hidden motives by glencore

Equinox hints at hidden motives in Glencore's rejection of concentrate
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By: Liezel Hill
Published on 8th January 2009
TORONTO (miningweekly.com) - Five truckloads of copper concentrate from Equinox Minerals' Lumwana mine, in Zambia, were turned away at the gate by Mopani Copper Mines (MCM) without so much as a sample test, which raises questions about MCM and owner Glencore's argument that the concentrate did not meet specifications, Equinox chief Craig Williams argued on Thursday.

The situation was "disappointing", but also "a little bit confusing as to how you can reject something without testing it", he commented.

For the first five years operation, Equinox has an offtake agreement with the new Chinese-owned Chambishi smelter, to treat just over one-half of the concentrate produced at Lumwana.

About 28% of the mine's production was to have been treated at MCM's Mufulira smelter, but this is now in doubt and, for now, the concentrate that was earmarked for smelting by MCM is being sold to international traders.

Williams said MCM and Swiss commodities trader Glencore had suggested that the presence of measurable uranium in the concentrate made it unacceptable.

However, Equinox maintains that its contractual commitment is to meet the International Atomic Energy Agency's standard, which Williams said was easily measurable.

"Our concentrate typically has less than half of the specified uranium levels...we are very clear on that."

Williams speculated that there may be some other reason for why the concentrate was rejected, including the possibility that the owners of the smelter were hoping to renegotiate the offtake agreement at better terms.

"I don't know what sort of game Mopani and Glencore are playing, but there is certainly some sort of agenda here that is not clear," he said.

A Glencore spokesperson declined to comment when approached by Mining Weekly Online.

Equinox plans to pursue its rights under the contracts with MCM and Glencore, but remains open to resuming deliveries, if they would be accepted.

For now, the company is not having trouble finding buyers for the concentrate, and pointed out that none of them, nor the operators of Chambishi, had indicated they had any problems with the concentrate.

The company is also in advanced talks to enter longer-term offtake agreements, Williams said.

The Lumwana mine, which began production last month, is expected to produce an average of 172 000 t/y of copper in its first five years of operation.

As an aside, copper-miner First Quantum Minerals, which also owns about 17% of MCM, increased its stake in Equinox last year by buying shares on the open market, and now owns about 19,25% of the smaller company.

Editor: Liezel Hill