010, resulting in a set of recommendations that will be implemented. The recommendations mainly focus on implementing the necessary policies, procedures, and governance structure to ensure compliance.

©2011 | Wilfred Visser | thebusinessofmining.com