EIB Freezes Funding To Glencore Zambia Amid Tax Evasion Prob
JOHANNESBURG -(Dow Jones)- The European Investment Bank said Wednesday it is investigating tax evasion accusations against commodity trader Glencore International PLC (GLEN.LN) in Zambia, where it is the majority owner of Mopani Copper Mines PLC., and has frozen further funding to the group.
The EIB provided Mopani with a $50 million loan in 2005 to help fund renovation of the Mufulira copper smelter. The loan is due to be fully repaid by the end of 2016.
However, following accusations of tax evasion by non-governmental groups and a leaked draft of a Zambian Revenue Authority commissioned pilot audit report that accused the trader of inflating mine costs and of undervaluing its minerals, the EIB said it will now hold its own investigation.
"Due to serious concerns about Glencore's governance, which have been brought to light recently and which go far beyond the Mopani investment, the President of the EIB has instructed the services to decline any further financing request from this company or one of its subsidiaries," the EIB said.
Glencore denied wrongdoing.
"We welcome the EIB taking a close look at Mopani since we are confident that we will be completely exonerated," the company said.
The EIB said the $50 million loan is the only one given to a Glencore entity. It was used to partially fund the first phase of the renovation and modernization of the copper smelter to reduce the emissions of sulphur dioxide. The EIB said total project costs were $130 million with the remaining $80 million financed from Glencore's own funds.
"In the event that this investigation were to conclusively demonstrate tax evasion according to the Zambian authorities this would clearly expose Mopani Copper Mines to local financial penalties and lead to events that may trigger early repayment of the EIB loan," the EIB said.
-By Devon Maylie, Dow Jones Newswires; +27 (11) 783 7848; devon.maylie@dowjones.com (Alex MacDonald in Lisbon contributed to this article).