Copper Smelter Aurubis Says It Is Victim of Huge Metal Scam

(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 metal scam, and no longer expects to meet its profit forecast for the year. The shares plunged as much as 18%.

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The Hamburg-based smelting company doesn’t yet know the extent of the damages but has discovered significant discrepancies in inventories and shipments of metal associated with its recycling business, Aurubis said in a statement. It’s conducting a thorough check of metal reserves that should be completed by the end of September, and it has involved the state office of criminal investigation.

High-value industrial metals like nickel and copper have historically been an attractive target for criminals, and the industry has been repeatedly 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.

As well as buying raw material from mines, Aurubis also purchases 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.

Considerable Discrepancies

“During a scheduled review of metal inventories, Aurubis has identified considerable discrepancies in target inventory as well as in individual samples from specific shipments of input materials for the recycling area,” the German company said.

“It cannot currently be ruled out that the damages might be in the low, three-digit-million-euro range.”

The company 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. Steelmaker Salzgitter AG, which owns 30% of Aurubis, has also suspended its results guidance for the financial year.

Aurubis said in June the public prosecutor’s office and police were investigating a suspected theft ring targeting precious metal-bearing intermediate products generated from Aurubis’ production processes. 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.

The latest evidence “has led Aurubis to conclude that it has been the target of further criminal activity following the cases reported in June,” the company said on Thursday.

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.

(Updates with shares.)

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