By Christine Loh 2 August, 2010
HK listed Zijin Mining’s epic toxic spill may have opened a new chapter for environmental protection. Loh explains.
The plight of the Hong Kong- and Shanghai-listed Zijin Mining Group, China’s leading gold producer and major copper supplier, may have opened a new chapter for environmental protection. Between 4pm on July 3 and 2.30pm the following day, 9,100 cubic metres of waste water (nearly four Olympic-sized swimming pools) spewed from a blown-out tank at its copper smelter into the Ting River in Fujian province, killing 1,700 tonnes of fish and poisoning the river.
The company delayed disclosing the toxic spew for nine days. On July 12, it filed a notice to the Hong Kong and Shanghai exchanges but had the audacity to put the blame on rainfall – stating that the spill was primarily related to a natural disaster and “impossible to predict” – when the real cause was poor management of infrastructure facilities.
Under intense media attention, the company said it did not disclose the spill earlier because it didn’t want to cause alarm.
The poisoned waste water eventually washed downriver, and on July 16 a second leak of 500 cubic metres pushed copper levels up by two-thirds in the Guangdong section of the river. Guangdong banned fishing there and is considering a claim against the company, as is Fujian province.
Not surprisingly, the company’s stock price nosedived. The delayed disclosure became a media cause célèbre on the mainland. Reports showed that Zijin was previously a government-owned enterprise and still has close ties to the local government; officials hold Zijin shares, and many work for the company after leaving public service. Environmental groups were also highly critical of Zijin’s irresponsibility.
On July 19, the company finally apologised for the leak and acknowledged it was overconfident, lacked crisis awareness and did not “properly handle the balance between economic efficiency, ecological benefit and public interest”. On the same day, the China Securities Regulatory Commission, the securities regulator, issued a notice to investigate a breach of the rules concerning disclosure of information, since listed companies should disclose complete and accurate information on a timely basis.
Zijin’s story follows a well-trodden path. It first tried to hide and fudge, then claimed its silence was for good reason. Only when the problem was too big to disappear did it capitulate. A number of its executives have been detained, and three local government officials have been sacked.
Zijin has a history of environmental violations, according to official records. Yet, it was lauded by Forbes magazine last year as a candidate to enter its “Fab 50” list of Asia’s top private companies with the best long-term prospects. Only since the spill are investment analysts starting to report that the company’s low-cost and old mining methods pose significant environmental risks to investors. Before its fall, such inappropriate practices boosted profits, and investors and analysts didn’t seem to care. Now it is fashionable for them to talk about the importance of environmental protection and corporate social responsibility.
Zijin’s scandalous behaviour is not unusual on the mainland. Well-connected companies often ignore environmental and safety rules. How many similar accidents are waiting to happen? The central authorities seem to want to make Zijin the whipping boy as a warning to other businesses and government officials and to promote better governance and accountability.
Just as the Ministry of Environmental Protection is paying close attention to the case and the securities regulator is investigating the delayed disclosure, the Hong Kong stock exchange also has a role to play by demanding full and timely disclosure.
A group of 11 mainland non-governmental organisations have called on the Hong Kong stock exchange to play its part. Hong Kong NGOs, too, as well as our government and regulatory officials, should seize this opportunity for Hong Kong to take the lead in environmental governance – otherwise we will be out of step with the mainland.
Published initially in the South China Morning Post. Reprinted with permission from the author.
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