June 1, 2011 / 8:52 AM / in 8 years

EIB halts Glencore lending on governance concerns

* EIB to decline all new financing for Glencore

* Cites “serious concerns” over governance

* Had provided $50 mln loan for majority-owned Mopani

* EIB carrying out independent probe into tax claims

* Glencore denies wrongdoing, welcomes probe

By Clara Ferreira-Marques and Philip Blenkinsop

LONDON/BRUSSELS, June 1 (Reuters) - The European Investment Bank has frozen all new loans to commodities trader Glencore (GLEN.L) and its subsidiaries, it said in a statement on Wednesday, citing “serious concerns” over the group’s corporate governance.

The EIB, the European Union’s lending institution, provided in 2005 a $50 million loan to Mopani Copper Mines, a Zambian subsidiary of Swiss-based Glencore, to help pay for the modernisation of a copper smelter.

But Mopani has since been accused by some non-governmental organisations — 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, which stem from a leaked version of a pilot audit report commissioned by the Zambian tax authorities. The EIB has commissioned its own independent probe into the matter.

“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.”

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 had 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.

Mopani, in which Canada’s First Quantum (FM.TO) owns a minority stake, 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 in a record-breaking market debut.

Its shares were trading at 527 pence, down 0.8 percent, at 0835 GMT, underperforming a 0.8 percent rise in the broader sector and still below their 530 pence debut price. (Editing by Greg Mahlich)

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