Maravi

(REUTERS) UPDATE 1-EIB halts Glencore lending on governance concerns

COMMENT - This article came to my attention, courtesy of Cho's Zambian Economist blog. Glencore is a company led by a convicted criminal, Marc Rich. Convicted of tax evasion, and pardoned by former president Bill Clinton.

UPDATE 1-EIB halts Glencore lending on governance concerns
By Clara Ferreira-Marques and Philip Blenkinsop
Wed Jun 1, 2011 11:33am GMT

LONDON/BRUSSELS, June 1 (Reuters) - 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.

The EIB, the European Union's lending institution, provided a $50 million 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 subsdiaries," it said.

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

Other projects with EIB involvmement 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 projcts 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 1050 GMT, underperforming a 0.9 percent rise in the broader sector and still below their 530 pence debut price.

(Editing by Greg Mahlich)

Labels: CORRUPTION, EIB, FIRST QUANTUM MINING, GLENCORE INTERNATIONAL AG, MOPANI, TAX EVASION, WINDFALL TAX

posted by MrK @ 1:48 AM