When will GCM Resources be put out of its misery?

GCM AGM demo 2014

Photo: Diamond Studios

Report on the GCM Resources AGM, 4 Hamilton Place, London W1, Tuesday 9 December 2014

by Richard Solly, Co-ordinator, London Mining Network

(GCM Resources has only one active project, the Phulbari coal project: this is a plan for an opencast coal mine in north western Bangladesh. The project has been stalled for years as it awaits permission from the Government of Bangladesh. It would probably be kinder to put the company out of its misery, ban the Phulbari project and let the company go into administration, but the saga drags on and on and on and on…)

Same old story

There’s a tedious repetitiveness about GCM Resource AGMs.

It began this year with an apology for absence from two out of the three directors, Guy Elliott and Dato’ Md Wira Dani Bin Abdul Daim. They were absent from last year’s AGM as well. One absence can perhaps be excused, but two in a row begins to look like carelessness.

Then there was company Chair Michael Tang’s demand to know how many shares questioners possess. We dealt with that one last year and established that shareholders have no legal obligation to disclose how many shares they own. I reminded him of this fact, and he dropped the demand. But just in case he is reading this post, I’ll repeat exactly what I wrote last year:

“It’s clear why Tang wanted the information – if you have only got a few shares, everyone can assume you don’t care about the company’s profits and they can discount your opinions. But I am sure that shareholders know that those of us who attend its AGMs to raise objections to the Phulbari project have only got a handful of shares between us. We are there to support the tens of thousands of people in Phulbari and elsewhere in Bangladesh who object to the company’s plans and deserve to have their views conveyed to shareholders.”

Out of his element

Dear old Michael Tang doesn’t really seem to enjoy these kinds of meetings. He frequently took advice from Chief Operating Officer Gary Lye, who sat next to him and seemed to have more of an idea about what was going on.

As last year, Tang tried to get away with passing all the resolutions before discussing the Annual Report. I pointed out that this is very poor practice: how can shareholders decide whether or not they want to vote for proposed directors before we have examined the company’s record over the past year?

“Here, here!” shouted one of the ordinary shareholders. So Mr Tang relented – though he still kept his extraordinarily short report on the company’s activities until after formal business. How different from the larger mining companies! Their Chairmen and CEOs usually give lengthy speeches at the beginning of their AGMs, boring shareholders rigid and testing our will to live. You’d have thought Tang might have taken a leaf out of their book.

One thing that Michael Tang is clearly jolly good at is persuading people to part with their cash. The first question was about the company as a ‘going concern’. A shareholder was worried that the  company would soon run out of cash. What’s the plan? Tang said he would undertake a fundraising exercise in the early part of next year. The shareholder suggested that if GCM is so short of cash, it should not be paying Tang so much money. Tang said that the only reason the company is still a going concern is that he raised the cash for it single-handedly. He must be a hugely persuasive man.

An invisible contract

Golam Mustafa then  said that he understood that no legal contract exists between GCM and the Government of Bangladesh. The Prime Minister of Bangladesh has said that the government would not give a contract to GCM or any other company at present before developing the country’s own skills base. Even yesterday, the Secretary for Energy said that GCM had no contract to do anything in Bangladesh. What right does the company have to sell shares on the basis of a supposed open pit coal mining operation in Phulbari. Is this legal?

Michael Tang said that GCM’s wholly owned subsidiary Asia Energy does have a contract with the Government of Bangladesh.

Zahanara Rahman waved a newspaper article saying that the Bangladesh Government would not allow the project to go ahead. She demanded that Michael Tang show shareholders the paper saying it has permission. If Michael Tang did not have such a paper, Gary Lye should have it.

Gary Lye thanked everyone for their comments and questions – a rather masochistic thing to say, I thought, given the general negativity towards the board and management. He said that when Asia Energy listed on London’s Alternative Investment Market (AIM), a lot of due diligence had been done, and the primary component of it was the contract with the Government of Bangladesh.

Zahanara demanded to see it. Gary Lye said that there are references to it in the listing documents. The Energy Minister is new in his job and is ill informed. It is the Bureau of Mineral Development which has responsibility and it awarded the company the contract. Copies of it exist in Bangladesh and the UK. The mining lease cross references the contract. The company has operated in Bangladesh since 1998 with a registered office and with bank accounts. It has work contracts for expatriate staff. He concluded, “We don’t have to give you proof.”

Golam said that shareholders surely have the right to see the contract if it exists. It was extraordinary to say that the Minister of Energy is unaware of the contract – it is part of his job. He deals with contracts, and both he and the Prime Minister have said there is no contract. So do shareholders have the right to see the contract?

Why are you here?

Tang then demanded to know why Golam had come to the AGM and why he invested in GCM. Tang is not a very smooth operator. Chairmen of the larger companies know full well that there are those who attend company AGMs to speak up for those negatively affected by the company’s operations. Tang seems to think that the only legitimate reason for attending an AGM is sharing a desire to make loads of money. It’s a good thing that not everybody thinks that way. But Golam rightly pointed out that if there is no contract, shareholders will not gain anything.

Tang asked him again why he was attending the meeting. Zahanara Rahman pointed out that shareholders and their proxies have a right to attend it. Gary Lye had just come back from Bangladesh, where he had visited the Phulbari area and people had protested. Gary Lye had called the protesters ‘terrorists’ in a press release published in the Energy Bangla newspaper. If GCM thinks local people are terrorists, why invest in Bangladesh?

There was a bit of back and forth about what Gary Lye had said and why he had said it. Lye said that there had been meetings with different groups in Phulbari and that the protest had been led by three people who do not represent the community’s wishes and do not speak for them. Around fifty youths had joined the protest and “behaved like terrorists, not like normal people.” A security guard had been badly beaten up. The matter was now in the hands of the authorities.

As for the contract, Michael Tang said it was a confidential document which the company is not at liberty to share.

Golam said that he concluded from this that there is no contract.

Several shareholders advised Golam to sell his shares if he believed there was no contract. But one shareholder said that if a government minister is saying that there is no contract, surely the company’s public relations people need to challenge it.

Protests in Phulbari

Sam Brown asked whether it was surprising that there was a protest last week in Phulbari, given what several United Nations Special Rapporteurs had said about the damage the project would cause.

Gary Lye (who by now really appeared to be running the meeting, while the Chairman faded into the background) retorted that the UN Special Rapporteurs did not understand the project, had reacted to a letter from a campaigning group, did not visit the area and had not responded to GCM’s attempts to communicate with them. GCM responded in detail to their comments but was unable to get a meeting with them in Geneva. Reporting in the press was unbalanced.

Zahanara Rahman asked the name of the injured security guard as she would be in Bangladesh soon and would like to visit him. This provoked a flutter of protest from some other shareholders. But Zahanara explained that she had spoken with local people and they had said that in fact nobody was injured, so she questioned the veracity of Gary Lye’s account.

Studies and delays

Matin Sarker said that the latest study on water modelling at the nearby Barapukuria coal mine had been rejected by the authorities. That area is less heavily populated than the Phulbari area, so how can we expect that the plan for water management at Phulbari would be accepted?

Gary Lye replied that the Phulbari study, conducted by international experts, encompasses Barapukuria as it has to cover 10 kilometres around the proposed mine. He could not comment on the Barapukuria study as it was not yet public and he understood that it was still being finalised. But the coal deposits at Barapukuria and Phulbari represent over a billion tonnes of coal and must be tapped.

Sam Brown commented that tapping them would destroy productive agricultural land and displace up to 130,000 people.

Lobbying the government

Shareholder Brian Mooney, who used to work for GCM in Phulbari, pointed out that the Government of Bangladesh was supposed to have approved the plan of work within a short space of time but that the company has now been waiting ten years. When and how will GCM get the contract implemented?

Michael Tang replied that GCM continues with its efforts to lobby the government. It has increased its activities in the local community and the board believes it is in a better position than before to secure approval. He said that in Bangladesh many projects are constantly delayed. Meanwhile, half the country does not have power. But the government has awarded two large new coal fired power projects to international companies in the hope of improving the standard of living of the people of Bangladesh and enhance the country’s economic development. Phulbari is able to produce up to 15 million tonnes of coal a year, equivalent to 4,000 Megawatts of power, so he hoped that the governmment would support GCM’s efforts.

Mr Mooney asked why the company was more hopeful now than at any time in past ten years.

Gary Lye replied that when the feasibility study was produced the company did not realise that coal had not made it into Bangladesh’s energy mix and there was a belief that the country was floating on gas. It had taken a few years for that myth to be dispelled but the fact that the government is now assuming that half the country’s power will be provided by coal means that finally it is all on the table (presumably meaning plans on the table, rather than coal on the table; though GCM’s 2012 AGM did indeed end with coal on the table…). Barapukuria had shown that underground mining is not very successful and is quite dangerous. The mine is combating flooding at present. It can never produce its target one million tonnes of coal a year and this is too small a quantity to make much difference to the country’s energy needs.

Another shareholder asked him to comment on recent suggestions that the country should import coal.

Gary Lye replied that the suggestion had been that coal imports could be a start up. If you begin to build a coal fired power station at the same time as you begin constructing a mine, the mine would beat the power station. Domestic coal is 25% to 30% cheaper than imported coal. Bangladesh has river ports on mighty rivers which produce the largest volume of ocean sediment in the world, so coastal waters are shallow and this makes it difficult to bring in big ships.

I thought, but did not say, that the continued burning of coal is guaranteed to raise sea levels considerably and that this may help with coal imports – though it will also, of course, flood a huge proportion of southern Bangladesh, causing tens of millions of people to have to move. I assume that mention of climate change or ‘stranded assets’ at a GCM Resources AGM would be particularly unwelcome.

The OECD complaint

Kirsty Wright of WDM said that the findings of the complaint against GCM Resources under the OECD Guidelines for Multinational Enterprises had recently found that GCM had breached the guidelines by failing to develop self-regulatory practices and management systems that foster confidence and trust in the societies they operate in. She asked what GCM Resources was doing in response to this finding, and whether it would be done by May 2015, when the OECD’s UK National Contact Point (NCP) would issue its follow-up report.

Gary Lye replied that the detail on the NCP’s website shows that the problem concerned communication between 2006 and 2012 – there was a partial breach of the guidelines because the level of communication with the local community was insufficient because of the instability in the country and the company’s inability to maintain a presence in the field. But GCM had already addressed that and was present again in the communities so people can ask questions and receive answers as they have the right to do.

Michael Tang’s report

With this, Michael Tang put the resolution that the annual report and accounts be accepted, and they were. All the other resolutions were also carried, the formal business of the meeting concluded and the AGM closed. Only then did Michael Tang give an update on the company’s business.

He said that as detailed in the annual report, since the last general election the Government of Bangladesh had been moving towards use of coal for energy generation. There is increased support for the Phulbari Project from local communities. The recent unprovoked attack on GCM’s offices was in no way reflective of local feeling. GCM welcomes the OECD verdict, which was almost wholly in support of the company and rejected the assertions of the groups bringing the complaint. The board will build on this result. The share price has risen slightly in the last year but remains depressed because of overall problems in the industry. Despite the delay in project approval, the board believes that pressing on is the best way of delivering value to shareholders. GCM will continue to talk to the Government of Bangladesh.

The invisible petition

Golam Mostafa said that the report was misleading. Most shareholders have no clue about the community movement in Phulbari. In 2006 people died in protests against the project and the movement is still going on. The present Prime Minister has said that the government will not support this project and the opposition is saying the same thing. Golam said he would find out about the existence of the contract from other sources. He asked which groups in Phulbari the company had consulted.

Gary Lye said that the Phulbari Project cuts into four upazilas (sub-districts). The township of Phulbari sits to the west of the deposit and is where GCM’s office is located. The community that GCM talks to is not just Phulbari township but people across parts of the other three upazilas. More than 70 people in the area provide feedback and disseminate information so the company has a good handle on who it is talking to and when. Gary had been told by community representatives that they had handed in a petition, said to contain 50,000 signatures in favour of the mine, to the upazila head, and had given a copy to the local MP. Mr Lye had not seen the petition.

Zahanara Rahman asked him how he could be sure that so many people had signed the petition. If GCM had such support, why did the police escort him out of the area when he visited recently? He should show shareholders the petition.

Gary Lye replied that the majority of people in the area keep silent but want a job. GCM has a good understanding of their needs. They want to know about how their livelihoods will be affected, what the compensation package is. Nobody could criticise the company for attempting to give people the right to information. If Jahanara wanted to see these groups of people, she should go there.

Zahanara  said she would. People are worried that they will lose their livelihood because of the destruction of farming. How many jobs will there be in the mine? Surely not enough for everybody. So what will happen to the others? What about protection for mineworkers’ health?

Gary Lye then asked Zahanara whether she lived in Bangladesh. She replied that she visits frequently. Michael Tang said the company would be happy for Zahanara to visit the company’s office. She accepted, but said she would speak to local people independently.

Concluding arguments

There was a brief discussion about whether the police did or did not escort Gary Lye and his wife out of the Phulbari area after his recent visit. Gary Lye said that the issue had been over-dramatised in the press.

A further question returned to the matter of lobbying. Gary Lye was asked whether he had ever met with the Prime Minister of Bangladesh. He replied that he had not. GCM had been told to work at the level of state ministers.

Golam said that he knew a few ministers in Bangladesh and that MPs and ministers are asking questions about the project. What is the timeline for implementation of the project?

Michael Tang replied that GCM has no timeline but hopes to shorten the process as much as possible.

Another shareholder asked whether GCM is hamstrung by being a UK company. Would it not be better to have a large Bangladeshi shareholder on board? Should it not be based somewhere else or have a sizeable Bangladeshi shareholding?

Michael Tang replied that there is a group that holds this view. It makes some sense and GCM has received similar comments in country. GCM is listed in the UK but has some Asian presence. He said the point was taken. More local involvement may improve the situation. GCM is consulting influential people inside and outside the government.

Sam Brown said that it was clear that the company, condemned by the UN as a danger to the people of Bangladesh, is not wanted there. As a Londoner, Sam said that he would like GCM to move out of London – it is not welcome here either.

Brian Mooney retorted that what makes London great is that “we accept everybody.”

I thought, but did not say, that among the companies that London has accepted are Bumi and ENRC, both under investigation for corruption, and Vedanta, accused of numerous crimes. MPs and financial commentators are among those calling for UK Stock Exchanges to be considerably more discerning in who they accept.

Sam said that London may accept everybody but people judge them by their actions and the UN report says that the Phulbari project would create severe problems for local people.

Brian Mooney said that the UN report was one sided. Critics should read the company’s own reports and listen to the other side of the story.

The meeting then began to break up into arguments between different shareholders. One concerned the recent OECD report’s failure to evaluate the impacts of the project if it starts. Another was over whether the people of Bangladesh actually want the project: there was a clear division between those – all English – claiming that the people of Bangladesh DO want to the project and those – all Bangladeshi – explaining that they do NOT.

Sam Brown had nearly the last word, though it was greeted by angry shouts. He said that the company was illegitimate, the project illegitimate and the meeting illegitimate. And then the meeting broke up unceremoniously.

Oh, I hope we don’t have to sit through another GCM AGM. Let’s hope that by next December this company and the Phulbari project will just be unhappy memories…

Meanwhile, on the cold street outside, a lively demonstration took place…

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