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6. The strategies of transnationals

Technological strategies
Investment diversification strategies
Collective investments
Finance strategies

Recent changes in the Third World mining industry have stimulated the development of new strategies on the part of the Western and Japanese mining and industrial enterprises. New technological strategies are applied, with the aim of reducing Third World producers' access to mining and metallurgical technology. New investment and financing strategies are also developed in response to the general move towards nationalization, processing and pricing control of natural resources.

Technological strategies

Since the mid-1970s, the relative stability that characterized the world mining and metallurgical industry seems to have been challenged by the big Western and Japanese operators. The oil price rise obviously stimulated the search for new energy-saving techniques. To convert copper ore into blister in the smelters requires very high temperatures and, therefore, considerable energy, as the existing techniques do not permit the recycling of the energy consumed. New techniques are being developed by the mining firms, aimed at recovering part of the energy used by substituting the successive cooling and heating operations by continuous processes. Compared to conventional techniques these allow a reduction of 50% of the energy consumption. Two, at least, of these techniques have reached the stage of commercial exploitation Noranda's and Mitsubishi's. Existing capacities are still based on the old technologies but many new investments incorporate the new processes.

Energy needs are also very important for processing bauxite, and even more so for refining alumina; to produce one ton of aluminium 15,000 kWh are necessary, which is the equivalent of 25 barrels of oil. The oil price rise was an even greater stimulus for the development of energy-saving techniques in alumina processing than for copper processing. For example, Alcoa introduced a new method for the calcination of alumina which reduces energy consumption by 40% and another method that saves 30% of the energy used. This firm already runs a 15,000 tons refinery based on this process.

The search for energy-saving techniques also characterizes the iron and steel industry. For example, in Japan during the 1970s, the energy consumed to produce one ton of steel was greatly reduced, so that Japanese energy consuming standards are now 25% less than those for the other advanced countries. In common with copper, energy savings for steel production are obtained by substituting successive sequences of cooling and reheating with continuous processes, and by the recovery of the heat and the gases. For example, the recycling of pressurized gases in blast furnaces makes possible the production of electricity needed for their operation.

Very often, the search for energy-saving processes implies the limitation of the cooling and reheating operations, but there has been general progress in recent innovative policies towards the development of continuous production processes. For example, the continuous casting of copper was applied on a large scale during the 1970s, and the production capacity of the plants which process the copper cathodes directly into finished products increased from 800,000 tons in 1970 to five million tons in 1980. Continuous casting of steel has also been progressively adopted in most countries. The discontinuity points have, however, been discarded for only some segments of the metallurgical process and techniques that could ensure full continuity of operations are still at the experimental stage.

Pollution limitation is another important axis of the research and development programme in developed countries, especially for copper and aluminium. Stricter government regulations compel, for example, the copper enterprises to reduce gas emissions, by recycling them in the smelters. One electrothermic process has thus been developed for blister production which allows the recovery of sulphide gas, but other processes have also been introduced.

Hydro-metallurgy is also a quite recent element of the innovation policies of the big mining and industrial firms. Hydro-metallurgy, as opposed to the conventional pyro-metallurgy, accounts at present for about 15% of world output of refined copper. It corresponds to the processing of minerals, and especially of mineral wastes, through selective dissolving or through separation according to density, and it is usually applied to the oxide ores not suitable for calorific treatment, while the sulphide ores can be treated only by pyro-metallurgy. Copper hydro-metallurgy is based on dissolving oxide ores to obtain 'copper cement', with a metal content of 40%, but copper metal can also be obtained by the electrolysis of the solution. In all cases, copper produced on the basis of hydro-metallurgy is much less pure, and present technical research is precisely to improve its grade as well as to increase the range of usable ores. Some processes have already been developed which allow the use of sulphide ores in hydro-metallurgy and improve the quality of the final product.

Hydro-metallurgical techniques are less energy consuming, less polluting and less dependent on economies of scale than are pyro-metallurgical techniques. In the near future hydro-metallurgy techniques are likely to be developed not only for copper but also for uranium and all associated ores. This technique, when applied to associated ores, clearly increases the profitability of the mines. For example, uranium is obtained as a by-product of gold extraction in South Africa; and in Zaire cobalt is a by-product of copper production. As the prices of the associated minerals are not linked to those of the main mineral of a given field, the production of the latter can be increased, even if it is not profitable in itself, to obtain a greater quantity of the associated minerals (for instance, uranium, cobalt) when their prices rise.

Lastly, the development of recycling and of substitution, represent an increasingly important aspect of the innovation policies in the consuming countries.

For copper and iron, in fact, substitution is possible for the final products only. Glass, plastics, aluminium or other pure or alloy metals can, in some cases at least, be substituted for copper and/or iron. For uranium, substitution means a competition between alternative sources of energy. But for aluminium, the mineral itself can be substituted by others. Different raw materials, with an alumina content of 16% to 40% can, indeed, be used to produce aluminium, such as nepheline, anorthite, alunite, kaolinite clay or some bituminous shales. With the exception of small quantities of alumina obtained in the USSR from alunite and nepheline, however, these alternative raw materials are not yet used on a large scale. Some processes for the production of aluminium from kaolin instead of bauxite have already been developed by the big enterprises of the industry (Pechiney-Ugines-Kuhiman, Alcan and Alcoa in particular) but their cost is still prohibitive; the energy consumption is much higher than for conventional techniques. The Bayer process consumes 3,000 thermal units per ton of aluminium produced, while the techniques based on clay, shales or kaolin need between 5,000 and 10,000 units.

Recycling is not really new, as a high proportion of the metal consumed in developed countries has been obtained in this way: 20% to 40% for steel; 20% to 35% for aluminium; 35% to 45% for copper. Recycling is based both on the recovery of the metallic wastes resulting from mineral processing and on the recuperation of the metal contained in used manufactured goods. Technical progress consists here in improving the quality of the recovered metals and the results have been so impressive that on the London Metal Exchange today recycled metals are no longer distinguished from the pure ones.

All these technological changes have not yet significantly affected the world mining and metallurgical industry. Because most of them have been developed in the recent period of crisis, marked by the delaying of big investments, their diffusion is still very limited. Nevertheless, for the big mining and industrial firms of developed countries they represent an important asset which compensates for the greater competition they are now facing, in particular from the Third World.

We have seen how uranium technology is monopolized on the world scale. The nuclear industry in the advanced countries has acquired prime strategic importance as it reduces dependence on foreign energy sources, and technical and scientific research in this field has high priority. In the big consuming countries of the West, private oil and industrial companies are actively participating in the development of uranium technology. The light water/enriched uranium US process and the heavy water/natural uranium Canadian process are still the most widely diffused, not only in the developed countries but also in some Third World countries. In France and Britain the technology of breeder reactors is being developed with the aim of reducing the need for primary uranium.

Another promising technological prospect is the development of the reprocessing of used uranium to obtain plutonium, which, when recycled as fuel in nuclear reactors can reduce the need for primary uranium by 30%. Several reprocessing plants have been built in the USA, Britain, France and Japan. It is thought by some people that with the generalization of the breeder-reactor and reprocessing, the developed countries will no longer need to import natural uranium within three or four decades. These technologies are, however, very dangerous, not only for the environment but also for the social and political systems of developed countries, because of the very stringent security conditions that their large scale use would make essential. The general application of these technologies would be quite problematic.

The new technological policies implemented in the world mining and metallurgical industry are only one aspect of the global strategies of the big Western and Japanese firms and of their parent states during the present period.

Investment diversification strategies

The big enterprises which have traditionaly controlled the production of one specific mineral are today investing in the production of other minerals, either complementary, such as chromium or manganese in relation to iron, or substitute, such as bauxite versus copper. But investment diversification sometimes also applies to minerals which have neither a commercial nor a technical link with that usually produced by the investor. These enterprises are also investing in the energy-producing sector, and especially in coal and uranium industries.

The US firm Newmont Mining has become the biggest coal producer in the US, with a 70 million tons output, and 12% of all US production. Asarco, which is a big US copper firm, produces four million tons of coal and has many shareholdings in coal mines in Australia. Utah International is also present in the US coal sector (seven million tons) and in Australia (20 million tons). Amax has a coal output of more than 16 million tons in the US, which represents a quarter of its total turnover.

British mining concerns have a comparable strategy. They too, are investing in the energy sector, particularly in coal: for example, Rio Tinto-Zinc and Consolidated Cold Fields have taken majority shares of the capital of Australian and Canadian coal-producing enterprises.

This intervention of the big traditional mining firms in the energy sector is matched by the big oil firms' growing involvement in mining activity; these oil groups are also investing in the coal sector. Thus, at present, the US oil enterprises control one-fifth of US coal resources and production. Such enterprises as Conoco and Occidental produce large quantities but most of the others prefer to have control of resources rather than to exploit them; the same is true of the British oil groups. Shell owns a concession of four billion tons of coal in Canada as well as shareholdings in Australia. British Petroleum has a coal mining subsidiary which will produce up to 20 million tons outside the UK. The strategy of British groups is different from that of North American groups in two respects: 1) their domestic basis is much narrower and their diversification investments are in foreign countries; 2) they seem more interested in developing coal production than in controlling reserves.

Oil groups are also involved in the uranium sector, where they compete both with the traditional mining concerns and Western and Japanese government agencies. For example, Exxon, Mobil Oil, British Petroleum and Shell are actively participating in uranium prospecting in Africa.

But more interesting is the fact that these oil groups are investing in the non-energy producing minerals. Thus Amoco (Standard Oil of Indiana) is involved in two projects of copper extraction, one in Zaire and one in New Guinea. Shell has acquired the Billiton enterprise which produces bauxite in Brazil and copper in Peru. The big US copper producers, Anaconda and Amax, have been absorbed respectively by the US oil companies Altantic Richfields and Standard Oil of California. The stock exchange value of the mining enterprises is generally less than the real value of their assets, which makes such transactions relatively easy. Not all oil groups' investments in mining activity are of the merger type, however, but are also concerned with creating production facilities.

The biggest diversification investments are those of oil and mining firms in such energy-producing minerals as coal and uranium. Such investments, made in the 1970s, that is, in a context of rising energy prices, obviously presented very good profit prospects. Coal and uranium prices actually increased very markedly during that period, along with the oil price, and this made investment in high cost alternative energy sources profitable. Although the oil groups had greatly benefited from the oil price rise, their investments in coal and/or uranium were also aimed at compensating for their reduced role in the world oil industry. The mining concerns' investment in coal and uranium represented, as it were, an insurance against possible nationalization of their traditional mining interests; but their involvement was less impressive than that of the oil companies. Lastly, investments in other minerals remained relatively less important. The main function of these investments was to distribute the risks over several unconnected activities; the control structure of the different mineral industries either on the domestic or world scale remained virtually unaffected.

Investment diversification has an important geographical dimension but the situation differs according to the minerals considered. Western and Japanese industrial enterprises try to diversify their supply sources for iron ore and bauxite through the development of new fields, particularly in Africa. Such a policy was followed by the North American steel manufacturers, which, in the 1950s, had concentrated mainly on the South American iron mines, in Venezuela and Chile. The West European steel companies have a very strong propensity to invest in Africa, while a growing proportion of their imports come from Brazil and Australia. The Japanese enterprises' involvement in Africa reflects a very marked change in their supply strategy. Lastly, the big Western aluminium companies seem to have elected Guinea and Australia as the main suppliers for bauxite, thus reducing the significance of the Caribbean on the world market.

It is true that the steel crisis in the advanced capitalist countries has brought most investment projects in iron mining to a halt and that the diversification of Western and Japanese iron ore supplies in favour of those from Africa is only at the planning stage at present. But, as we have seen, the situation is quite different for bauxite and uranium, where the relocation of Western and Japanese mining investments in Africa is already effective. Since the mid-1970s, big mining and industrial capital has been trying to reduce the relative share of the Third World in its mineral supplies, but this policy does not really apply to Africa. On the contrary, some African countries, South Africa, of course, but also Liberia, Guinea, Zaire, Namibia, Gabon and Niger are considered by Western enterprises and governments as reliable components of the new 'mining belt' of the West, along with such countries as Canada and Australia.

The geographical and sectoral diversification of investments has an important implication. Each mining country usually specializes in the production of one particular mineral, while the Western groups tend to share their activities between different minerals and different countries. An intersectoral and international oligopoly is thus replacing the classical forms of horizontal and vertical economic concentration. This oligopoly's very wide range of activities is not limited to the mining industry. The big British mining groups which have been active in Africa since the beginning of the century are a good example of this diversified oligopoly.

Rio Tinto-Zinc (RTZ) is by far the biggest British transnational enterprise; its assets are distributed between mining and industry and its mining activities cover a wide range of minerals. According to a study carried out in the 1970s, its profits are derived from: iron ore (26%); copper (19%); bauxite (14%); uranium (9%); and other minerals (8%). RTZ's investments in Africa are mainly located in South Africa and Namibia and represent less than one-tenth of its total investments, which are distributed between Australia and Papua New Guinea (55%); the USA and Canada (24%); and Britain (13%). This enterprise's investment diversification strategy has been implemented along with a relocation policy in favour of Australia, Canada and the US, and also of South Africa and Namibia. RTZ contributed to the strong growth of iron ore production in Australia; it owns 40% of the capital of the Hammersley iron mine, which is the biggest in the country, with an output capacity of more than 40 million tons. RTZ has also been involved in the production of bauxite and alumina in Australia; of coal in Australia and Canada; of uranium in Australia and the USA; and of oil and natural gas in Canada and in the North Sea; but it remains heavily dependent on its Southern African mines for copper and uranium. Rio Tinto is a holding enterprise with over half its capital held by British insurance companies.

Charter Consolidated is the successor of the colonial British South Africa Company which had been granted the concession of all mining rights in what was Northern Rhodesia. More than half its capital shares are in finance companies, and the remainder are distributed between diamonds (14%); copper ( 10%); hydrocarbons (11 %); and manufacturing. This enterprise depends more heavily on its African mines than does RTZ, as 41% of its assets are in Africa; 27% in Britain; 15% in North America; 8% in Europe; 5% in Australia; but its African investments are concentrated in South Africa.

Consolidated Gold Fields, which was founded for the extraction of gold in South Africa, has diversified its activity so much that gold now represents only a quarter of its investments, against 15% for tin; 9% for energy; 23% for building materials; and 25% for financing. Here, too, diversification has been accompanied by relocation, as only 22% of its assets are still located in South Africa.

Other British mining firms remain more dependent on African mines but they have diversified their activities within the mineral sector. Such is the case for Selection Trust, which owns minority shares in mining concerns in South Africa, Namibia, Ghana and Sierra Leone; and of Lonrho, which invested in gold in Ghana, and in copper, coal and platinum in South Africa. Mining activity, however, represents only 3.5% of the sales of Lonrho and 10% of its profits.

These enterprises are often linked to each other by cross participations. Charter, for example, owns 10% of RTZs capital, 31% of the capital of Selection Trust and 6% of the capital of the South African group, Anglo-American, which in turn holds 36% of Charter's capital. All these British firms have, from the beginning, been associated with mining in Africa and the changes they have experienced in terms of capital structure, of diversification and of geographical relocation are illustrative of the global transformations that affected the world mining industry in the recent period.

The big US mining groups implemented similar strategies, with the difference that the relocation of their investments corresponded to an involvement in Africa's mining sector rather than to a disengagement as for the British firms. The same is true of the big US oil companies. As for the industrial firms of the West which have mining assets in Africa, their investments have usually been limited to the minerals they needed to feed their plants: iron ore for the steel makers and bauxite for the aluminium 'majors'. But an analysis of their global investments would indicate a quite strong diversification of their activities, either within the industrial sector or outside it.

Collective investments

The new strategies of the Western and Japanese enterprises are not limited to sectoral diversification and geographical relocation. The systematic association of different investors for any big investment project in mining is another important aspect of these strategies, as is the partnership with the state of the host country.

The investment partnership between foreign investors and host states characterizes all important mining projects in the recent period in Africa. All big iron mining projects in the 1970s included a host government capital share, which varied from 5% as in Mount Klahoyo in Ivory Coast, to 50% as in Mifergui-Nimba in Guinea. The Zairean copper project of Tenke-Fungurume also included a minority government share, as well as the uranium projects of Niger and those of Guinea for bauxite.

More important from the point of view of mining projects' management was the partnership between competing big enterprises developed in Africa during the 1970s. For iron ore and bauxite, the consortia which have been formed by different investors are usually limited to enterprises of the same industry but from different countries. The firms that invest in iron ore are the big steel makers of Europe, Japan and the USA, and those interested in developing bauxite production are the main leaders of the aluminium industry in the advanced capitalist countries. By contrast, for copper, and especially for uranium, consortia are inter-sectoral and international associations. Here, indeed, we have mining enterprises from different developed countries but also industrial firms, oil groups and state energy agencies. In all cases, the partnership facilitates the entry of new foreign investors and opens up the traditional zones of influence of the colonial era.

All planned investments in iron mining associate different big steel enterprises of Europe, Japan and the USA with the host state and sometimes minor operators from other African countries. Here, for example, is the capital structure of the companies which manage some of the biggest projects:

Collective investment in African iron ore fields is not actually a new phenomenon. In the 1950s and 1960s an association of US or European steel firms existed for the development and management of iron mines in Liberia and Mauritania. Before it was nationalized, the capital of the MIFERMA company in Mauritania was shared between French, Italian, German and British steel makers, French banks and the French Bureau of Geological and Mining Research. The ore produced was taken by the different partners in proportion to their capital share to be processed in their respective plants in Europe. Such associations were, however, usually limited to either US or European firms, while present investments associate the European enterprises with their American and Japanese rivals.

These firms' traditional strategy of having their own mines in the Third World has, therefore, been substituted by co-operation with their competitors to secure supplies of raw materials. This evolution is all the more remarkable in that it is paralleled by a growing competition on the international steel markets between the same investors. Meanwhile, the Japanese concerns that originally limited themselves to financing mining investments in the Third World are now more directly involved. The generalization of the partnership through the setting up of mining consortia reflects the relative weakening of the European firms' position in the exploitation of African mineral resources to the benefit of the US and Japanese investors.

The strategy of co-operation for mineral supplies between Western industrial groups also applies for bauxite, although the big projects here are concentrated in only one country, that is, Guinea. The North American aluminium concerns which were traditionally absent from the African continent, are now involved in bauxite mining and processing in partnership with the European leaders, such as Alusuisse and Pechiney, and with new investors from Germany, Britain and Italy. Japanese firms are not yet interested in African bauxite, but they are involved in copper mining, in association with UK, US and Canadian mining enterprises.

There is still more systematic co-operation between foreign investors in uranium prospecting and extraction. Here, foreign investors come not only from different countries but also from different sectors. In Namibia, Niger and Gabon, the UK, US and Canadian mining groups invest in uranium in association with US and European oil firms, state energy agencies of Japan and Western Europe and even the leading aluminium firms. Among the mining groups, the British, US and South African are predominant in Southern Africa, but for uranium prospecting they operate in Cameroun and in Sudan. US (Mobil, Exxon, Conoco) and European (Total, Shell, British Petroleum, ENI) oil groups are at present involved only in prospecting, in Sudan, Botswana, Zaire, Somalia, Niger and Gabon. The Japanese and European state agencies for nuclear material are associated either with the UK, US and Canadian mining groups, as in Southern Africa, or with the local state, as in Niger and Gabon. Japanese companies have simultaneously an individual prospecting policy, as in Mali and Zaire, or, as in Niger, in association with the French Commissariat for Atomic Energy. The aluminium 'majors' are also involved in uranium prospecting: for example, Pechiney in Algeria, or Alusuisse in Central Africa. Lastly, the French state, through its Commissariat for Atomic Energy is extremely active in the Sub-Saharan French-speaking countries, Niger, Gabon, the Central African Republic, and the Congo. It has an important role in prospecting, as well as in production and in uranium mining development in general. Thus, the COGEMA company, which is a subsidiary of the commissariat in Niger, participates to between 25% and 70% in all local enterprises founded for uranium prospecting and/or extraction. Although the number of partners is greater and their national and sectoral origins more diversified than for other minerals, co-operation between the main operators is, however, not very close. For example, the UK and US mining groups predominant in Southern Africa are involved neither in prospecting nor in production of uranium in Western and Central Africa. Conversely, the French Commissariat for Atomic Research, which is leading the development of the uranium sector in Niger and Gabon, is totally absent from Namibia and South Africa. State agencies for nuclear material are associated with either the former or the latter operators but participate to only a minor extent, except for the Japanese agencies in Western Africa. As for the oil and aluminium companies, with the exceptions of Conoco in Niger and Total in Namibia, their involvement is limited to prospecting.

The new investment strategies of the advanced capitalist countries' industrial, mining and oil enterprises tend to suppress the national and sectoral barriers which earlier delimited closed competition spaces. A new and larger competition space is developing which encompasses a great diversity of minerals and where foreign investors of different nationalities and industries are involved. We have seen that the concentration of capital decreased markedly during the recent period within individual mining industries because of nationalizations and the entry of new investors. But the development of co-operation between the big industrial, mining and oil enterprises of Europe, Japan and the USA can be interpreted as an increased concentration of capital within a unified world mining and metallurgical industry. From this point of view, collective investment in Africa's mineral resources implies the setting up of joint Western and Japanese transnationals' control over African mineral fields.

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