An Indonesian coal company on the London Stock Exchange

The KPC mine, East Kalimantan - one of the world’s biggest open-cast coal mines. (Photo: JATAM)

DTE 91-92, May 2012

Campaigners are calling for the UK government to tighten up the rules for companies listed on the London Stock Exchange. A new report, launched in February 2012, includes a case study by DTE on the newly created Bumi plc. This company, is jointly owned by Indonesia’s Bakrie brothers - powerful players in national politics as well as business – and the UK financier Nat Rothschild. Bumi operates one of the world’s biggest coal mines, Kaltim Prima Coal in East Kalimantan, a vast open pit project long associated with evictions, livelihood loss, pollution, strikes and dubious business deals.[1]

London Mining Network, an alliance of 27 human rights, development and environmental groups,  is calling on the British government to firm up the rules for companies listing on London’s Stock Exchange (LSE) as part of the discussion on a new Financial Services Bill.  Looking at eight case studies, UK-Listed Mining Companies & the Case for Stricter Oversight  argues that:

  • Many mining companies listed in London have very poor records of complicity in human rights abuse, environmental pollution or destruction of people’s cultures and livelihoods around the world.
  • Once listed in London, some mining companies have continued to flout the law in the countries where they operate, or engage in damaging tax avoidance, or break accepted international mining industry standards, with no move by the UK Listing Authority to discipline them.

The report follows on from dramatic developments at the end of February in which a proposed opencast coal mine in Bangladesh being developed by GCM, one of the eight case studies used in the report, was condemned as “threatening human rights” by an independent panel of UN experts.[2] At the launch, John McDonnell MP said “We cannot stand by and witness these global mining companies brutally impoverishing and destroying the lives and environments of whole communities. We need not only to expose this exploitation but also to demand that a firm system of international regulation, control and accountability is put in place that halts the destructive activities of these corporate pirates.”

In addition to Bumi, the seven London-listed mining companies looked at in the report are African Barrick, Brinkley Mining, African Minerals, London Mining, Vedanta Resources, Glencore and GCM Resources.

In April and September 2011, LMN submitted comments to the UK Treasury's consultations on the new proposals which include establishing a new body called Financial Conduct Authority (FCA). Based on knowledge of the social, environmental and human rights impacts of mining around the world, LMN considers that this new body needs to be equipped with the authority, expertise, personnel and funding to enable it to exercise vigilance over all UK-listed companies in a way that has been lacking in the past. Reform of securities regulation must result in much stricter oversight, particularly of companies involved in mining and trading in minerals.

Recommendations for the proposed new FCA

If the FCA is to function effectively as the UK’s new listing authority, its operational objectives must include enforcing good conduct on all UK-listed companies. As the case studies in the LMN report demonstrate, even obedience to UK law has not in the past been effectively enforced by the UKLA.

  1. London-listed companies and their directors must obey the law in the UK and in the countries where they operate and face appropriate sanctions when they do not obey the law. This must include compliance with national regulations concerning biodiversity, ecological and environmental protection.
  2. UK-listed companies should be legally required to note in their corporate reports all findings of non-compliance with IFC and OECD standards, and of UK and non-UK regulations concerning biodiversity and environmental protection, as well as convictions in UK and non-UK courts.
  3. The FCA should have powers to enforce the corporate reporting requirements relating to environmental and social impacts contained in section 172 of the Companies Act 2006, with sanctions for failure to comply.
  4. The FCA should ensure that UK-listed companies recognise and respect international human rights and environmental standards to which the UK is a signatory, including the Universal Declaration of Human Rights, the International Covenant on Economic, Social and Cultural Rights, the UN Declaration on the Rights of Indigenous Peoples and the Convention on Biological Diversity, and implement the highest environmental, social, cultural, labour, and health and safety standards.[3]
  5. The FCA’s oversight needs to extend beyond the financial services sector to include vigilance over the behaviour of all companies listed on UK-registered investment exchanges. This will require sufficient funding for the FCA to be able to call on the expertise necessary.
  6. The UK Government should back strong reporting rules for EU-listed and EU-based unlisted mining and other extractive companies. These rules should be based on current European-level proposals requiring extractive companies to publicly report payments to governments and other financial data on a country-by-country and project-by-project basis. EU rules should be at least as comprehensive as listing requirements for mining companies on the Hong Kong Stock Exchange and those proposed under the US Dodd-Frank Wall Street Reform and Consumer Act.[4]
  7. Present regulation of AIM (The LSE’s Alternativie Investment Market) is not sufficiently rigorous to prevent harm and should be improved to ensure that AIM-listed companies fully comply with the human rights, social, cultural, labour and environmental laws, regulations and conventions noted above.
  8. The FCA’s governing body needs to include people with expertise not only in financial matters but also in human rights and environmental protection if it is to exercise its function in a competent manner.
  9. People and organisations with well-founded concerns about the conduct of UK-listed companies should be able to make their concerns known to the FCA through an accessible and transparent procedure. The FCA should take account of, and respond to, these concerns, in compliance with legal obligations, and respect guidelines concerning meaningful public participation in decision-making.


Bumi arrives in London

One of the companies highlighted in the LMN report is Bumi plc, because its listing on the LSE demands greater scrutiny. The following is extracted from the LMN report.

In June 2011, after a ‘reverse takeover’[5] with Vallar plc – a shell company set up by the financier Nat Rothschild[6] – an Indonesian coal company arrived on the London Stock Exchange (LSE) through a deal with the Bakrie business empire.[7] A year previously, Indra Bakrie, the chair of newly named Bumi plc, had declared an intention that Bumi should become the world’s biggest exporter of power station coal by 2013.[8] Ambition and rhetoric were not in short supply.

This venture was the outcome of the meeting of two powerful business families from West and East: Nat Rothschild, corporate financier and scion of the Rothschild family, and Indra Bakrie, youngest of four siblings, owners of the Indonesian business group PT Bakrie & Brothers.

The Bakrie Group has business interests in agriculture (including palm oil), property, media, insurance, banking, trade, shipping, construction, manufacturing and mining.[9] Aburizal Bakrie, the eldest son, is currently chairman of Golkar, the political party of the Suharto regime, and a potential presidential candidate for the Indonesian elections in 2014. In 2006, one of the companies controlled by the Bakrie Group, PT Lapindo Brantas, was responsible for an oil drilling disaster in East Java. This caused a mud-volcano that has engulfed thousands of homes and displaced some 30,000 families, is blamed for the death of 14 people, and continues pouring out mud to this day.[10] In what could be seen as an attempt to avoid paying compensation to the thousands of victims of this ongoing disaster, Energi Mega Persada, the Bakrie-owned company controlling the majority of shares in PT Lapindo Brantas, twice attempted to sell this company for US$2 to an offshore company.

In the political arena, the Bakrie family’s record is disturbing also. The family is linked with cases of bribery and tax evasion, most notably in relation to an investigation into the activities of the Kaltim Prima Coal (KPC) mine and its parent company Bumi Resources.[11] In 2010, attempts were made by Indonesian Government officials to investigate the tax dealings of both KPC and Bumi Resources. This process has been stayed by the courts thanks to interventions by company lawyers.

Recently, an official from the Indonesian tax office claimed that he was bribed by Bakrie-owned companies to help them with their tax affairs.[12] More worrying was the resignation in May 2010 of Finance Minister Sri Mulyani after a long political vendetta by Bakrie.[13] Sri Mulyani was noted for her anti-corruption campaigning. Two days after her departure, Bakrie was appointed ‘managing chairman’ of a joint secretariat to determine government policy.[14] Politics and business continue to be very closely linked. In an article about the partnership between Bakrie and Rothschild, the head of research of a foreign brokerage company was quoted as advising investors to avoid too powerful business groups in Indonesia as they are often ‘too big and risky to challenge’.[15]

For Nat Rothschild, it appears that the risks and challenges of doing business with the Bakries were outweighed by the potential profits that Indonesian coal offered. Indonesia is currently the world’s largest exporter of thermal coal, and demand for coal from China and India is prompting more growth.[16] The business model employed by Rothschild has been to create London-listed shell companies as investment vehicles for mining companies and oil and gas companies around the world. In July 2010, the IPO (initial public [share] offering) for Vallar raised US$1.1 billion.[17] Since then, Rothschild has launched a similar enterprise under the name of Vallares to invest in oil and gas projects in Kurdistan, together with former BP CEO Tony Hayward.

A Financial Times article about the Bumi coal deal highlighted Rothschild’s hunger for making money above all other considerations. ‘You have to make hay while the sun shines,’ he said on his initial visit to Indonesia to look at the Kalimantan coal mines he was about to buy.[18] Given the rapidly disappearing rainforests of Borneo and the livelihoods they provide for local people, there is a certain irony to this remark. Rothschild’s ‘hay-making’ is unlikely to benefit Kalimantan’s forests and the people whose lives depend on them.

Much has been written in financial columns about the arrival of Bumi plc on the LSE. This process has been rapid and subject to minimal oversight. It took little over six months from the initial announcement of the US$3 billion deal in Jakarta to Bumi’s LSE listing.[19] A further six months on from this listing, the tangled web of business intrigue is already becoming evident, throwing up serious questions about the effectiveness of the ‘due diligence’ process undertaken prior to the company’s launch on 28 June 2011.[20] On 8 November 2011, a letter from Rothschild in the Financial Times surprisingly denounced the corporate governance of Bumi Resources, the Indonesian partner company of Bumi plc, and called for the repayment of debts by connected parties.[21]

Whether Rothschild is genuinely concerned about the corporate governance of Bumi Resources and its debts has been much debated in the financial media. Most ascribe more cynical reasons to the letter. The Bakries are reported to be investigating their new partner for trying to manipulate the price of shares in order to gain a bigger stake in the company. Indeed, soon after the letter was published, Rothschild spent GBP1 million buying more shares in the company.[22] The fact that both Bumi Resources and the Bakries are heavily indebted is old news, which Rothschild would have known before embarking on any business deals with them. In the Asian financial crisis of the late 1990s, the Bakries’ empire nearly collapsed because of debt.[23] A recent Reuters report describes the Bakrie Group as being ‘known for its acquisitions funded through debt that is linked to shares in its firm’, commenting that this is a ‘strategy that backfires when global financial crises hit equity and debt markets’.[24]

In the rush to take advantage of Indonesia’s vast natural resources and the world’s hunger for energy, both parties appear to see only money and profit and to give little consideration to impacts on local communities and the environment, let alone the world’s climate, of bulldozing the forests of Borneo for coal. The LSE and financial institutions are now playing a key part in enabling and encouraging this to happen. In this connection it also appears that the LSE’s reputation is starting to be questioned abroad. In reference to a Jakarta Globe article about the Bumi deal, one commentator wrote: ‘A question to ask is why very many of the world’s oligarchs are based in UK ... Arab, Russian, Indian, Chinese, etc. Mainly because in the City of London anything goes.’[25]

Have the regulators simply given up? The head of the UKLA was quoted last autumn as saying: ‘We don’t see our role as one to ensure or underwrite best practice in relation to the combined code, nor do we have powers to do so.’ He continued weakly: ‘The role of shareholders is greatly underestimated.’[26] Does this mean that the UKLA is expecting Indra Bakrie and Nat Rothschild to regulate themselves?

The full LMN report can be downloaded from

Brutal attack against KPC mineworkers

The International Federation of Chemical, Energy, Mine and General Workers' Unions (ICEM) reported a serious case of violence against miners at the Kaltim Prima Coal (KPC) mine in March this year. Four hundred striking workers gathered at the coal company's office in East Kutai district on the counsel of a local citizens group to offer themselves back to work. They were immediately attacked by a regional military brigade serving the interests of Thiess and KPC.

KPC is owned by Bumi Resources (see main text) while Thiess, the main contractor, is owned by Australia’s Leighton Holdings (itself majority-owned by Germany’s Hochtief).

Twenty miners were severely beaten and hospitalised. Another 12 were immediately detained and throughout the night of 24 March and into the next day, police and military rounded up another four union leaders and jailed them.

By the following weekend, most of the unionists had been released but police and regional military were still holding two union leaders, according to the ICEM alert, issued April 1st. Source:


Taxes & export bans to slow down mining rush?

The international mining fraternity appears to be getting worried about attempts by the Indonesian government to curb their profits by slowing down a current ‘export rush’. Jakarta mining officials say companies are trying export as much as possible before a ban on some unprocessed minerals - copper, gold, silver, nickel, bauxite, zinc and tin - comes into force in 2014. An export tax of 25% this year and 50% next year has been proposed for base metals as well as coal.

The move is also aimed at capturing more value from these resources  and spurring the development of minerals processing in the country.

Indonesia is currently the world’s biggest exporter of tin and thermal coal (used to fuel power stations). Major importer nations include India and China.

All foreign mining companies are also required to sell majority stakes in their mining operations to local companies by tenth year of production.

UK’s Churchill losing its battle for Kalimantan coal

The UK-based company Churchill (see DTE 85-86) appears to have lost its bid to hang onto coal concessions in East Kalimantan. Instead, it is likely that Nusantara Resources - a company run by former Suharto son-in-law Prabowo Subianto - will develop the rich deposits into what could become yet another mega-mine along the lines of KPC (see photo above). Churchill says it will take the case to international arbitration.

Sources: 4/Apr/12; 3/Apr/12; Reuters 12/Apr/12.

[1] Problems associated with this mine have been documented by DTE over the years. See for example articles in DTE 85-86, August 2010.

[2] Open-pit coal mine project in Bangladesh threatens human rights – UN experts

[3]  On companies’ duty to respect human rights, and states’ duty to protect, see the UN ‘Protect, Respect and Remedy’ Framework for Business and Human Rights, and its Guiding Principles, Respect for environmental standards implies that companies: • Not undertake activities which have a negative impact upon any of the protected areas covered by the IUCN I-IV categories, UNESCO World Heritage and the Ramsar Convention; • Ensure that their activities will not have a negative impact on the community or population level of any species identified on the IUCN Red List; • Ensure that activities will not lead to the illegal trade of any species listed as endangered under CITES; • Not produce or trade in any living genetically modified organism except with the approval of the importing country and as otherwise required under the Cartagena Protocol; • Provide assessments of the cumulative biodiversity impacts upstream and downstream (including impacts on ecosystems, species and genetic resources); • Provide and make public ongoing monitoring and reporting of impacts, at least consistent with the guidelines found in the Global Reporting Initiative for reporting on biodiversity, land use and air-and water-pollution, emissions and discharges. • Agree to sustainably manage all living natural resources used in its operations, such as forests, plants and animals; • Ensure that activities will not involve the introduction, intentional or unintentional, of invasive alien species; • Meet the consent and benefit-sharing requirements found in the UN Convention on Biological Diversity regarding activities involving access to genetic resources; • Identify, in consultation with communities, NGOs and scientists, what are to be treated as “no-go zones”, such as HCVAs, endangered forests, biodiversity hotspots, river watersheds, fish spawning grounds and spiritual sites, and where necessary exclude activities in those areas from development.

[4]   European Commission, ‘Disclosure of Payments to Governments’,; see also Hong Kong Stock Exchange listing rules,, chapter 18, ‘Equity securities - mineral companies’; and US Dodd- Frank Act 2010,, section 1504.

[5]   A reverse takeover or reverse merger (reverse IPO) is ‘the acquisition of a public company by a private company so that the private company can bypass the lengthy and complex process of going public’,

[6]   A shell company ‘serves as a vehicle for business transactions without itself having any significant assets or operations’,

[7]   For background on international links to Indonesian coal and the Bakries, see ‘Corruption, collusion and nepotism’, DTE 85-86, August 2010.

[8]   ‘Indra Bakrie lauds Bumi’s London move’, Jakarta Globe, 19 November 2010,

[9]   The Bakries’ principal mining company is Bumi Resources, owner of the huge Kaltim Prima Coal mine in East Kalimantan; for more on this and the Indonesian coal industry, see DTE coal campaign page.

[10]   Estimates of the numbers of people affected have varied enormously; figures quoted here are from a 2010 University of Durham report that blamed drilling as the cause of the mud-volcano: ‘Geologists say drilling caused Indonesian mud volcano’, CBC News, 3 November 2008,; ‘Indonesia mud disaster caused by human error: study’, Jakarta Globe, 13 February 2010,

[12]   ‘State capture: how Bakrie group dodges the bullet again’, Jakarta Globe, 30 July 2010,

[13]   ‘Exit Sri Mulyani: corruption and reform in Indonesia’, East Asia Forum, 9 May 2010,

[14]   ‘Indonesia’s Bakrie grabs new post’, Asian Correspondent, 12 May 2010,

[15]   ‘Bakrie coal mining partnership turns sour’, Jakarta Globe, 25 November 2011,

[16]   Indonesia’s Coal: Local Impacts – Global Links, DTE 85-86, August 2010.

[17]   ‘Rothschild plays strongest suit with coal mining deal’, Bloomberg, 1 December 2010, billion-commodities-deal.html

[18]   ‘King Nat’s mines’, Financial Times, 14 January 2011,

[19]   A precise breakdown of the original deal is available on the IPO prospectus. One other major component to Bumi plc is the incorporation of PT Berau Coal, another sizeable Indonesian coal company, into the deal: See DTE 85-86, August 2010.

[20]   ‘London Stock Exchange welcomes Bumi Plc to the Main Market’, LSE press release, 28 June 2011,

[21]   ‘Rothschild calls for clean-up at PT Bumi’, Financial Times, 9 November 2011,

[22]   ‘Rothschild raises stake in coal venture Bumi’, Reuters, 17 November 2011,

[23]   ‘Politics and business mix in Indonesia’, Asia Times, 22 July 2006,

[24]   ‘Debt for Indonesia’s Bakrie Group is business as usual’, Reuters, 12 November 2011,

[25]   ‘Bakrie coal mining partnership turns sour’, Jakarta Globe, 25 November 2011,,comment3.55pm, 26 November 2011

[26]   ‘City relaxes its rules to attract the mega deals’, Sunday Times, 30 October 2011.