EIB commences investigations into operations of Glencore Int
The European Investment Bank has joined other concerned economic players in the fray with the lender stating that it has commenced investigations into reports of alleged tax evasion accusations against the company, co owners of Mopani Copper Mine in Zambia.
To the effect, it had slapped a ban on all funding’s to the group to establish the truth behind the matter. The EIB provided Mopani with USD 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.
In view of the accusations of tax evasion by non governmental groups and a leaked draft of a Zambian Revenue Authority commissioned pilot audit report linking the trader of inflating mine costs and of undervaluing its minerals, the bank decided to undertake its independent investigations into the matter.
EIB stated that due to the 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. Glencore has since denied any wrongdoing.
The lender stated that the USD 50 million loan is the only one given to a Glencore entity and was used to partially fund the first phase of the renovation and modernization of the copper smelter at Mufulira mine in northern Zambia to reduce the emissions of sulphur dioxide. According to the EIB, total project costs were USD 130 million with the remaining USD 80 million financed from Glencore's own funds.
The lender said that 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 lender has since slapped an indefinite ban on all financing to Glencore because of what it called serious concerns about its governance.
According to data, in 2005, the European Investment Bank signed a finance contract with Mopani Copper Mines, a subsidiary of Glencore for the amount of USD 50 million to partially fund the first phase of the renovation and modernization of the Mufulira copper smelter with the aim of reducing the emissions of sulphur dioxide (SO2). Total project costs were USD 130 million and the remaining USD 80 million were financed from own funds of the borrower.
The EIB loan was fully disbursed in April to August 2005. The project was successfully completed by mid 2007, and was effectively eliminating half of the SO2 emissions of the smelter. A further and final reduction of SO2 and dust emissions was planned for latest 2015 when Mopani Copper Mines would have completed the construction of the second acid plant without co financing by the lender.
It was envisioned that the efforts would render the smelter compliant with local and World Bank emission regulations. Mopani Copper Mine's debt service to the bank has always been excellent and the loan is expected to be fully reimbursed by end 2016.
EIB said that accordingly prior to its approval, the loan received the Non objection from the Zambian government, as well as from the European Commission. The loan had been correctly used, the project successfully implemented and the smelter was operational with environmental benefits demonstrated.
The EIB added that it had a long record in supporting mining projects in African, Caribbean and Pacific countries, with 8650 million signed since the implementation of the Cotonou Agreement in 2003. On tax, the lender added that it was aware that the Zambian Revenue Authority had commissioned a pilot audit report on Mopani, and that a version characterized by the ZRA as a confidential, preliminary and incomplete draft had been leaked recently.
However, the EIB, in accordance with its anti fraud policy had also launched its own investigation. The Mopani operation has generated over US$380 million in tax payments to the Zambian government since privatization in 2000 through royalties import and customs duties and income taxes. The Mufulira smelter was first built in 1937. Prior to privatization in 2000, 100% of all SO2 went into the atmosphere.
So far the situation has improved since, including notably through the investment financed by EIB's loan to Mopani copper mine for modernization of the copper smelter. The project has successfully established the capacity to eliminate 250,000 tonnes of SO2 a year, materially contributing to the protection of the environment.
(Filed by Mr Kapembwa Sinkamba SteelGuru Correspondent Zambia)
Saturday, 04 Jun 2011
http://www.steelguru.com/metals_news/EI ... 08336.html