Danger in the mines

The London Stock Exchange recently unveiled a glossy new guide to best practice in corporate governance for companies quoted on its platforms. This must be regarded as a timely exercise, given the increasing domination of the FTSE100 by natural resources groups with operations in the most exotic corners of the world.

In its desire to be the world’s IPO capital, the City through the ages has offered a haven to overseas miners. There has been a tendency, however, to overlook their governance, environmental and social failings. In general, mining firms based in the great Anglo-Saxon democracies of the United States, Canada and Australia offer their workers a decent wage and reasonable housing, and adhere to environmental and safety standards. But in the developing world the same rules are rarely observed.

This disparity has taken some of the shine off mining and natural resources stocks. No one doubts that over the long haul, demand for commodities by the wealth-creating economies of Asia will be extraordinarily strong despite swings in the trade cycle.