Cheating mines exposed – Glencore inflated the costs of procurement
- A study by consultants after Glencore put the mine on care and maintenance according to mines Permanent Secretary Barnaby Mulenga, reveals that Glencore inflated the costs of procurement, goods and services as well as how much was paid to expatriates at the Mopani Copper Mines.
SANFRONSA MANYINDA AND BUUMBA CHIMBULU
THE discovery of extensive overpricing of operational costs by Glencore forced Government to assume control of the company to save jobs and ensure profitability.
A study by consultants after Glencore put the mine on care and maintenance according to mines Permanent Secretary Barnaby Mulenga, reveals that Glencore inflated the costs of procurement, goods and services as well as how much was paid to expatriates at the Mopani Copper Mines.
The Mine Contractors, Factories and Allied Workers Union (MCFAWU) has confirmed the rampant cheating on the mines.
And Mr Mulenga said the detailed investigation of Mopani involved the Zambia Revenue Authority, Ministry of Finance, Ministry of Mines and Ministry of Labour to check what was happening exactly at the mine when Glenore indicated that they were pulling out.
Mr Mulenga said a detailed report conducted around May up to end of July 2020 revealed and proved that the provision of goods and services among others were inflated.
Meanwhile, MCFAWU confirmed that there had massive cheating in the mining sector with regard to overpricing.
Union General Secretary, Levi Chimfwembe said that mining firms, Mopani included were not declaring proper prices to the State.
Mr Chimfwembe observed that such a trend affected taxation in the country and defrauded the much needed revenue in the country.
“It was through the group of technocrats that was created to give a report on what was going on in terms of pricing that we discovered that mining firms were not declaring proper prices,” he said.
Mr Chimfwembe said that this however served as a lesson to the government as forms of cheating were discovered over the years.
He expressed confidence that the acquisition of shares by ZCCM-IH in Mopani was a commendable move which would help put the situation that has been happening over the years under control.
Mr Mulenga said it was surprising that at the time when the investigation was being done, a tonne of copper was about US$8,000 and yet Mopani claimed that it was mining at a loss.
He said some exaggerations regarding the costs of expatriates and the way procurement was being done were detected.
Mr Mulenga said during the ZNBC Sunday Interview that the investigation had to be undertaken because the decision for Glencore to pull out of Zambia was sudden.
“At the time when the investigation was being done, a tonne of copper was about US$8,000 and yet they said they were mining at a loss as of May. So it was found that first of all, they were some exaggeration regarding the costs of expatriates but also the way procurement was being done. Prices were inflated,” he said.
Mr Mulenga said the reality was that some of these mining companies were not paying taxes as expected.
He indicated that Mopani was looked at as one of those potential giants which was about ramp up its production after completing its projects, but unfortunately and suddenly, the partners [Glenore] said they were pulling out.
“So what meant was that there were serious losses the company was incurring. So there was an admission even from Glencore themselves the fact that the company was not operating the way it was operating,” Mr Mulenga said.
About a week ago, Glencore agreed the sale of its majority stake in Mopani Copper Mines to Zambia’s mining investment arm ZCCM-IH in a US$1.5 billion deal.
ZCCM-IH already holds the remaining 10 percent stake in Mopani and is acquiring the outstanding interest from Carlisla for US$1 plus the transaction debt of $1.5bn, which will remain owed by Mopani to Carlisla and other Glencore group creditors following the completion of the deal.
The deal is expected to close within the next three months, conditional on the receipt of regulatory approvals in Zambia and on the approval of ZCCM’s shareholders and board of directors.