Gov’ts squeeze mining companies

With miners and their associates having been given a free hand for much of the past decade, one trend of the new decade is a renewed willingness on the behalf of national governments to step in and get involved in the high-level decisions of miners and related business people.

• In Australia, the Singapore Exchange’s politically tone-deaf bid to buy the Australian Securities Exchange was vetoed by Australian Treasurer Wayne Swan, with the explicit backing of Australia’s Foreign Investment Review Board.

“Let’s be clear here,” Swan said. “This is not a merger; it’s a takeover that would see Australia’s financial sector become a subsidiary to a competitor in Asia. It was a no-brainer that this deal is not in Australia’s national interest.”

At a more nuts-and-bolts level, the Australian government publicly said it had “concerns over clearing and settlement” and objected to Singapore’s insistence that it alone would decide what future partnerships the resulting exchange would seek out internationally. An unstated reason was concern over the much lower quality of the Singapore Exchange’s operations compared to the ASX.

The deal’s blocking gives further cover for Canadian politicians to kibosh the London Stock Exchange’s friendly, $3.2-billion bid for the TMX Group, which still needs approval in Canada from five provincial securities commissions – most notably Ontario’s and Quebec’s – and the federal government.

The Canadian government, which has let so many crown jewels be sold off to foreigners in the past decade but last year blocked BHP Billiton’s hostile bid for Potash Corp. of Saskatchewan, may never get to kill the LSE deal, as it may get blocked first by Ontario’s Finance Minister Dwight Duncan, who speaks with great skepticism on the deal whenever it’s brought up. Duncan doesn’t have a direct say in the matter, but the Ontario Securities Commission naturally takes its political cues from the provincial government of the day.

After the stern rebuff from Canberra, the Singapore Exchange’s Swedish CEO Magnus Bocker quickly jumped to his plan B: the promotion of an “ASEAN brand identity” for Southeast Asia’s seven stock exchanges, with a new website giving an “integrated window view” into the ASEAN capital market. (The Association of Southeast Asian Nations, or ASEAN, comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.)

The longer-term plan is to integrate in small steps Southeast Asia’s stock markets into several regional platforms. Malaysia and Thailand are leading the way in this regional integration, even though Singapore considers itself the top exchange of the bunch. 

Meanwhile the Hong Kong Stock Exchange remains the biggest regional competitor to the ASEAN plan.

• Over in Brazil, in another government squeeze, Vale’s dynamic and charismatic CEO Roger Agnelli was told to hit the road by Vale’s controlling shareholder, the Brazilian government, when his contract expires May 22.

Taking the reins in 2001, Agnelli, 51, oversaw Vale’s aggressive, acquisition-fueled rise to become one the world’s top three miners, and he leaves the company as its posts its largest-ever profits.

But Agnelli and his management team drew the ire of the Luiz Inacio “Lula” da Silva-led Brazilian government when the company fired and laid off thousands of Brazilians during the last economic downturn and redirected profits to offshore acquisitions and mine developments at the expense of Brazilian ones.

The Brazilian government holds a controlling interest in Valepar SA, which controls 53.5% of Vale, and the ouster is one of the boldest moves yet by the three-month-old, left-leaning government of President Dilma Rousseff, who was Lula’s former chief of staff.

Workers at Vale’s Canadian operations, acquired through the purchase of Inco, will be familiar with Vale’s new, Valepar-picked CEO, Murilo Pinto de Oliveira Ferreira, who was president of Vale’s Canadian operations until 2008, when he left the company.

Murilo is seen as a more conciliatory figure than Agnelli, and may be more inclined to direct Vale more towards the Brazilian government’s pet projects in steel and energy.