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Europe’s Top Copper Producer Aurubis Hit by Huge Metals Scam

Mark Burton
Fri, September 1, 2023 

(Bloomberg) -- Europe’s top copper producer Aurubis AG warned it may face losses in the hundreds of millions of euros after being hit by a massive scam involving shipments of scrap metal that it uses in its recycling business.

Shares in the company plunged as much as 18% after it announced it found a significant metal shortfall and said it no longer expects to meet its profit forecast for the year. Aurubis believes some of its suppliers have manipulated details about the scrap metal they provided and had been working with employees in the company’s sampling department to cover it up.

The global metals industry has been rocked in recent years by a series of scandals, including the shock revelation by commodities trader Trafigura Group that it was the victim of a massive alleged nickel fraud. The incident will raise concerns about Aurubis’s security controls, particularly after the company said in June that it had uncovered a theft ring targeting products containing precious metals. The two incidents appear to be separate, a spokesperson said.

The scam announced late Thursday relates to material purchased for Aurubis’s metal-recycling business. In addition to raw material from mines, the company also buys huge volumes of copper-bearing scrap, from near-new manufacturing offcuts to old cables, pipes and electronic circuit boards. It processes thousands of tons of these materials every day to produce refined metal.

Manipulated Details

“What we currently know is that some of our recycling suppliers appear to have manipulated details about the raw materials they deliver to us, and they have been working with employees in our sampling department to hide the shortfall from us,” Angela Seidler, vice president for investor relations and corporate communications, said by phone. Suppliers provide an estimation of what the materials contain, and after a visual inspection Aurubis’s labs analyze the metal content and pay the firms on that basis, Seidler said.

“Then, in the production process, we have found that the metal is missing, but it is something we have discovered over time because in the case of copper, for example, it takes four weeks for the material to be processed.”

The company is conducting a thorough check of metal reserves that should be completed by the end of September, and it has involved Germany’s state office of criminal investigation.

Aurubis had previously forecast operating earnings before taxes of €450 million to €550 million for the 2022-23 financial year, which it no longer expects to achieve. It said losses could be in the “low, three-digit-million-euro range.” Steelmaker Salzgitter AG, which owns 30% of Aurubis, has also suspended its results guidance for the financial year.

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Serious Incident

“It’s a very serious incident, but the impact of it will be digested within our current fiscal year, and it will not have an impact on our expansion plans and our strategic priorities,” Seidler said.

Aurubis said in June that the public prosecutor’s office and police were investigating a suspected theft ring. Several Aurubis employee workspaces and the on-site offices of contractors at the Hamburg site were searched as part of the investigation, it said at the time.

“It appears to be separate from the incident in June, but it is too early to say whether or not the cases are interlinked,” Seidler said. “In that incident, they stole high-value precious-metal bearing intermediates that are generated during the refining process, and it takes a certain knowledge and access to processing equipment to treat these materials. The people involved in that are currently in custody awaiting trial.”

Aurubis’s announcement is the latest in a series of scandals to hit the global metal industry in recent years.

Trader Trafigura said in February that it expected to lose nearly $600 million in what it called a “systematic fraud,” after finding that cargoes of nickel it had bought didn’t contain any nickel.

The London Metal Exchange also this year shocked the market after discovering that a small number of bags of nickel registered in its warehousing network were filled with stones instead.

--With assistance from Jan-Patrick Barnert.

Bloomberg Businessweek