Nearly every day since April 4, when California-based Chevron Corp. announced
its proposal to acquire Unocal Corp., also based in California, the story has
made headlines. Unocals board of directors recommended the transaction
to its shareholders, who will vote on the proposal on Aug. 10. In the meantime,
however, Hong Kong-based CNOOC Limited proposed a higher bid, leading to speculations
and concerns about the possible ramifications of a Chinese energy company purchasing
an American energy company.
In its roughly $16.6 billion cash-and-stock acquisition offer, Chevron promised Unocal stockholders $65 in cash per share or 1.03 shares of Chevron stock. The Chevron-Unocal agreement presents a compelling, long-term investment opportunity for stockholders, said David J. OReilly, chairman and CEO of Chevron in a press release. Unocal spokesman Barry Lane says that while the boards recommendation to approve the Chevron deal stands, it is a constantly moving target, and I cannot say what will happen tomorrow much less in a month.
Two and a half months after Chevron made its move, on June 22, CNOOC offered Unocal $18.5 billion in cash $67 cash per share to acquire all shares of the company. CNOOC Chairman and CEO Fu Chengyu released a statement welcoming the opportunity to undergo a review of the potential transaction by the Treasury Departments Committee on Foreign Investment in the United States (CFIUS). On July 1, CNOOC formally filed a notice with the U.S. government in hopes of expediting the review process.
Only a day earlier, on June 30, the House of Representatives approved an amendment to the Treasury Departments spending bill, which would prohibit CFIUS from recommending the CNOOC purchase offer. Rep. Richard Pombo (R-Calif.), chair of the House resources committee and Rep. Joe Barton (R-Texas), chair of the energy and commerce committee, among other powerful representatives, led the charge, saying that the buyout could threaten national security and energy production, among other concerns. However, CFIUS can only review the potential deal if Unocal accepts CNOOCs buyout proposal, says Frank Verrastro, director of the Energy Program at the Center for Strategic & International Studies in Washington, D.C.
The Federal Trade Commission and the Securities and Exchange Commission have already given the green light to Chevrons offer. If Unocal accepted CNOOCs bid instead, it would be subject to intense scrutiny and approval by both agencies, as well as CFIUS and the White House.
CNOOCs all-cash offer is slightly higher than Chevrons bid, Verrastro says, so some on Wall Street are calling for Chevron to sweeten the deal. But the certainty associated with the fact that the Chevron deal has already been approved by federal regulatory agencies might give the company the edge in the shareholder vote, he says. At press time, Chevrons initial offer had not changed.
Depending on how the process plays out, the competition for Unocal could, however, have broader geopolitical consequences. As the worlds largest oil consumers and importers, the United States and China have a unique opportunity to influence energy markets by promoting efficiency, sharing technology and improving the environment, Verrastro says. The real danger in spinning up the rhetoric on Unocal is that we could wind up transforming potential strategic allies into strategic competitors or enemies.
Back to top
Edward Klimasauskas, the cadmium commodity specialist for the U.S. Geological Survey, has compiled the following information on cadmium, a mineral constituent used in rechargeable batteries.
Cadmium, which was once used almost exclusively for pigments, now has many
diverse applications. Cadmiums low melting point, excellent electrical
conductivity and resistance to corrosion make it valuable for many products
including batteries, electroplated coatings, stabilizers for plastics, solar
cells and nonferrous alloys. Todays cadmium is primarily used in rechargeable
batteries, accounting for about 78 percent of consumption in 2004. In 2000,
an estimated 3.5 billion consumer batteries were sold in the United States,
of which almost 10 percent were nickel-cadmium batteries.
Because cadmium is never found in nature as a native metal, its discovery came relatively recent. The metal was first separated from an unusual sample of zinc ore by Friedrich Stromeyer of Germany in 1817. He named it cadmium, after cadmeia, an ancient Greek word used to describe calamine zinc oxide ores. Primarily, cadmium sulfide pigment was used for paint in the 19th century.
Only a few cadmium minerals are known greenockite, hawleyite and otavite and they are associated with zinc minerals. Strata-bound zinc deposits, also known as Mississippi Valley-type deposits, are the most commercially important type. Zinc deposits suitable for extracting cadmium occur throughout the world, but China, Australia, the United States, Canada and Kazakhstan possess about 64 percent of the world reserve base.
In 2004, world refinery production of cadmium was about 17,200 metric tons, and, in descending order, China, Japan, Republic of Korea, Kazakhstan and Canada were the leading producers. The United States accounted for about 3.5 percent of the world refined production, a decrease of about 0.5 percent from that of 2003.
Cadmium use is concentrated in industrialized countries; only six countries account for 85 percent of world consumption. Japan is the leading consumer, followed by Belgium and the United States. In 2000, an estimated 13 percent of cadmium consumption in the United States came from recycled batteries and materials. However, cadmium usage in developed countries has declined in recent years owing to its toxicity.
The U.S. Environmental Protection Agency lists cadmium as a bioaccumulative pollutant and has set a target to reduce cadmium use by 50 percent by 2005. Cadmium can damage the lungs, and cause kidney disease and cancer. Exposure usually occurs in the workplace where cadmium products are made. The general public is exposed from breathing cigarette smoke or eating cadmium-contaminated foods, such as shellfish, liver or kidney meats. Consumer batteries make up only an estimated 1 percent of municipal solid waste but contribute a disproportionately high percentage of cadmium to the waste stream. The European Union is considering a ban on all nickel-cadmium batteries containing more than 0.002 percent cadmium starting in 2008.
Visit minerals.usgs.gov/minerals for more information on cadmium.
Back to top