Notes of the Bumi AGM, 14 June 2012, Institute of Directors, Pall Mall, London

The meeting began at 11 am.

Chairman Samin Tan said that it was the Board’s duty to set the strategy for the company. Its vision is to become the main UK-listed coal producer and exporter. It wants to reduce debt in the Bumi group and to simplify the group’s structure. Health and safety, environmental impacts and community affairs are all vital. The company needs to safeguard the health of its workers and engage with communities to enhance its social value. The Indonesian Government says it has no plans to impose an export tax on Bumi’s coal: all Bumi’s coal falls under first generation licences, the terms of which cannot be changed. There is a growing demand for coal from Indonesia, India, China and Japan.

Roger Moody of Nostromo Research raised a point of order about voting, pointing to discrepancies in the company’s Annual Report about its relationship with Bakrie Longhaul Holdings. He pointed out that Bumi’s former chairman, Indra Bakrie, told shareholders on page 7 of the 2011 Annual Report that his eponymous firm held a joint 47.6% stake in the company with PT Borneo. But, some 60 pages later, the Report omits reference to the Bakries having any voting power whatever over the London-listed company. Instead, Mr Tan’s BORN conglomerate is now recorded as holding the 29.99 % of voting shares which the Bakries exclusively enjoyed until earlier this year. Why had this major change not been publicly announced?

Samin Tan offered an extremely convoluted explanation of the corporate relationship. Changes in voting power were arranged between key Indonesian shareholders when they set up two Special Purpose Vehicles in Singapore, and the change was therefore not material. Roger pointed out that it pertained to the transparency of the wider Bumi group. [For a fuller discussion of this matter, see the Nostromo Research article on the Mines and Communities website at http://www.minesandcommunities.org/article.php?a=11759&l=1.]

Andrew Hickman of Down to Earth asked whether all the Board members were present. The Chairman replied that Indra Bakrie and one other Board member were absent. Andrew said that this was surprising given that Indra Bakrie was Chairman during the period under discussion. He said that he had hoped to address some of his questions directly to Indra Bakrie. He asked what is the credibility of Berau Coal when in the last six months there had been various accidents, including the dumping of thousands of bags of coal and the dumping of chemicals in coral reefs in a conservation area. What is the credibility of the company when it allows such things to happen?

The CEO of Berau Coal said that it was ‘not in his knowledge’ that the company was dumping chemicals. The company is the main supporter of the coral reef. It had been awarded a first prize for corporate responsibility for Indonesia one month ago by the Indonesian government and is presented as a model for coal mining for Indonesia. It had never dumped chemicals in a coral area.

Andrew Hickman said that the dumping had been accidental and that he would provide reports of the incident.

Graciela Romero of War on Want asked about corporate responsibility. She said that Bumi plc mentions its committee on health and safety and engagement with communities. She said that it was not clear from the company’s website how communities could engage. Communities have raised issues about displacement for coal extraction. What are the terms of reference for communities who want to engage with the company? Graciela noted that corporate responsibility is voluntary, not binding, and asked how the company could ensure that its code of practice would not only be voluntary but also accountable. How would it respond to complainants in communities? The company was much more powerful than the communities. She said that in March 2011 there had been allegations of mistreatment of workers trying to obtain union rights at the KPC [Kaltim Prima Coal] mine. She asked how the company was safeguarding workers when this occurred. How would workers have rights to collective bargaining?

Chief Executive Officer Nalin Rathod said that there had been no strikes in the history of KPC. Most of the time there was a reasonably satisfactory relationship between workers and management. The company has a reasonably good relationship with employees. There may be a dispute between contractors and their employees. The company has helped contractors come to agreements with their employees.

Graciela pointed out that the company was responsible for the conditions of its subcontractors. This was part of the company’s management responsibility.

Chairman Samin Tan said that it is not the case in Asia that companies are more powerful than their employees or the people.

Graciela replied that the Chairman was ignoring the fact that communities are demanding compensation for what is happening to them. To say that the company is not more powerful than the people is a flagrant denial of responsibility.

Samin Tan asked for evidence of the allegations being made.

Co-chair and Senior Independent Director Sir Julian Horn-Smith said that the company would be happy to engage with its critics but that this was the first time the Board had heard of the allegations.

Roger Moody insisted that the AGM was the correct forum for raising substantive points and that he wished to raise matters about KPC’s mines.

Sir Julian Horn-Smith replied that if the points were serious, he was surprised that Roger had not told them before.

Roger pointed out that the matters he wished to raise had been in the Indonesian press. He said that he had visited KPC four times, both before and after Bumi took control of it. He had seen the devastation upriver, the acid mine drainage and the displaced people. No mention is made in the annual report of the issues raised by the operation of KPC. A lot is apparently envisaged with regard to health and safety at the Berau mines. He asked whether the company was arguing that because Bumi plc’s ownership in KPC is diluted, the meeting could not deal with it, or whether KPC could in fact be discussed at the AGM.

Roger was assured that KPC could be raised at the AGM; but when he resumed his arguments, Sir Julian Horn-Smith told him that he should ‘engage’ with the company at some other time and in some other place. Roger replied that he would not do so, as such matters should be discussed publicly, in front of shareholders, at the AGM. Sir Julian Horn-Smith said that he would accept no ‘lectures’ from Roger about human rights, and accused him of ‘ranting’. Sir Julian appeared to have taken over chairing the meeting, as Samin Tan sat silently during the heated interchange between Roger and Sir Julian.

Richard Solly, of London Mining Network, said that he was unclear who was chairing the meeting, and was assured that it was the Chairman, Samin Tan, who was doing so. Richard observed that he and his colleagues had attended numerous mining company AGMs and that this one was being conducted in a manner so markedly different from all the others he had ever attended that it was a little confusing. He said that he was concerned that the Board had not heard about the points being raised, given that they had been in the Indonesian press, in trade union press releases, on various websites, and in a report published in March by London Mining Network, a report which had been mentioned in debate in the British Parliament. The Board made no response to these observations.

Another shareholder asked what progress had been made towards restructuring the company.

Samin Tan replied that the work was ongoing. He could not report to shareholders yet. When the company came to London they had met with major investors and explained that by July or August of 2012 the company should know what it is achieving.

Andrew Hickman said that he worked on Indonesia and had spoken at various mining company AGMs. He engages with companies but takes his lead from the communities with which he works in Indonesia, and they are suspicious of the power relationships involved with companies ‘engaging’ when the motivation is to keep issues behind closed doors. The company needs to be open and transparent. The impact on communities is the most important matter, but in general the issue of transparency is important.

Samin Tan replied that Berau Coal represents 70% of the economy of the area in which it operates. He asked who it was who was saying that the company is not contributing to the economy or breaching human rights? As for transparency, that was what the Board was at the AGM for.

Chief Financial Officer Scott Merrilees said that the three companies in the Bumi Group are all well established and it is important that communities thrive as a result of national resource development. Coal producing areas are doing very well in Indonesia. The mines provide employment and this has a multiplier effect in the local economy. The mining companies provide fresh water, build schools, churches, mosques, roads and electricity generators. The areas around KPC, Arutmin and Bumi’s operations are thriving. The Board takes all allegations very seriously. He urged that if people had specific facts they should put them in writing and tell them.

Roger Moody said that KPC was doing many good things as well as many bad things, but asked why health and safety at KPC was not included in the annual report so that it could be addressed by shareholders.

Samin Tan said that Roger’s point had been noted.

Richard Solly asked what financial and legal risk assessment the company had conducted given its heavy reliance on coal production, in light of the fact that international concern about climate change was making the possibility of legislative change more likely. The Board appeared not to understand the question. Samin Tan said that the company complied with all Indonesian laws. Nalin Rathod said that the company had the approval of the Government of Indonesia for the volumes of coal it was producing. Nobody on the Board appeared aware of the possibility of lawsuits against companies making large contributions to greenhouse gas production.

Samin Tan then announced that the resolutions were set out in the notice of meeting; that voting would be by poll; that shareholders and proxies should complete the voting cards and deposit them at the back of the room before leaving; and that results of the poll would be announced that afternoon via the London Stock Exchange and on the company’s website. He then closed the meeting, without running through the resolutions individually or giving shareholders any opportunity for asking questions about them.

The meeting finished at 11.45 am.

Sir Julian Horn-Smith then approached dissident shareholders and chided them for raising human rights issues at the AGM rather than ‘engaging’ with the Board. Both Roger Moody and Richard Solly replied that in their view it was important that such issues should be raised in public at the AGM. Sir Julian accused them of ‘ranting’ and stalked off.

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