From Finance Institutions in Mining

Jump to: navigation, search
Navigation
TOOLBOX
LANGUAGES
This page was last modified on 14 August 2013, at 14:36.

CS

CS
Based in Zurich
Active in India, Australia, Zambia, United States, DR Congo, Bangladesh, Philippines, Argentina, Chile, Ecuador, Namibia, Uganda, Ghana, South Africa, Colombia, Peru, Bulgaria, Spain, Greenland, Tunisia
Targeted base metals, construction minerals, energy fuels, precious metals

Credit Suisse/ Credit Suisse First Boston Equities/ CS and Glencore (qv) in 2006 formed a joint venture to trade in metals and minerals derivates [Forbes.com 3 August 2006].

This partnership followed a similar joint venture set up by the two firms, in power, petrol and oil trading, along with the major US electricity utility TXU [Forbes.com ibid].

Then, in August 2011, CS announced that it had completed the first ever coking coal swap transaction via a new over the counter contract cleared by the CME Group .

The contract was between Credit Suisse and an "unnamed coal industry participant", involving 60,000 tonnes of coking coal, settled against the Platts Australian coking coal index [Reuters 29 August 2011].

The transaction was said to have have been concluded "more than three years after Credit Suisse and Deutsche Bank co-launched an over the counter iron ore paper market by offering cash-settled swaps settled against index-based reference prices". This would "enable[s] [steel] mills to hedge all of their variable costs" [Reuters ibid].

As of 9 September 2011, CS held 4.95% of GCM Resources - a position that has remained constant since 2009 [Hemscott 14 August 2009]. The bank's holding was through CS Securities (Europe) Ltd. A year later, in November 2012, CS First Boston was registered as owner of the same amount of shares.

Formerly known as Asia Energy, GCM is manager of the notorious, blood-stained Phulbari coal mine project in Bangladesh. Thansk to this, CS was the subject of a letter-writing campaign by European and Bangladesh NGOs in late 2007 (at which point it somewhat reduced its equity stake in GCM, but increased it shortly afterwards)

In 2009, the bank also held 4.43% of African Minerals (see Prudential PLC) [Hemscott 22 February 2009].

CS Securities Ltd has 5.79% in Central African Mining & Exploration (Camec), active in DR Congo (see Capital Group Companies, and RP Explorer Master Fund).

In February 2009, CS Securities Europe held 9.45% of Alexander Mining PLC, which sells mining and mineral processing technologies [Hemscott 12 February 2009]; 3.74% of Aricom [Hemscott 13 February 2009], and 4.72% of Mwana Africa PLC (see HSBC Global Custody Nominees (UK) Ltd)) [Hemscott 14 February 2009].

It also became the third biggest shareholder (at 3.94%) in BlackRock World Mining Trust PLC (qv) and also held:

  • 5.30% of Nufcor Uranium Ltd (see Deutsche Bank) [Hemscott 14 February 2008];
  • 4.76% of Kalahari Minerals PLC (see RAB Capital) [Hemscott 12 February 2008];
  • 4.25% in Diamondcorp PLC [Hemscott 11 February 2008];
  • 8.49% of Van Dieman Mines PLC (see Galena) [Hemscott 12 February 2008];
  • 5.84% of Palmaris Capital plc (qv)

In 2003, CS arranged made a “Capital Management Arrangement” for the controversy-ridden Tampakan Copper Project in Mindanao, the Philippines, although this was terminated in 2006. [Piplinks Research, 2007]; in mid-2007 it held 3.42% of Minerals (now Intex) [Philippines Research, 2007].

CS Client Nominees (UK) was in 2008 the biggest stock holder (10.82%) in Mariana Resources Ltd, which invests in, and explores for, gold, silver, copper et al in Argentina, Chile and Ecuador [Hemscott 12 February 2008]. It also held:

  • 9.27% of the seabed minerals “explorer”, Neptune Minerals PLC [Hemscott 13 February 2008];
  • 7.31% of Oriel Resources – focussed on chrome and nickel in Russia [Hemscott 13 February 2008];
  • a small stake (3.08%) in Cambrian Mining PLC [Hemscott 11 February 2008];
  • just under 8% of Cape Diamonds PLC [Hemscott 11 February 2008];
  • 12/42% of Tower Resources PLC, active in Namibia and Uganda [Hemscott 13 February 2008];
  • 4.28% of gold “recovery” junior, Goldplat PLC, operating in Ghana and South Africa; and
  • 4.95% of Ariana Resources plc (see Starvest PLC).

As of November 2007, CS's UK nominees held 3.13% of Palmaris Capital plc (qv.) and by mid-2007 had become the largest single shareholder in Cambridge Mineral Resources plc, engaged in extensive gold prospecting in Colombia, Peru and Bulgaria and which, in 2006, acquired the major Masa Valverde base-metal deposit in Spain. [Cambridge annual report, 2006, 14 June 2007]. CS Client Nominees’ holding in Cambridge was itself held by RAB Special Situations (Master Fund) Ltd (qv).

In February 2009, the nominees were the biggest holder of shares in Angus & Ross PLC, whose prime asset is a lead-zinc mine in western Greenland [Hemscott 12 February 2009]; and second biggest fund holder in Beowulf Mining PLC – see Sunvest Corporation Ltd [Hemscott 13 February 2009].

(Note: In 2009, Angus & Ross renamed itself Angel Mining plc; its Greenland lead-zinc mine has been shuttered for some time. See: http://moneytometal.org/index.php/Cyrus_Capital_Partners ).

Credit Suisse First Boston Nominees in February 2008 held 21.85% - as the biggest shareholder – in Maghreb Minerals PLC, which explores for lead, zinc et al in Tunisia [Hemscott 12 February 2008]; and 3.26% of UMC Energy PLC [Hemscott 12 February 2008].

In July 2011, the Berne Declaration (based in Switzerland) rounded on both UBS AG and Credit Suisse for their financing of what it declared to be "the world’s most controversial mining company: Vedanta Re-sources".

Dubbing the UK-listed company its “Worst in Class", the Berne Declaration commented:

"In 2009, Vedanta earned the number two spot on a list of “most environmentally and socially controversial multinational companies” by RepRisk, a service provider for rep-utation risk, specializing in the financial sector. In 2010, Vedanta Resources occupied third place, just behind Transocean and BP. Amnesty International had already written about Vedanta in 2009, in an investor briefing specially-tailored to the financial sector. Vedanta is also one of the few firms for which Amnesty has produced a detailed research report on its human rights violations.


"[Vedanta] has plants in India, Zambia and Australia. In the high-risk mining industry, Vedanta has a particularly bad reputation. Since 1997, the firm has been confronted time and again with complaints and charges of displacement, land grabs, pollution, lack of security, tax evasion, con-struction without a permit, etc." [ One Step Forward,Two Steps Back: Credit Suisse,UBS and Human Rights, Andreas Missbach, Ph.D., Fabian Jucker, Berne Declaration, July 2011].

On the eve of the 2011 climate change conference (Conference of Parties) held in Durban, South Africa,four organisations (urgewald of Germany, BankTrack, and South Africa groups Earthlife Africa and groundWork) identified CS as the 9th heaviest financier of coal fired electricity and coal mining in the period 2005-2011. According to the report, CS had released 9,495 million euros of such funding [Bankrolling Climate Change, urgewald et al, 2011].

In March 2012, Credit Suisse Securities (Europe) Ltd acted as issue manager and bookrunner for US$300 million of five-year fixed-rate notes, for Carmen Copper Corp. A subsidiary of Atlas Consolidated Mining, Carmen is said to be the first Philippines "local miner to tap the offshore debt market" [Reuters 12 March 2012].

Two months later, CS along with Deutsche Bank AG (DB), Goldman Sachs Group and Morgan Stanley, acted as joint co-ordinators for an IPO on behalf of Graff Diamonds, a London-based retail diamond firm.

Graff chose to list on Hong Kong’s stock exchange,rather than the LSE - dealing a “bitter blow" (as cityam describes it)to the world’s leading mining stock exchange [cityam, 8 May 2012].

In June 2012, CS and Barclays agreed to provide up to US$120 million of debt financing for Edgewater Exploration Ltd's Corcoesto gold project in northern Spain [MJ 22 June 2012].

Practice and policy - are they together?

Credit Suisse's "Summary of Mining Policy" (as of October 2012) says it "seeks to promote responsible mining practices that protect the environment, ensure health and safety for workers and local communities, and engage the public through consultation and disclosure".

The Policy commits the bank to "..only finance or advise reputable mining companies with a record of responsible management of environmental and social issues relating to their operations. Assessments of a mining company’s reputation and management practices should be based on its ability to demonstrate that it has adequately addressed the following issues:

■ Water contamination and use ■ Habitat depletion, fragmentation and degradation ■ Waste management ■ Site decommissioning and remediation ■ Worker and community health and safety ■ Public involvement, consultation and disclosure

"Where subcontractors are used for operations that have a significant impact on the above issues, the mining company should be able to demonstrate that it has processes in place to ensure subcontractors comply with the mining company’s standards.

As to standards: "Credit Suisse encourages mining companies to comply with the following best practice standards and initiatives: International Finance Corporation’s (“IFC”) Environmental, Health, and Safety Guidelines for Mining and for Construction Materials Extraction; Extractive Industries Transparency Initiative (“EITI”); International Council of Mining and Metals; Voluntary Principles on Security and Human Rights (for security services); International Cyanide Management Code (for gold mining)".

All this is par for the course in the case of other major European investment banks - and CS goes a step further than some of these, stating it "will not finance or provide advice on operations undertaken by mining companies in the following areas:

■ UNESCO World Heritage Sites (unless the activities pre-date the UNESCO designation) ■ Wetlands on the Ramsar list (the Register of Wetlands of International Importance of the Ramsar Convention on Wetlands) ■ Most protected areas (IUCN categories I, II, III and IV) ■ Primary tropical moist forests, High Conservation Value Forests (HCVFs) or critical natural habitats, where the operation results in significant degradation or conversion (unless legacy assets are involved)

" ii. Tailings disposal in riverine or shallow sea environments. Credit Suisse will not finance or provide advice on operations undertaken by mining companies that include the disposal of tailings in a river or shallow sea-water environment.

" iii. Mountaintop removal mining. Credit Suisse will not directly finance or provide advice on operations to extract coal or other resources where mountaintop removal mining practices are used".

Nonetheless, in 2010, CS made a loan to the Bakrie Group of Indonesia, via Recapital Advisors to enable the group to list its Bumi Resources subsidiary on the London Stock Exchange in 2011. JP Morgan was the chief advisor to Bumi and promoter of the IPO.

While technically not engaged in "mountaintop removal" of coal (as understood in the United States), Bumi's Kaltim Prima mining practices have involved the destruction of several hill areas in East Kalimantan. The consequences of this are strikingly similar to those recorded in the Appalachian region of the eastern USA. [See: http://www.minesandcommunities.org//article.php?a=11939&l=1; http://www.minesandcommunities.org//article.php?a=11759&l=1 ].

As of September 2012, CS was still owed US$440 million by the Bakries on this loan [See: http://uk.finance.yahoo.com/news/broker-tips-bumi-rentokil-stanchart-125208522.html ].

An even more startling anomaly is that, among what CS terms "Sensitive Activities" - for which a transaction must complete the bank's Reputational Risk Review Process and "require a higher level of scrutiny regarding specific issues" - are:

■ Coal mining ■ Asbestos mining ■ Uranium (or other radioactive materials) mining

On financial grounds alone, CS' readiness to consider investing in extraction or use of asbestos is bewildering. In its July 2012 assessment of risks, run by its Australian branch, the bank ranked highest the liabilities of its investment in closed-down former asbestos mining companies (notably CSR and JHX) - they approached 14% of the companies' target price.

But, in moral and reputational terms, its asbestos "policy" sets the bank at odds with growing global public opinion and government decisions that eschew any involvement in promoting the world's deadliest mined material.

In July 2013, at a meeting of 300 CS clients, held by the bank at its New York headquarters, its experts seemed to predict that the recent commodities "supercycle" had come to an end. In a June 25 2013 research note ("Commodities Forecast Update: The Return of Fundamentals"),

CS concluded that the prices of individual commodities would no longer rise and fall together as they have for the past five years,and that investors and traders will have "to focus on the specific supply and demand dynamics for individual commodities" [Business Insider, 5 July 2013].

Toolbox