from Crikey .....

What you won't learn about the Xstrata 'closures' from the media

Canberra correspondent Bernard Keane writes:

CCS, COAL MINING, COPPER MINING, WANDOAN, XSTRATA

The media and the opposition would have you believe the fifth horseman of the Apocalypse, looking very much like Kevin Rudd riding on his RSPT, had gone into Mt Isa and wreaked havoc, in the wake of Xstrata's decision to suspend its Wandoan coal project and an extension to its Ernest Henry copper mine.

It's garbage, and the cleverly tax-avoiding Switzerland-based empire has played this game before.

Let's look at the facts of what they're claiming to do -- facts you won't get from the mainstream media today.

The "$6 billion" Wandoan coal project - it's still in the planning stage and hasn't even received the requisite environmental approvals yet - isn't intended to produce coal for export. As Xstrata itself admits in its spruiking of the project, massive road, rail and port infrastructure upgrades are required if the coal could ever be exported. Instead, the project was dependent on the Wandoan Power project - a Carbon Capture and Storage initiative that is entirely reliant on federal government funding. The government is investing billions in trying to make the so-far commercially-unproven CCS technology viable, but it's not even yet clear if the Wandoan project will attract funding from the government, and won't be for quite some time.

And as always when it comes to the mining industry, look at what they do, not what they say. Remember that huge $4.85 billion bid by the coal industry for QR's coal lines last week? That's the one where the bidders specifically said they were prepared to pay a premium -- using borrowed money -- for the infrastructure because they were so confident of 'future growth' in coal exports.

Who's leading that bid? Who has such confidence in growth in coal exports that they're prepared, even in the light of the RSPT, to pay over the odds for infrastructure? BHP and Xstrata.

Again, look at what these people do and not what they say, because when they open their mouths they lie.

When it comes to the Ernest Henry copper mine, even Xstrata itself is confused. It says it's not proceeding with one extension, but it is with another. Ernest Henry will still be going for another decade, according to the company. The real reason why it isn't proceeding with its more expensive expansion of the mine at this point is simple: the copper price has tanked and doesn't look likely to recover any time soon, not while there are concerns about sovereign debt and banks in Europe and the Chinese government is trying to rein in growth.

Nothing to do with the RSPT. How do we know? Well, Xstrata shut down a major copper operation in Canada back at the start of the year. Since then, the price of copper has fallen further.

This isn't the first time that Xstrata has made these sorts of claims, though.

In March last year, at the height of the CPRS debate, Xstrata confidentially told Malcolm Turnbull they wouldn't proceed with the Wandoan project if the CPRS went ahead. Turnbull, eager to score points off the Government, used the claim in question time, saying it was evidence the CPRS would cost thousands of jobs.

An embarrassed Xstrata then had to back down from the claims, admitting the project wouldn't be substantially affected by the CPRS.

In the 'perpetual present' of political coverage, of course, that's long been forgotten by journalists.

As one former coal industry insider told Crikey: "this is a total con". Threatening to halt or delay projects was, they said, a common industry tactic, and was frequently used during the campaign against the CPRS. "This was all just tactical bullying and everyone in the industry knew that at the time."

And in the mainstream media and lazy journalists, they have a willing ally.

and then .....

Tax havens and cosy deals: the Xstrata story

Canberra correspondent Bernard Keane writes:

GLENCORE, XSTRATA

So what exactly is Xstrata? It's an outfit that rewards some close scrutiny.

See, while Rio and BHP might be every bit the lying multi-national bullies that Xstrata is, at least they're actually genuine mining companies.

But Xstrata makes more sense as a Swiss investment vehicle that has become a major force in mining around the world by acquisition, rather than real growth.

The dominant (34%) shareholder in Xstrata is a privately-held outfit called Glencore. Glencore was founded and run by Marc Rich, the indicted tax evader and embargo-breaker who was notoriously pardoned by Bill Clinton at the end of his term in office. Rich sold out in the 1990s to two of his lieutenants, Ivan Glasenberg and Willy Strothotte.

The CIA has accused Glencore of sanctions-busting deals with Saddam Hussein's Iraq, among other rogue states, and the company has a history of human rights controversies, particularly in South America. Xstrata has long been involved in attempts to de-unionise its Australian workforce and force them onto individual contracts (the Xstratafacts website details the company's ongoing campaign against its workforce).

But Glencore has more than a proprietorial relationship with Xstrata. Strothotte is chairman of both Glencore and Xstrata, and Xstrata shareholders revolted in May against his re-election, with a quarter opposing him (CEO Mick Davis's generous remuneration package was also savaged). Glencore CEO Ivan Glasenberg is also on the Xstrata board.

More particularly, Glencore extracts huge marketing agent fees from Xstrata, worth $80 million in 2008, and acts as Xstrata's distributor for a number of products (and in some cases collects fees regardless of whether it sells Xstrata products or not). The close relationship between Glencore and Xstrata was a key reason for a mooted merger with Vale falling over two years ago, with complaints from other Xstrata shareholders that Glencore had wrecked the deal.

According to Xstrata's 2009 annual report, it gets only 26% of its revenue from Australasia, compared to more than 50% from the Americas. Despite its limited exposure to Australia, its share price fell 10% in May, significantly under-performing local miners with much higher exposures to the government's proposed RSPT.

You might have noticed that, for all its vociferous attacks on the RSPT, Xstrata, led by its South African CEO Mick Davis, hasn't had much to say in the debate about effective tax rates.

That might be because Xstrata is headquartered in Zug, a small canton in Switzerland. Zug is one of the tax avoidance capitals of Europe, boasting "some of the lowest tax rates available in any stable democracy". Glencore is headquartered there as well. Look at BHP's or Rio's annual reports and they produce figures showing they pay 30% tax on their global operations - which leaves out generous deductions and concessions they receive in Australia, but that's another story. Xstrata's figures show they pay 25% globally, courtesy of their use of a tax haven.

It appears Glencore and Xstrata are very sensitive about tax. No wonder they'll say and do anything to ward off the RSPT.