News Archive

U.S., Switzerland forge bank settlement deal amid tax probe

Thu Aug 29, 2013 6:36pm EDT

WASHINGTON (Reuters) – The U.S. Justice Department said on Thursday it had signed an agreement with the Swiss government to allow some Swiss banks to avoid or defer prosecution stemming from a long-running probe of tax dodging by Americans using Swiss bank accounts.

The settlement program will apply to about 100 second-tier Swiss banks, provided they agree to disclose certain previous hidden assets of U.S. customers. It will be open only to banks not already under U.S. criminal investigation.

The deal is a step forward in a three-year U.S. effort to pierce the shroud of Swiss bank secrecy, but some details of the program raise questions about its potential for rooting out U.S. tax evaders, tax lawyers and watchdog groups said on Thursday.

Under the program, eligible banks would pay penalties and disclose account information about U.S. customers in order to avoid prosecution, the department said in a statement.

“The program’s requirement that Swiss banks provide detailed account information will improve our ability to bring tax dollars back to the U.S. Treasury from across the globe,” Attorney General Eric Holder said in a statement.

Fourteen Swiss banks already under investigation by U.S. prosecutors are excluded from the program, the Justice Department said. The program is not available to individuals.

Some critics of the Justice Department’s previous tax crackdown efforts welcomed the settlement program.

“On the whole it’s a pretty strong agreement,” said Heather Lowe, director of government affairs at anti-graft watchdog Global Financial Integrity.

Still, the settlement program has “gaps,” specifically whether banks could settle without turning over U.S. client names, Lowe said. “That is definitely one open question here.”


Under the program’s penalty provisions, a Swiss bank seeking a nonprosecution agreement must agree to a penalty equal to 20 percent of the total dollar amount of all hidden U.S. customer accounts held by the bank on August 1, 2008.

That was roughly when the United States started cracking down on tax avoidance by Americans with secret Swiss accounts.

The penalty amount increases to 30 percent and then to 50 percent, depending on how active a bank was in continuing to open secret accounts for Americans after the crackdown began.

To determine whether or not to participate in the program, Swiss banks will need to weigh the cost of potential penalties versus the risk of a U.S. prosecution, tax lawyers said.

“It’s a choice between two evils,” said Walter Boss, a tax lawyer with Poledna Boss Kurer AG in Zurich. If they don’t cooperate with the U.S., the U.S. might indict them.”

The program also requires cooperating banks to tell prosecutors about Americans’ assets that left Switzerland and were moved to other tax havens.

Though the Justice Department declined to identify the Swiss banks it is investigating, a number are known to be facing U.S. probes. These include Credit Suisse (CSGN.VX), Julius Baer (BAER.VX), the Swiss arm of Britain’s HSBC (HSBA.L), privately held Pictet, and state-backed regional banks Zuercher Kantonalbank and Basler Kantonalbank (BSKP.S).

Several of these banks have said they are preparing information on client withdrawals as demanded by U.S. investigators, after the Swiss government said it would allow them to circumvent secrecy and privacy laws to do so.

“The U.S.’s goal ultimately is to get untaxed money into the tax system,” said Jeffrey Neiman, a former federal prosecutor involved in other Swiss bank investigations who is now in private law practice in Fort Lauderdale, Florida.

“Whether or not this program is going to be a big step is still an open question.”

(Editing by Kevin Drawbaugh, Gary Hill, Matthew Lewis and Ken Wills)

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Icahn raises Nuance stake, may push for board seats

Thu Aug 29, 2013 6:27pm EDT

(Reuters) – Activist investor Carl Icahn said he had raised his stake in speech recognition software maker Nuance Communications Inc (NUAN.O) to 16.9 percent and that he may discuss the possibility of adding his nominees to the company’s board.

Icahn had reported a stake of 16.03 percent earlier this month.

Nuance shares were up 2 percent in extended trading after closing at $18.31 on the Nasdaq on Thursday.

Icahn said he had acquired the shares “in the belief that they were undervalued.” (

Apple Inc (AAPL.O) uses Nuance’s speech recognition technology in its iPhone devices as part of its “Siri” voice feature.

Following Icahn’s announcement of a 16.03 percent stake earlier this month, Nuance adopted a stockholder rights plan to reduce the chances of any investor gaining control “through open market accumulation or other coercive takeover tactics without paying an appropriate control premium”.

The provisions would come into effect if a person or group acquires 20 percent or more of Nuance’s shares in a transaction not approved by its board.

The company was not immediately available for comment on Thursday.

Nuance cut its full-year forecast earlier this month as some of its mobile customers had delayed contracts.

Icahn, who is known for taking large positions in companies and pushing for management change, revealed on April 1 that he had taken a 9.27 percent stake in Nuance.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Sreejiraj Eluvangal)

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Renault’s Tavares steps down after hinting at U.S. move

Thu Aug 29, 2013 6:15pm EDT

PARIS (Reuters) – Renault SA’s (RENA.PA) second-in-command, Carlos Tavares, quit on Thursday, two weeks after he dismayed colleagues by hinting he might join one of the U.S. carmakers.

Tavares, chief operating officer at the French auto manufacturer, said in an interview with Bloomberg published on August 14 that he had “the energy and appetite for a No. 1 position” but was unlikely to succeed Chief Executive Carlos Ghosn, 59, any time soon.

“My experience would be good for any car company,” Tavares said in the interview. “Why not GM? I would be honoured to lead a company like GM.”

“It raised a lot of eyebrows,” a Renault insider who asked not to be identified said on Thursday. “How do you motivate your teams when you’ve said publicly you’d rather be at GM or Ford?”

Another colleague said Tavares’ departure followed an informal meeting on August 26 at which Ghosn “sounded out” senior company officials.

“It’s brutal, but what Tavares had said in (the interview) did not win him any friends.”

Tavares’ exit marks the second departure by a Ghosn lieutenant in as many years after his predecessor, Patrick Pelata, was ousted over his role in the wrongful dismissal of three executives.

“This is clearly bad news for Renault,” said Deutsche Bank analyst Gaetan Toulemonde. “Tavares is a real car guy, and replacing him internally is no easy matter because the alliance structure isn’t simple – you need someone who has a certain recognition at Nissan as well.”

Renault said in a statement that Tavares would cease to be COO immediately and his duties would be assumed temporarily by Ghosn, who also heads Japanese affiliate Nissan Motor Co Ltd (7201.T).

Tavares joined Renault in 1981. He moved to Nissan 23 years later as programme director for compact cars and rose to the rank of Americas chief before returning to Renault in 2011.


Ford Motor Co (F.N) spokesman Jay Cooney said the company has “succession plans in place for each of our key leadership positions” including CEO Alan Mulally, 68. Chief Operating Officer Mark Fields is widely seen as heir apparent.

“Our preference always is to develop talent internally, and we are fortunate to have a strong list of internal candidates,” Cooney said.

“He’s not coming here,” General Motors Co (GM.N) spokesman Greg Martin said of Tavares joining the company, now led by CEO Dan Akerson, who is 64. Chrysler, a unit of Italian automaker Fiat SpA (FIA.MI), declined to comment “as a matter of policy.”

In his last Nissan role, Tavares slashed production costs with an industrial expansion in Mexico and won $1.6 billion in U.S. Energy Department funding for an electric-car battery plant.

His exit deals a setback to Ghosn’s efforts to revive the domestic industrial base with new production for 43.4 percent-owned Nissan and a renewed push into larger, plusher and performance cars.

Tavares also piloted a ground-breaking labour deal with French unions that introduced wage restraint and longer working hours in return for production commitments.

His determination to narrow the pricing gap with German rival Volkswagen AG (VOWG_p.DE) also helped deliver an unexpected increase in core earnings in the first half, despite falling sales.

Senior executives who have worked with Tavares say he would be well-suited to a high-placed role at a U.S. carmaker.

“He is one of finest auto executives in the world. And he is qualified to run any auto company or major supplier,” former Chrysler Group LLC CEO Tom LaSorda said in an email.

“The big PE/VC firms should grab him fast. Renault made a big mistake,” said LaSorda, who now runs a venture capital fund based in suburban Detroit.

(Additional reporting by Christiaan Hetzner in Frankfurt and Ben Klayman and Deepa Seetharaman in Detroit; editing by David Cowell and Matthew Lewis)

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U.S. futures industry regulator NFA comes under fire from within

Thu Aug 29, 2013 5:23pm EDT

CHICAGO (Reuters) – A U.S. futures industry regulator is falling short in its attempt to keep tabs on brokers and asset managers, more than a year after the collapse of one brokerage under its oversight that cost clients hundreds of millions of dollars, according to one of the regulator’s directors.

Jeff Malec, who was elected to the National Futures Association (NFA) board of directors earlier this year, told brokers in an email this month that the regulator “isn’t doing all that it could” to protect futures traders and urged them to complain about it. The email was obtained by Reuters.

The NFA, which is based in Chicago and funded by industry fees, has long operated in relative obscurity, overshadowed by better-known market regulators like the Commodity Futures Trading Commission.

That changed last year after brokerage Peregrine Financial Group, known as PFG, failed due to a 20-year fraud that the company’s founder perpetrated despite yearly audits by the NFA.

Malec, chief executive of Chicago-based futures firm Attain Capital Management, said in the email that NFA leaders have ignored complaints about its performance this year.

He sent it to NFA members known as introducing brokers, or IBs, who accept orders to buy and sell futures contracts from customers but do not hold their money.

“If you feel (like I do) that the NFA isn’t doing all that it could (that someone should be fired over PFG … Review processes are a mess. That the teams that come in and audit your IB are dangerously inexperienced…) please let those thoughts be known,” Malec wrote in an August 5 email.

NFA President Dan Roth declined to comment on the email. NFA Chairman Chris Hehmeyer said the association had implemented a number of improvements since Peregrine’s collapse.

Roth offered to resign after Peregrine failed, but the NFA board rejected his offer, Hehmeyer said.

“We have done a lot of work here to dig into what went wrong with PFG,” Hehmeyer. “We always strive to do better.”

Malec, whose firm had money at Peregrine when it failed, was one of the NFA’s biggest critics after the collapse. He declined to comment on the email.

Peregrine’s failure shook confidence in the futures industry less than a year after the collapse of larger brokerage MF Global. The NFA was Peregrine’s front-line auditor, although the CFTC also oversaw the firm. Exchange operator CME Group Inc (CME.O) oversaw MF Global.

Peregrine’s founder, Russell Wasendorf Sr., said in a note last year that he had duped “unquestioning” regulators from the NFA by falsifying bank statements. He began a 50-year prison sentence for fraud in February.

A study released in January, commissioned by the NFA and conducted by an outside consulting firm, found that auditors of Peregrine lacked the skepticism needed to assess the risk of fraud. The NFA said at the time that it would adopt an extensive list of recommendations in the report.

The board plans to file a report in November on its progress in implementing changes, Hehmeyer said. The NFA also is surveying members, he said.

Malec said in the email that he surveyed brokers following his election in January and that roughly half the respondents were unhappy with the NFA. The NFA’s board and leadership “widely dismissed and ignored” the results, he said.

The NFA in 2007 charged Attain Capital with using misleading promotional materials, failing to properly maintain financial records, and failing to supervise employees. The firm paid a $25,000 fine, but Malec denied the charges.

(Editing by Steve Orlofsky)

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Wall Street rises on economy, but Syria concerns limit gains

Thu Aug 29, 2013 5:10pm EDT

NEW YORK (Reuters) – U.S. stocks closed modestly higher on Thursday as the economy showed signs of improvement, but uncertainty over possible military action against Syria continued to pressure markets.

Talks that could lead to a major deal in which U.S. phone company Verizon buys the part of Verizon Wireless it doesn’t already own from Vodafone helped push stocks higher.

Wall Street was solidly higher most of the session but pared gains in the last hour on concerns over Syria. Many in the market expect a strike by the United States and its allies because of an alleged poison gas attack by government forces that killed Syrian civilians. U.S. officials said a response would be “discrete and limited.

“That there will be an attack is priced into markets, but there’s no way the market appreciates the implications beyond that if the U.S. were to go to war,” said Joe Tanious, global market strategist at J.P. Morgan Funds in New York.

“It will create a lot of side effects the market isn’t aware of, with the impact on oil the main complication.”

U.S. crude futures have spiked 2.2 percent this week on tensions oil supply from the Middle East will be interrupted.

Stocks rose after the government said in an upwardly revised estimate the economy expanded by a stronger-than-expected 2.5 percent in the second quarter. In a separate report, it said weekly jobless claims fell more than anticipated last week, a possible sign that hiring improved in August.

The Dow Jones industrial average .DJI was up 16.36 points, or 0.11 percent, at 14,840.87. The Standard Poor’s 500 Index .SPX was up 3.21 points, or 0.20 percent, at 1,638.17. The Nasdaq Composite Index .IXIC was up 26.95 points, or 0.75 percent, at 3,620.30.

The SP was unable to close above its 100-day moving average for a third straight day, an indication that near-term momentum may fade.

The robust data could bolster the case for the Federal Reserve to soon wind down a major economic stimulus program that has driven a rally of more than 15 percent in the SP 500 this year.

The data “reiterates that the economy continues to grow, which is supportive to risk assets and bodes well for the prospect of future growth,” said Tanious, who helps oversee $1.5 trillion in assets.

“That the market is reacting positively to this shows that investors have become more comfortable with the idea of tapering.”

U.S.-listed shares of Vodafone Group (VOD.O) jumped 8.1 percent to $31.80 as the biggest percentage gainer on the Nasdaq 100 index .NDX after the company said it was in talks with Verizon Communications (VZ.N) to sell its 45 percent stake in their U.S. joint venture, Verizon Wireless.

If completed, the deal could be worth around $130 billion, according to a person familiar with the situation, who asked not to be identified. Verizon rose 2.7 percent to $47.82 as one of the top boosts to the Dow.

Homebuilding stocks were among the strongest of the day. Lennar Corp (LEN.N) rose 3.2 percent to $32.62 while PulteGroup Inc (PHM.N) was up 3.1 percent to $15.86.

After the market’s close, software company Inc (CRM.N) raised its full-year revenue outlook, sending its shares 6.8 percent higher to $46.60.

Guess Inc (GES.N) jumped 13 percent to $30.82 in the wake of second-quarter results that beat Wall Street estimates, bucking a trend of falling sales for apparel retailers.

Campbell Soup Co (CPB.N) fell 3.1 percent to $43.33 after reporting revenue that missed expectations.

About 63 percent of companies traded on the New York Stock Exchange closed higher while almost 70 percent of Nasdaq-listed shares ended higher. Volume was light, with about 4.74 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.31 billion shares.

(Editing by Chizu Nomiyama and Kenneth Barry)

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Scare or no scare, customers have little choice but Fonterra

Thu Aug 29, 2013 4:53pm EDT

WELLINGTON/SHANGHAI (Reuters) – However much China and other big customers strive to rely less on Fonterra after a global food contamination scare this month – now downscaled to a ‘false alarm’ – the New Zealand firm’s grip on the global dairy trade is unlikely to be loosened.

While many countries such as India, China and the United States produce more milk, New Zealand, a small island nation of 4.5 million people, exports more than 90 percent of its output and controls a third of the global dairy trade. Most of those exports from what is dubbed the ‘Saudi Arabia of milk’ come from Fonterra Co-operative Group Ltd (FSF.NZ), which is owned by its 10,500 farmer suppliers.

China, New Zealand’s biggest customer, is particularly exposed. Annually, it spends around $1 billion on imported milk powder, used in infant formula, sports drinks and confectionary, with some 90 percent of that coming from New Zealand.

Despite Beijing’s rhetoric about expanding domestic supply, skimmed and whole milk powder production has risen just 9 percent over the last five years to an estimated 1.28 million tonnes, while consumption has almost doubled to 1.9 million tonnes, data from the Foreign Agricultural Service show.

While Chinese firms increasingly look overseas to secure supply – building processing plants in France, the Netherlands and New Zealand, for example – the country’s milk formula market alone is set to double to $25 billion by 2017, and will likely remain dependent on Fonterra.

“If you’re not going to source from Fonterra, where are you going to source from? That’s the issue,” said Shaun Rein, Shanghai-based managing director at China Market Research Group, who describes even big global food and beverage companies as “beholden” to Fonterra.

Inner Mongolia Yili Industrial Group (600887.SS), one of China’s biggest milk powder producers, said it had not seen any increase in orders for its milk powder. “Nothing has changed in the wake of the Fonterra issue,” a spokesperson said.

China was one of a number of countries including Russia, Sri Lanka, Malaysia and Vietnam to restrict imports of Fonterra products after the company said batches of its whey protein may be contaminated by a bacteria that can cause botulism, a potentially fatal disease. No one fell ill, and independent tests on another 195 samples showed the contamination actually involved a far less dangerous bacteria.

A separate scare involving traces of the agricultural chemical dicyandiamide (DCD) detected in Fonterra’s milk supply last year has also caused no illnesses. The company disputes the presence of the chemical is a food safety issue.

The far-reaching, and sometimes extreme, reaction to the Fonterra scare suggests milk is becoming a strategic issue for developing economies where a growing middle class hungers for more protein. It has also punctured New Zealand’s reputation as a source of safe, natural and high-quality food.


Some dairy industry experts say Fonterra’s missteps over the contamination scare will help China, which has pledged to improve food safety, while promoting its domestic industry.

“The new government in China has decided that they want to reestablish credibility of the Chinese dairy sector and to do that the only direct competition they really have is New Zealand,” said John Missen, director of Realize Asia, a New Zealand-based exporter and distributor of milk powder in China.

But producing more at home looks a long-shot. Industry data shows raw liquid milk production actually fell in China in the first half of the year, said Sandy Chen, senior analyst for food and agribusiness research at Rabobank in Shanghai.

Over the last five years China has clamped down on small-scale dairy farms, which once provided 60-80 percent of the country’s raw milk. Large corporate dairies have yet to fill that gap, and milk powder production is also hobbled by feed supply issues, limited land availability, disease control and a lack of large-scale dairy farming expertise.

“You have to look at the whole chain. A powder supplier would need to have access to raw milk and that’s the bottleneck right now. China is not producing sufficient raw milk onshore,” said Chen, adding that the prospect of other firms – which could include rivals Nestle (NESN.VX), France’s Lactalis Group and Dairy Farmers of America DRFMA.UL – muscling in on Fonterra’s market share was “wishful thinking”.

That doesn’t mean some customers aren’t trying.


In Sri Lanka, a court last week temporarily banned Fonterra from selling and advertising its products. Fonterra’s ubiquitous blue, white and red Anchor brand dominates a market where milk powder imports have roughly tripled to $300 million a year since 2000. Colombo, however, wants to promote consumption of local fresh milk to stem capital outflows and increase the viability of domestic farmers, a big voter base. Some politicians went so far as to suggest Fonterra was trying to test chemically tainted products on local consumers.

“This is part of economic nationalism,” said an independent analyst based in Sri Lanka, who didn’t want to be named due to the sensitivity of the dispute. “This is to destroy Fonterra brands and force consumers to drink locally produced milk.”

Fonterra resumed operations in Sri Lanka on Wednesday.

Russia’s import ban on Fonterra, its third-largest dairy supplier, came after Moscow slapped similar restrictions on U.S. meat over feed additives in February, drawing allegations of protectionism from western food producers.

“The restriction could ease some pressure on the domestic market,” said Andrei Danilenko, head of Russia’s national milk producers union. “Russia is not able to cover all its needs from domestic production, so other importers are likely to take a share (of the market) from New Zealand.”


The backlash against Fonterra – Bangladesh has also held up imports of Fonterra products pending tests – may also be a form of retribution for what some see as long-standing arrogance displayed by the biggest milk supplier on the block.

Two Fonterra customers hit by this month’s recalls dispute claims by Fonterra CEO Theo Spierings that he was in constant contact with senior management at their firms in the days after the contamination announcement. They didn’t want to be named as they are still discussing the recalls with Fonterra.

Karicare infant formula maker Nutricia, part of France’s Danone (DANO.PA), said it is considering legal action against Fonterra over the recalls.

Fonterra maintains its customer relations are strong, and feedback has been positive regarding the way it handled this month’s recall.

“Personally, I think the company has … been a little arrogant with their dealing with the international market, and I think they’re paying for it,” said Realize Asia’s Missen.

($1 = 1.2841 New Zealand dollars)

(Additional reporting by Shihar Aneez in COLOMBO and Polina Devitt in MOSCOW; Editing by Lincoln Feast and Ian Geoghegan)

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Fed should strengthen controls for handling of minutes: watchdog

Thu Aug 29, 2013 4:37pm EDT

(Reuters) – The Federal Reserve should beef up its controls over the handling of minutes for its policy-setting meetings after the top-secret documents were inadvertently released a day early to a select group in April, the U.S. central bank’s watchdog said on Thursday.

Fed Chairman Ben Bernanke asked for a review of the Fed’s handling of the documents after a staff member emailed minutes of the U.S. central bank’s March policy meeting to more than 100 congressional staffers and bank lobbyists on April 9, about 24 hours ahead of their scheduled release.

The lapse was the Fed’s worst security breach in years. Minutes of policy-setting meetings can have a major impact on global financial markets because they can give hints on future Fed action.

That said, the market reaction to the March minutes was muted, and several recipients of the email told Reuters they had not even realized they received it until the Fed publicized the error.

The Fed should limit access to the minutes to board staff who “have a need to know,” and remove any staff who do not, the Fed’s Office of Inspector General said in its report.

The OIG’s office also recommended the Fed develop written policies and better training to safeguard confidential documents.

The Fed has begun to implement the OIG’s recommendations, it said in a letter attached to the report, including a requirement that emails regarding minutes contain only a brief note and a link to the Fed’s public website, rather than an attached document.

After discovering the breach early on April 10, the Fed decided to publish the minutes at 9 a.m. EDT (1400 GMT), or five hours ahead of the scheduled release time.

Among those who received the minutes early were people with email addresses that identified them as working for a number of financial firms, including Goldman Sachs (GS.N), Barclays Capital (BARC.L), Wells Fargo Co (WFC.N), Citigroup Inc (C.N), UBS (UBSN.VX) and JPMorgan Chase Co (JPM.N), which trade on new information about U.S. monetary policy.

The staff member responsible for the breach told the Fed’s watchdog he was confused about the release date, and accidentally sent the email a day early, the report said.

Fed officials met three days after the breach to fix some issues, including limiting the contact list for the congressional liaison’s office to government officials.

(Reporting by Ann Saphir and Jonathan Spicer; Editing by G Crosse and Krista Hughes)

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Brazil’s Batista sells more of stake in oil company OGX to pay debt

Thu Aug 29, 2013 4:35pm EDT

RIO DE JANEIRO (Reuters) – Brazilian tycoon Eike Batista, the controlling shareholder of OGX Petróleo e Gás Participações SA (OGXP3.SA), sold 1.54 percent of the oil company’s stock to pay debts of his EBX group, OGX said in a securities filing on Thursday.

Batista made the sale on Wednesday, OGX said, bringing his total sale of stock in OGX to 5.67 percent since March. Batista plans to sell at least another 5 percent of his OGX stake, but plans to maintain his controlling interest of at least 50.01 percent of OGX shares, according to a securities filing.

OGX, whose shares fell as much as 21 percent on Thursday, has led a year-long the meltdown of Batista’s EBX Group which includes energy, shipbuilding, mining and port operations. The group, once worth more than $60 billion, has seen its value nearly evaporate in the last year-and-a-half.

Lower than expected oil output at OGX raised concerns about the group’s abilities to generate cash flow to fund expansion and pay debt, creating a crisis of confidence in other EBX companies, many of which depended on each other for revenue.

The OGX slide has led to a wider restructuring of the EBX empire, with Batista agreeing to give up control of port operator LLX Logística SA (LLXL3.SA) and electricity generator MPX Energia SA (MPXE3.SA) to foreign companies in exchange for new investment.

While he has maintained most of his holdings, Batista has made small sales in recent months to pay debts.

Batista has been using Brazilian investment bank Grupo BTG Pactual SA (BBTG11.SA) to help him reorganize his companies and finances. The accord, signed in March, has provided Batista and EBX with access to loans, advice and other services.

Shares of OGX and other EBX companies came under additional pressure on Thursday after the Veja weekly news magazine said BTG Pactual and Batista will end their relationship. Veja did not name any source in its report.

BTG Pactual’s returns on the partnership depend on the performance of EBX Group stock. EBX Group stock has fallen sharply since the accord was made in March. BTG Pactual and the EBX Group declined to comment on the news report.

The sale of OGX stock is the second asset sale announced by Batista’s EBX this week. On Tuesday, OSX Brasil SA (OSXB3.SA), EBX’s shipbuilding unit, said Batista would sell $50 million of stock in the shipyard to help pay for a promised capital injection into the company.

Batista’s Centennial Asset Mining Fund LLC and Centennial Asset Brazilian Equity Fund LLX, companies that form the basis of the EBX Group’s holdings, held 58.92 percent of OGX as of July 10, according to Thomson Reuters data.

OGX stock fell 12.3 percent on Thursday to close at 0.49 reais, its lowest close in six weeks.

(Additional reporting by Asher Levine; editing by Gerald E. McCormick, Reese Ewing and Matthew Lewis)

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Anglo CEO: platinum unit must deliver, nothing sacrosanct

Thu Aug 29, 2013 4:29pm EDT

JOHANNESBURG (Reuters) – Anglo American (AAL.L) remains committed to its South African platinum mining business if it pays its way but violence in the country’s mines must stop, the group’s new chief executive said on Thursday.

Anglo American Platinum (AMSJ.J), the world’s largest producer of the precious metal, made a loss last year because of low prices and strikes in the country, which sits on four fifths of the world’s known platinum reserves.

The company has been trying to hammer out a restructuring plan for the business but fierce government and union resistance led it to rein in plans for 14,000 job cuts to just under 7,000. The company will give a further update on the process on Friday.

Asked whether Anglo American was committed to staying in South African platinum, CEO Mark Cutifani told Reuters: “Yes we are … as we are for all of our commodities. But if they don’t deliver, they won’t stay in the portfolio. Nothing is sacrosanct.”

The nation’s mining sector was rocked last year by violent wildcat strikes rooted in a union turf war that killed dozens of people, cost billion of dollars in lost output and triggered credit downgrades for Africa’s largest economy.

That conflict saw the Association of Mineworkers and Construction Union (AMCU), accused by critics of using intimidation – which it denies – poach tens of thousands of members from the National Union of Mineworkers (NUM) on the platinum belt, where tit-for-tat killings continue.

In prepared remarks delivered at the end of a mining conference in Johannesburg, an emotional Cutifani – who stunned the audience as he paused and held back sobs at one point – rounded on criminal elements he said were behind the violence.

“We cannot allow thugs and murderers to intimidate ordinary and law-abiding citizens in their individual quest for power and subversion,” Cutifani said.

“It is time for all of us to stand together and just say no. Just say no to physical threats and abuse. Just say no to intimidation. Just say no to violence against people and property,” he said to applause from the audience.

More strikes in the gold sector could begin this weekend as a militant and restive workforce seeks pay hikes of up to 150 percent, which the companies say they can ill afford.


Cutifani told Reuters before his speech that investors were “sick” of the bad news coming out of South Africa, a trend that had destroyed the value of mining shares in the resource-rich country.

“Investors have South African fatigue. If you look at the series of bad news stories that have come out of South Africa since 2011 it really has weighed on share prices,” said Cutifani, who is also the president of South Africa’s chamber of mines.

“The mining index has underperformed the Johannesburg All-share index. We’ve destroyed value. Whether it’s London, whether it’s New York, whether it’s Timbuktu, they’re all sick of the bad news coming out of South Africa,” he said.

Since the start of 2011, Johannesburg’s mining index .JMINI has shed 18 percent against a gain of 32 percent on the All-share index .JALSH, which has scaled a series of record highs this year. Anglo American Platinum shares have tumbled 40 percent in the same period.

Cutifani knows South African mining well, having been the chief executive of Johannesburg-based AngloGold Ashanti (ANGJ.J) – which is not part of the Anglo stable – before assuming his new position at the London-listed global mining company.

He said about 50 percent of South Africa’s gold and platinum shafts were “underwater” at current prices and he feared a new round of stoppages would hit jobs in a country with an unemployment rate of over 25 percent.

The chamber of mines negotiates on behalf of the gold producers which include AngloGold, Harmony Gold (HARJ.J) and Gold Fields (GFIJ.J).

“If we do end up going into strikes, I do fear for jobs and shafts,” Cutifani said.

With wage talks deadlocked, more strikes seem likely.

The National Union of Mineworkers (NUM) will give gold producers on Friday 48-hours’ notice of its members’ intention to strike over deadlocked wage talks, a source with direct knowledge of the matter said on Wednesday.

“I hope we are able to salvage something at the 11th hour,” Cutifani said.

(Additional reporting by David Dolan; editing by Andrew Roche)

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