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The sins of the fathers continue to visit the sons, as Anglo American faces another class action

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It’s no accident that Anglo American PLC (LON:AAL) has increasingly diversified away from Africa in recent years. The company was one of the big economic pillars in an economic system that has come to be even more discredited now than it was at the time it was dismantled. There was apartheid, there was colonialism, and there was the almost total control of natural resources in sub-Saharan Africa by European interests.

Yes, it was a long time ago, but memories remain and cultures change, and in Western culture there is now at large a desire to repudiate the past in general, and to get certain interests specifically to atone.

It’s this cultural dynamic which underlies the surprising fact that the mining industry trades at a worse cashflow per share multiple than British American Tobacco. It’s this cultural dynamic which noted with outrage and sympathetic understanding the recent sins of Rio Tinto (LON:RIO) in destroying a sacred Aboriginal burial site in Australia. It’s this dynamic that underpinned the recent US$390mln settlement of silicosis claims by Anglo American in relation to its gold mining activities.

And it’s this dynamic that lies behind the latest class action lawsuit to be taken out against the company in relation to damages inflicted by the old lead mine at the town of Kabwe in Zambia.

Kabwe has been a toxic playground – literally – for decades. Children who play in its vicinity have been found to have elevated levels of lead in their blood, in some case up to 20 times the amount that would be permitted under US legislation.

The class action was filed in a Johannesburg court by a British and a South African law firm, and is said to represent up to 100,000 people, either children, or women of child-bearing age.

But although there seems little doubt that a court battle is looming, there may yet be a few twists and turns.

Anglo has as yet given no official response to the lawsuit, but it has stated via backchannels that at no point was it the sole owner of Kabwe. It’s not precisely clear what the company means by that, but one implication might be that Anglo is prepared to draw the Zambian government in as co-defendant.

It’s also notable that although an Anglo American subsidiary did run the project from 1925 to 1974 as the lawsuit says, the mine was then nationalised, along with the rest of the Zambian mining industry, and it carried on operating whilst under government control.

Given the complexities involved in getting British and South African lawyers embroiled in a South African court over assets in Zambia, it would be good to get the Zambian government’s take.

Certainly, there has long been an awareness on the Zambian side of the need to clean up Kabwe, and new licences in the area tend to be granted on the basis that some help with remediation work for past environmental damage will also be forthcoming.

But whether the class action lawyers will be able to clearly delineate between Anglo American’s liability and the Zambian government’s liability looks set to be a key question.

The thinking at this stage has to be that although this may make its way through the courts to a degree, a settlement will eventually be reached before a final judgement can be made. There’s plenty of precedent for that, including the silicosis settlement reached in 2018.

Other companies that have come under scrutiny for their actions in Africa, like Trafigura, have also reached settlements, often without ever admitting liability.

This case is unlikely to be the last of its kind, and underscores the increasing need of companies to keep a clear focus on ESG at all times.

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