Flogging a Dead Horse: the 2017 GCM Resources AGM

“The overall indication from various departments has not been entirely negative…” Datuk Michael Tang, Executive Chairman, GCM Resources.

Report on the GCM Resources AGM, 4 Hamilton Place, London W1,
Tuesday 12 December 2017

by Richard Solly, Co-ordinator, London Mining Network, with assistance from Sam Brown and Samarendra Das

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. Every year, at the company’s AGM, they tell us that one day it will go ahead, despite fierce local opposition and government ambiguity.

This year, GCM’s Executive Chairman Datuk Michael Tang characterised the state of official Bangladesh government support for the project by saying, “The overall indication from various departments has not been entirely negative…”

Goodness, what a ringing endorsement of so many years of work!

(For reporting on the protest outside the AGM, see Protest against Global Coal Management plc at their AGM and GCM must leave Bangladesh now!)

1. Michael Tang was joined on the directors’ table by Nik Raof Daud )Non-executive Director) and James Hobson (Finance Director) and, unlike last year, by Chief Operating Officer Gary Lye. Gary Lye joined last year’s AGM by skype from Bangladesh, apparently to save costs. The company had apparently decided to throw caution to the winds and actually bring the man to face shareholders in person.

2. Michael Tang began the company’s AGM by reporting that GCM had continued to make progress with its principle partner, China Gezhouba Group International Engineering Company Limited (CGGC, ultimately owned by the Chinese Government). The two companies were working together on a proposal for a mine mouth power plant to provide an integrated power solution for the Government of Bangladesh.

3. Last month, GCM had raised £2 million before costs, enabling all shareholders to participate in enabling GCM to continue pursuing its strategy of a joint mine and power plant proposal. There were significant challenges ahead, he said, “not least, achieving approval” to go ahead. But the company was moving in the right direction and hoped to continue the momentum in the New Year.

4. The Chairman then moved the formal business of the meeting. He asked that anyone raising questions give the number of their shares – a most unusual practice. But at least it makes clear that companies are not democracies, but plutocracies. All items on the agenda were passed, of course. The AGM was then formally closed, and only then were ‘general questions’ taken. This is poor practice but it seemed a waste of effort challenging it, as I had done so before to no avail.

5. When Michael Tang called for questions, there was silence. Perhaps everyone was simply too appalled to speak – either (like us) out of horror at the massive destructive potential of the Phulbari project or (for the handful of other shareholders present) frustration at the company’s continued failure to get on with it and make a return on their investment.

6. After a while, shareholder Brian Mooney said, “If no one else wants to speak, I’ll kick it off. I’ll just say the same thing I say every year: have you yet had a meeting with Hasina?” (Hasina is Bangladesh Prime Minister Sheikh Hasina Wazed.)

7. Michael Tang was clearly discomfited by this question – again. He replied, “Um, we’ve not had a meeting… um… with the Prime Minister… um… herself yet.” However, they were continuing to work with departments under her, including a ministry that she chairs personally, in addition to being Prime Minister, and which oversees the Phulbari project.

8. Brian Mooney continued, “Given that the ultimate decision is hers, would it not be good to have a dialogue with her? This has dragged on. It seems to me there is a political impasse.”

9. Michael Tang agreed, and assured Mr Mooney that “we are working with her bureaucrats and hope to make our way to her office in due course.”

10. Brian Mooney asked, “What is ‘due course’?”  Michael Tang replied, “We would like this to be sooner rather than later.”

11. Brian Mooney continued, “Last year you gave a percentage likelihood of getting the project started. Has this moved?”

12. Michael Tang replied, “Well, I don’t recall giving a percentage success rate. We are optimistic. We are working with CGGC and shareholders and other professional partners who may be able to facilitate.”

13. In response to a question from another shareholder, Michael Tang said, “We have been in discussion and met with ministers, energy and power ministers. We hope to continue dialogue with the help of CGGC.”

14. Brian Mooney said: “You submitted the project twelve years ago and you are still waiting for approval. This is a very long time. There is no sign that this twelve years will not turn into twenty.”

15. Michael Tang replied, “You are right. We are not able to say that the wait will not extend to twenty years, but the government has not said that this project will not go ahead.”

16. In response to a remark by another shareholder, Nik Raof Daud said that the company’s annual report makes clear that there has been a definite change in strategy, and that is to approach the project as a package with a power plant. It is no longer just a proposal for a mine. It is clear that the proposal involves a 2000 Megawatt (MW) mine mouth power plant, as the country needs energy, and the proposal to have imported coal is expensive and the infrastructure challenging. The board believes that this is an added value strategy. This is different from the proposal submitted twelve years ago, he said.

17. Brian Mooney pointed out that the scheme submitted twelve years ago did include a mine mouth power plant.

18. Nik Raof Daud replied that at the time, the company did not have a delivery partner, whereas “we are now working with credible delivery partners.”

19. Gary Lye added: “Time is money, but back then we were in the country at the behest of the government to find coal, but coal had not found its way into the country’s strategy. Coal has risen up into the thinking of the government. This project now links into the strategic thinking of the government. The timing is now right.”

20. Michael Tang said that the Government of Bangladesh had recently awarded coal fired power plant contracts to the international investing community. Prior to this, the largest power plant in the country was only 250 MW. Government energy source policy had been issued and clarified. GCM is in a much better position today than a couple of years ago. The coal fired power plants already awarded are premised on imported coal, which is costlier than domestic coal and requires infrastructure as well as representing an outflow of foreign exchange.

21. Brian Mooney asked, “Is it not the case that the power plants currently envisaged are around the coast? The coal in Phulbari is too far from them to feed them. The only plant you can supply is the one you are proposing yourself. There is no infrastructure to carry Phulbari coal to coastal power plants.”

22. Michael Tang said that infrastructure would have to be constructed but that Phulbari was no further from the coastal power plants than the overseas coal sources.

23. Gary Lye added that Bangladesh was “blessed with mighty river systems” so it would be easier for GCM to supply coal all over the country than for imports to take place, with the necessary construction of major ports.

24. Our friend Sam Brown said that Michael Tang had mentioned that there had been no statement from the government to the effect that the mine would not go ahead; but the Bangladesh newspaper New Age Daily on Aug 24 2015 had said: ‘The state minister for power, energy and mineral resources, Nasrul Hamid, on Sunday said that the government was not interested to extract coal from the deposits in the north Bengal region using open-pit method. “We have decided not to extract coal right now… We must consider high density of population and the agro-based economy of the mining area,” he said, while addressing as the chief guest a seminar on Energy Challenges to Vision 2030.’

25. Michael Tang said he was not aware of that press report, but the company had met with the ministry, including the minister himself, and no such statement had been made to them. The ministry continued to accept GCM’s annual payments for the lease rights.

26. Our friend Samarendra Das asked, “Do you not include ministerial statements in your political risk policy? In 2012, I remember that on 28 November in the UK Parliament, John McDonnell MP, now Shadow Chancellor of the Exchequer, said: “It is important that companies are held to account, and it is also important that Governments are held to account. Will the Minister personally examine the information that has flowed between the Government – that is, the Foreign and Commonwealth Office – and other Government agencies with regard to GCM and its operations at the Phulbari project in Bangladesh?” Political statements have been made by ministries of both the UK and Bangladesh governments, so this has implications for the project to go ahead. From the ground, you are not talking about your social licence to operate. Have you got FPIC [Free Prior Informed Consent] of indigenous communities living around the proposed project?” (Samarendra was referring to information to be found at https://hansard.parliament.uk/Commons/2012-11-28/debates/12112893000003/UK-ListedMiningCompanies and http://www.dhakatribune.com/bangladesh/dhaka/2017/11/26/nasrul-hamid-energy-officials-serve-consumers-honestly/.)

27. Gary Lye said that the minister had made various statements at various venues but “he has not said this face to face to us.” The Prime Minister, Sheikh Hasina, had defended a power plant close to the ecologically sensitive area known as the Sundarbans. She had spent two hours on television in late 2016 pointing to opencast coal operations near Cologne Germany as prime examples of coal operations which work. This was a departure from her theme of defending the power plant at Rampal, so the leader of country has shown that government policy continues to evolve. “It is about negotiating how this will go ahead,” he said. “We need to work to get our project in the right form. Coal is a means to an end and you have to ensure you do the right thing environmentally and socially, and we have got that right. Coal fired power technology is developing rapidly, with the most energy efficient engines you can get, 45% efficiency plus cleanest power. The Prime Minister of the country has demanded that coal power plants going in must use the best technology available. We don’t deal with statements in the media but we will check to see whether there is truth in the report. What is important is what the government says to us. In our dealings with the government, the question is not whether to go ahead, it’s how to go ahead.”

28. Samarendra Das asked, “What about social licence to operate? Are people happy?”

29. Gary Lye replied, “I have got more people on the ground than you have got contact with, and we have set up a system of community liaising people, and we work with them as conduits to provide and gather information. We have people stationed in the field office so the community can come and get information. If you look at all the work we have done, it has had overview from the ADB [Asian Development Bank] and other appointed consultants to make sure everything we do fits guidelines and standards, and we are committed to continue with this approach.”

30. Samarendra Das pointed out that Phulbari had been a case study in the United Nations gathering on business and human rights the previous week in Geneva and asked whether Gary Lye was aware of this. Gary Lye suggested he was unaware of it.

31. Sam Brown said, “Gary, you said GCM fully complies with all obligations. There was an OECD [Organisation for Economic Co-operation and Development] complaint about GCM failing to keep obligations. Did the NCP [UK National Contact Point of the OECD, a UK-government-run body] find against you?”

32. Nik Raof Daud – who was not being addressed and who was not the Chairman of the meeting – said, “You raised this last year and we responded fully. We will not take the question again.”

33. Sam Brown said, “Last year you said that the NCP did not find against GCM on any of the points. Are you telling shareholders that the NCP did not find against you at all?”

34. Nik Raof Daud said, “We will not respond to this again.”

35. Sam Brown continued, “The findings of the NCP state that it finds against GCM. I’ll read it: ‘The NCP finds that GCM partly breached its obligations under Chapter II, Paragraph 7 (which provides that enterprises should develop self-regulatory practices and management systems that foster confidence and trust in the societies they operate in).’ You told me that this did not happen. You say you have support on the ground but reportedly the last time it became publicly known that you, Gary, were in the area, people protested, blocking the highway and damaging the company vehicles and office, and you had to leave under police escort, and you backed legal cases against local activists. To say you have support of people on the ground is not only untrue, but 220,000 people will be impacted as irrigation channels run dry, according to a UN Commission based on an expert committee of the Government of Bangladesh. I’d say to the shareholders, you can invest in your place in history, in projects that support local people, affordable housing, community-owned renewable energy, instead of projects like this that run against local people’s quality of life.”

36. Michael Tang suggested that Sam organise a separate forum if he wanted to discuss these issues.

37. Brian Mooney asked Gary Lye to explain what was happening locally. “Do we actually have a full-time office and staff in the region?” he asked.

38. Gary Lye replied, “Yes, there is a full time office open in Phulbari. It’s open and functioning. In fact, we have guests staying regularly. We have people stationed there and some more senior people passing through a couple of times a month, and they organise meetings with specific groups, and one of the aspects is that the government is running feasibility studies for expansion of Barapukuria [a large coal mine to the north of Phulbari] and a possible new mine to the south. This has caused a lot of interest in the local community. People are very excited about Chinese involvement. At the same time they are raising their own concerns and putting demands to government as they saw they have not been compensated properly for concerns around the existing Barapukuria project, and they want to make sure they get proper compensation. Projects bring huge multiplier for business development. The local community around Barapukuria had its economic situation improved dramatically by providing goods and services to Barapukuria. We are there capturing this information and putting it to our people.”

39. Another shareholder said it was very heartening to hear this. “We as shareholders do not get to hear a lot of this information, only finding out at AGMs,” he said. “Can the company be more informative more often about the various things going on?” He said he was concerned about the ‘consistent aggression’ of the share price. He said that a statement had been issued in May about a power plant consulting group. An agreement had been signed. Was the board confident that the points covered by this agreement would be concluded in the agreed time scale?

40. Michael Tang said that the company was in discussions with CGGC. Six months had gone by, but CGGC are a very large organisation and have “many departments to get through in terms of the paperwork we are discussing with them.” He said that discussions should be finished by 30 June as in the agreement.

41. I asked whether international moves against coal use, including political agreements on climate change and changing behaviour among investors, made the Phulbari project less likely to go ahead. I mentioned that French President Emanuel Macron had made a renewed call for ending coal use in recent days.

42. Michael Tang replied that internationally this would have an impact but that Bangladesh is a developing country with limited resources. Coal is relatively affordable. With the new generation of coal power plants, environmental issues are adequately addressed. Coal will remain a critical source of energy supply for developing countries that do not have access to natural gas or solar, he said.

43. A shareholder who said his name was Geoff said, “Happily, for every Macron there is a Trump, so that balances things out.” (An extraordinary statement! Let us hope that he is wrong!) He said that the CGGC partnership had already developed significant infrastructure projects within Bangladesh and improved how the country operates, and had brought lots of business and wealth opportunities within the country. “You mentioned direct contact with ministries,” he said.”Have they given any feedback about how they feel about that particular partner and how you might follow suit with opportunities in Bangladesh?”

44. Michael Tang said, “It certainly has improved the situation. They are more welcoming in meeting us now that there is partnership with CGGC. The overall indication from various departments has not been entirely negative, but we do have supporters within various departments and we have officials who are lukewarm to our proposal. This is commonplace. We are working through various levels. This is a large scale project which involves various ministries from housing to agriculture to transport, so there are a number of bureaucratic divisions that we have to get through. Bangladesh not known to move very quickly on large scale projects, but in the last year they have awarded very large power and infrastructure projects, so the government is progressing in a positive manner insofar as our direct interaction has indicated. They are more welcoming now that there is partnership with CGGC.”

45. Another shareholder said that elections were due in Bangladesh in the next twelve months. Would this have a negative or positive or no effect?

46. Michael Tang said it would have a positive impact on the Phulbari project. Brian Mooney asked why. Michael Tang replied that the project had “attracted a certain controversy, not least from our friends in this room.” With a new mandate and a new government in place, GCM would be able to move a lot quicker.

47. Brian Mooney said, “So you’d have to wait at least twelve months?”

48. Michael Tang said that he could not comment on this, but he expected a faster pace of implementation by ministries.

49. Gary Lye added that this election would be different from previous ones. The government is in a much stronger position, and more confident, and “this flows on to bureaucrats.” The election “looks smoother than in the past,” he said. Government and bureaucrats are more confident and are delivering on commitments about power supply.

50. Another shareholder noted that there had been a 6% increase in shares issued. No information had been made available as to who were the guarantors.

51. Michael Tang said that following share placement, GCM did not receive any notification of any new shareholders exceeding 3% of the total shareholding. Underwriting was secured through a bid, and the board could not provide further information because of commercial confidentiality.

52. The shareholder asked, “How was Dyani Corporation chosen as a consultant?”

53. Michael Tang said that the consultants were based in Beijing and they were the nominated entity, but GCM may be the only public company they have dealt with in the recent past. They consult on energy and power within China.

54. The shareholder asked who were the directors of Dyani, but Michael Tang would not tell him, saying only, “The board is aware of the people behind Dyani.”

55. I asked why GCM continued to be listed in London, given the heavy Chinese involvement and the secrecy surrounding key people involved.

56. Michael Tang replied that London is a leading financial centre, “so there is an advantage to listing here, and we see no reason to move to another market.” He remarked that in future it may be appropriate to list elsewhere and that one advantage of doing so might be to avoid the presence of objectors within the AGM. I thought this was a little pointed.

57. Sam Brown suggested that the reason for protests at the AGM was that local people’s voices were not being heard by the company. He said, “Local people do not have a voice or stake in making the decision.”

58. Nik Raof Daud replied, “The decision will be made by the government, and they are elected, so we trust that in a democracy local people will have proper representation and ultimately the government will have to make some weighed decisions. Everything you have said today has been shared with local people and shareholders. These are not secrets. We trust in the system of democracy, and the government will have to make those decisions. We are engaging as a company with duly elected representatives and officials of the government. That is how democracy works.”

59. Sam Brown said, “Another way it works is that people who do not feel heard take action and protest. Can you update us on the prosecutions you have brought against local activists?”

60. Nik Raof Daud said, “This can be discussed after the meeting, not in it.”

61. Michael Tang said, “The project will bring significant investment, 50 to 60,000 jobs, new schools, upgrade infrastructure, and provide water to farmers, in a region that has not seen significant development for a long time, plus contributing in excess of 1% of GDP and providing seven billion dollars in taxes and royalties, plus energy for the country. We are confident that we will be developing the region for the good of the people and have the support of the locals.”

62. Sam Brown asked, “When did you last visit Phulbari, Gary? According to press I’m aware of, the last time it was reported there was a twelve hour blockade of the area…”

63. Michael Tang said, “I call the meeting to an end.”

64. Various informal conversations followed, and it seemed to me that some shareholders – not from our network – were not happy about the amount of information they were being given. I find it extraordinary that anyone would put money into this project, but there we are.

65. Outside the AGM, as usual, Phulbari Solidarity Group, the National Committee to Protect Oil Gas and Mineral Resources, UK Branch, and other friends, organised a lively and noisy protest. Inside, the loudest sound was surely that of dead horses being flogged…

(No horses were harmed in the writing of this report.)

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