Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Indonesian coal miner Bumi Resources, part owned by London-listed Bumi Plc, swung into a $632 million loss for the first nine months of 2012 after taking a $422 million hit from a rogue derivatives trade.
The steep loss is just the latest in a series of corporate governance troubles for the group which operates a number of coal mines in the Asian nation.
Holding company Bumi Plc was created in 2010 when Nat Rothschild, descendant of the founder of the two-centuries old banking empire, used his family name to get high profile investors to back him in a deal to bring a chunk of the vast business interests of the Bakrie family of Indonesia to the City of London.
Listing the coal and other mining interest in London provided the members of Sumatran family – one of whom, eldest brother Aburizal, has a good chance of becoming president of the world’s fourth most populous nation – a high profile in the West.
At the same time the deal gave Nat, 41, the chance to finally transform his popular image from that of a partying rich kid into a financier with true investment chops.
But only two years later, Bumi plc is collapsing amid bitter recriminations between the Rothschild and the Bakries, a probe by the UK market regulator and allegations of financial impropriety and even email hacking.
Both parties have put together deals to dismantle Bumi Plc that have gone nowhere. Nat Rothschild is no longer on the Bumi Plc board and its CEO, a Bakrie representative, stepped down in December.
Investors – including according to some reports members of the UK royal family – have lost most of their money, Nat Rothschild’s reputation is in tatters and the Bakries business, already burdened by piles of debt, now seems in deep operating trouble too.
Worst of all, if the UK regulators find enough evidence of wrongdoing in how Bumi was initially set up they could bar Nat Rothschild from ever doing business in the City again.
Something that would surely send his great-great-great-great-great grandfather spinning in his grave.
