EIB halts Glencore lending on governance concerns

Published by MAC on 2011-06-13
Source: Reuters, The Independent

EIB halts Glencore lending on governance concerns

By Clara Ferreira-Marques and Philip Blenkinsop

Reuters

1 June 2011

LONDON/BRUSSELS - The European Investment Bank has frozen all new loans to commodities trader Glencore) and its subsidiaries, it said in a statement, citing "serious concerns" over the group's corporate governance.

Glencore has a 73% stake in the Mopani copper mine in northern Zambia. Photograph: Jean-Claude Coutausse/Bloomberg News

The EIB, the European Union's lending institution, provided a $50 million (30 million pounds) loan to Mopani Copper Mines, a Zambian subsidiary of Swiss-based Glencore, in 2005, to help pay for the modernisation of a copper smelter.

But Mopani has since been accused by some non-governmental organisations (NGOs) -- most recently by campaign groups in an open letter signed by a group of European parliamentarians -- of tax evasion and of causing widespread pollution.

Glencore has denied the allegations, the bulk of which stem from a leaked version of a pilot audit report commissioned by the Zambian tax authorities. The EIB, in a statement issued to answer comments from NGOs, said it has commissioned its own independent probe into the matter.

Any conclusive proof of tax evasion would lead to local penalties and could trigger early repayment of the loan, the EIB said, adding it would, if necessary, improve its own due diligence audit mechanisms.

"We welcome the EIB taking a close look at Mopani, since we are confident that we will be completely exonerated," a spokesman for Glencore said on Wednesday.

"The allegations are based on an incomplete, draft desktop study that was circulated in Zambia several months ago. We publicly refuted the draft conclusions of this document at the time," he said.

Mopani itself has also placed advertisements in local Zambian newspapers to reject claims made in the draft audit on sales volumes, manipulated copper prices and improperly recorded hedges, saying the conclusions were based on "errors and inconsistencies" and were a "calculated move to tarnish the image and integrity of Mopani."

More than Mopani

But the EIB said in its statement its concerns went "far beyond" Mopani, repeating comments made in a letter to a group of parliamentarians who last week called for EU financing for mining projects in Africa to be suspended.

"Due to serious concerns about Glencore's governance, which has 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," it said.

EIB invests in mining projects throughout Africa and beyond as part of EU development cooperation policy.

Other projects with EIB involvement include the Ambatovy nickel project in Madagascar and the Tenke Fungurume mining project in the Democratic Republic of Congo.

The group of more than 50 members of the European Parliament called last week for a moratorium on EU public financing for mining projects until "adequate standards and regulations" are brought in.

They questioned the environmental impact of the EU investment in Mopani, arguing the EIB was ill-equipped to monitor mining projects and to deal with related risks.

Mopani, in which Canada's First Quantum and the Zambian state own minority stakes, has generated over $380 million in tax payments to the Zambian government since its privatisation in 2000, through royalties, import/customs duties and income taxes.

Glencore, the world's largest diversified commodities trader, listed on the London stock exchange in May.

Its shares were trading at 523 pence, down 1.5 percent, at 11:50 a.m. British time, underperforming a 0.9 percent rise in the broader sector and still below their 530 pence debut price.

(Editing by Greg Mahlich)

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Glencore in the spotlight as EIB freezes lending

By Nikhil Kumar

The Independent

2 June 2011

The European Union's financing arm has frozen all lending to the Swiss commodities trading giant Glencore, citing "serious concerns" about governance at the FTSE 100 listed firm.

The European Investment Bank had loaned $50m (£30m) to Glencore's Zambian subsidiary Mopani Copper Mines for the renovation and modernisation of the Mufulira copper smelter in 2005. It said it would "decline any further financing" requests from the company, or one of its subsidiaries, as it conducts an internal investigation into allegations of tax irregularities at Mopani stemming from a leaked draft of an audit report by the accountancy firm Grant Thornton and Econ Poyry.

The EIB said that, as well as launching its own investigation, it had informed Olaf, the European anti-fraud office.

Glencore denied the allegations and said it looked forward to the results of the investigation. "We welcome the EIB taking a close look at Mopani since we are confident that we will be completely exonerated," the company said. "The allegations are based on an incomplete, draft desktop study that was circulated in Zambia several months ago. We publicly refuted the draft 'conclusions' of this document at the time."

The EIB, however, said that its decision to stop lending stemmed from governance concerns "which go far beyond the Mopani investment". But the lender did defend the environmental record of the smelter since it was privatised in 2000.

"Pollution was much higher before privatisation, and the latest information obtained confirms that the situation has improved since, including notably through the investment financed by EIB's loan," it said.

But Saviour Mwamba, a director at the non-governmental Centre for Trade Policy and Development, said the central issue was not Glencore, but rather EIB's ability to asses the impact of its loans to miners operating in poorer countries. "The problem is not with one company. The issues are not only unique to Glencore," he said. "There are systemic problems in the international financing system."

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Zambia asks Glencore subsidiary for 'underpaid' mining taxes

By Chris Mfula

Reuters

7 June 2011

LUSAKA - Zambia has asked commodity trader Glencore's Mopani Copper Mines for unpaid taxes after an audit of the subsidiary, leaked earlier this year, said it had underpaid mining dues, the country's finance minister said.

But Zambia is leaving the door open for a deal with Glencore. Finance Minister Situmbeko Musokotwane told Reuters on Monday that the government hoped to resolve the long-standing issue and was giving Mopani a chance to respond.

Mopani has been accused by some non-governmental organisations -- most recently by campaign groups in an open letter signed by a group of European parliamentarians -- of tax evasion and of causing widespread pollution.

Last week the European Investment Bank, the European Union's lending institution, said it had frozen all new loans to Glencore and its subsidiaries, citing "serious concerns" over the commodity trader's governance.

Most of the claims stem from a pilot audit commissioned by Zambian tax authorities, which leaked earlier this year.

Glencore has repeatedly denied the allegations in the audit report and says they are based on an incomplete study. The commodities giant, which has said it believes it will be completely exonerated, had no further comment on Monday.

"The Zambia Revenue Authority has asked Mopani to pay more money in underpaid taxes, but they must be given a chance to respond," Zambia's Musokotwane said in an interview.

Musokotwane did not detail how much was owed, but he said Mopani had been asked to pay more. He said if the company's response did not hold up to scrutiny, it would be hit with a bigger tax bill.

"If their answers are satisfactory we will go by what they submit, but if they are not satisfactory we will adjust their tax liability upwards to the figure that the Zambia Revenue Authority has asked them to pay," he said.

"We are very confident that this matter will be resolved amicably and are just waiting to hear from Mopani," Musokotwane added.

Glencore is the world's largest diversified commodities trader and listed on the London Stock Exchange in May.

Mopani, in which Canada's First Quantum and the Zambian state own minority stakes, has generated more than $380 million in tax payments to the Zambian government since its privatisation in 2000, through royalties, import and customs duties and income taxes.

Transparency in Africa's resources sector is a huge issue, and corruption and underdevelopment linked to it are behind a U.S. drive to force companies to come clean on their payments to foreign governments.

(Additional reporting Clara Ferreira Marques; Editing by Ed Stoddard, Alexander Smith and Steve Orlofsky)