African Consolidated Resources (AFCR) has officially announced yesterday that it has concluded an agreement with Remin Baia Mare in order to evaluate a mining partnership. BURSA was the first to exclusively announce, back in May, that the South African company may be interested in Remin. Together with the AFCR, two other investors expressed interest as well - Romaltyn, which subsequently denied that it was interested in Remin - and Metal Finance Europe.
The memorandum between the AFCR and Remin has a six-month validity period, providing the possibility of conducting the necessary due diligence, according to a press release sent by the AFCR to our editors.
Andrew Prelea, CEO of the Romanian branch of AFCR told us: "We have spent six months reviewing the opportunities which the Romanian mining sector has to offer. Remin was a giant, a company that created thousands of jobs directly and indirectly, which made it the logical choice for our studies. In the next six months we will continue this review with the due-diligence procedure, which involves significant budgets. We want this cooperation to lead to direct foreign investments and to allow the bringing back of many jobs. In the coming weeks, we will bring in a team of international experts, which will train the employees in the use of the latest technologies, thus we have total confidence in the ability and capacity of the local professionals".
According to the statements of the representatives of African Consolidated in Romania, the company has begun evaluating the mining opportunities in Romani in October 2012.
Also, in the press release sent by the AFCR, the company is presented as operating in mining exploration and exploitation, as it is registered on the London Stock Exchange (AIM).
In its press release, the South-African company claims it has come to Romania, following the invitation from the largest domestic copper company, in order to participate in reviewing the business opportunities in Romania.
When asked whether the invitation came from "Cuprumin", the officials of AFCR said that this statement was confidential, as their name could not be disclosed.
The manager of "Cupru Min" dismissed
Since Monday, "Cupru Min" Abrud has a new management. The new Board of Directors decided in a meeting which was held in Bucharest to enact the order of the Minister of the Economy, Varujan Vosganian, which required the dismissal of manager Lucian Vasilache.
L. Vasilache has been replaced with Gheorghe Iordache, the former head of Min Bucovina SA of Vatra Dornei, according to the statements of the local press.
The appointment of Gheorghe Iordache as head of "Cupru Min" sparked many reactions, especially from the employees of the company, who, in a letter addressed to the Minister of the Economy, Varujan Vosganian, denounced his decision as being unfair.
The ties between African Consolidated Resources- Cupru Min- Energo-Mineral
African Consolidated Resources is represented in Romania by Andrew Prelea and Gabriela Dobrotă. The latter was a director at the Phoenix chemical-metallurgic plant and subsequently a director at SC Energo-Mineral Baia Mare, a company which had a partnership with Roșia Poieni, the current Cuprumin.
The business relationship between Cupru Min and Energo Mineral SA lasted between 200-7-2009, when a joint-venture agreement was concluded between Cupru Min and the consortium made up of Cuprom SA București, Energo Mineral SA Baia Mare (led by Gabriela Dobrotă) and Ipronef SA București, owned by businesspeople Horia Simu and Horia Pitulea.
According to market sources, Simu and Pitulea committed to invest 155 million Euros into retooling the mining exploitation of Roșia Poieni. The people of Energo Mineral were saying at the time, that the investments in Cuprumin concerned a long-term campaign, of 15 to 20 years.
In July 2009, after a nine-month slowdown of the activity and the layoff of 360 people, Energo Mineral, Cuprom and Ipronef have denounced the contract with SC Cupru Min SA, being left with approximately 50 million lei in debts towards Cupru Min.
The reasons provided by Energo Mineral, led by Gabriela Dobrotă, were the drop in the price of copper on the international market and the refusal to renegotiate the cooperation contract.
The decision had important consequences in terms of environmental protection at the tailing pond of Valea Șesii. Energo Mineral SA is 99.99% owned by Energo Mineral Trading. The remaining shares are owned by Nordexo Manufacturing SRL, Răzvan Florin Calangiu, Horia Simu and Horia Pitulea.
A major part of the debts which Cuprumin has accrued come from the period when it was associated with Energo Metal, between 2007-2009, says Nicolae Nicu, former minister of mining and an expert in the mining of non-ferrous minerals.
According to Nicolae Dicu, the copper deposit of Roșia Poieni is the only one of the non-ferrous mining sector that is still in use, and it is being mined using a quarry
The reserve of Roșia Poieni is less than one billion tons of ore, but the copper concentration is just 0.36%.
The main problems which Cupru Min is currently faced with are the age of its machinery, which require improvement, the draining of the waste water, as well as the manner of exploitation, as only 8% of the total deposit of Roșia Poieni is mined using a quarry, while the rest is being mined underground.
"At Cupru Min the exploitation can be done in two manners: using a quarry and underground. In the quarry a maximum of 10 million tons a year can be done, amounting to an output of 23,000 tons of concentrate a year. The problem is that only 10% of the total reserve of less than one billion can be tapped like this. Thus, depending on the annual output, the mining could continue for 10-15 years. If we keep mining underground, the maximum capacity can not exceed 5 million tons a year, which could exceed 12,000 tons of concentrate a year", Nicolae Dicu explained.
According to him, all the financial difficulties which Cupru Min is facing could be dealt with if the profit stayed within the company. Currently, 90% of the company's profits go to the state, and only 10% stay with Cuprumin.
The fate of Cuprumin, changed from one year to the next
In April last year, the sale of Cuprumin to Roman Copper failed, because the Canadian company refused to deposit a guarantee for the environmental investments, to pay the price of the shares within a month at the latest and to accept the publication of the privatization document.
Former minister of the Economy, Lucian Bode, was announcing at the end of the negotiations, that the Romanian party has asked the Canadian side to set up a collateral deposit of 32.27 million Euros in order to guarantee the environmental investments.
Roman Copper had already won the call for tenders held by the Ministry of the Economy, with a bid of 200 million Euros for Cupru Min. The Canadian company later refused to set aside 32 million Euros for the environmental guarantees and to accept the publication of the privatization contract.
According to statements by Varujan Vosganian, the Minister of the Economy, there are six investors interested in the privatization of Cupru Min, coming from major companies operating in the copper industry located in Russia, Europe and North America.
Mr. Varujan Vosganian said that the Ministry would soon pick the company which would provide legal, technical and financial consulting for the privatization of the company, including the solution for the tender book needed for starting the call for bids. The report of the consultant will be ready in June, in order to allow the honoring of the privatization schedule agreed with the IMF.
"Given the failed call for tenders which took place last year, which has harmed Romania's image and dented its credibility among investors, we can't afford to fail", the Minister of the Economy said, and he added that he opted for the public-private partnership for Cupru Min due to some lawsuits.
Essentially, the consultant will determine the necessary investments for the environment and for the modernization of the mining of copper, as well as for the stripping. The selected investor will pay the aforementioned in advance to Cupru Min, and will then recoup it out of the mined copper which the state will make available to it. The value of the copper will be determined based on the international quotations, and the investor will also receive a discount.
Cupru Min controls approximately 60% of Romania's copper reserves. In spring last year, the copper producer was put up for sale, but the privatization was halted due to the disagreements with Roman Copper, the winner of the call for tenders. Roman Copper has sued the Romanian state for not awarding it the contract and wants to recoup its collateral it deposited for participating in the call for tenders.
ALEXANDRA CRĂCIUN (Translated by Cosmin Ghidoveanu)
Craig Hutton, CEO AFCR: "The new strategy communicated by the AFCR, of turning the company into an important mining developer with a wide range of polymetallic materials is in line with the mentioned mix of opportunities."