Return to King Solomon's Spanish mine
Fire, floods and legal fights did not deter Emed from digging at Riotinto. Mark Leftly reports from Seville on a great comeback
Sunday 25 July 2010
A small corner of south-west Spain, a 75-minute drive from downtown Seville, is forever England.
Inside the late 19th-century clubhouse in Minas de Riotinto, named after the red-hued river than runs nearby, are a series of rooms that would still do the Victorians proud. In the library, an 1892 edition of the Lady's Pictorial lies open to an article on female artists, while another room contains a worn billiards table and a document entitled "Rules of the game of Russian pool".
This is an old mining town where the FTSE-100 giant Rio Tinto was formed in 1873. The group held a stake in the ancient copper, silver and pyrite mine even through the fascist Franco era until the site was nationalised in the 1990s. Run by a workers' co-operative, the mine survived as an active copper producer only until the first years of the new millennium.
Next week, Emed, an Alternative Investment Market-listed vehicle, will take a major step in reviving a mine that the Phoenicians, Romans and, according to local folklore, even King Solomon once worked. A salty mix of Australian, Canadian and American mining veterans will submit a technical report to Spanish authorities which should lead to a permit to reopen the mine for copper production by the end of next year.
The potential gains for a company valued at just £34m are huge. Emed's Cyprus-based, Egypt-born, Aussie chief executive, Harry Anagnostaras-Adams, predicts revenues of more than $200m a year to 2025. Anagnostaras-Adams is in the closing stages of an extraordinary battle that has so far lasted three years, since Emed took over this Mars-like landscape of red craters and boulders.
Pools of battery acid water, a tireless opponent, the dredging up of past disasters in a fierce online propaganda campaign, criminal prosecutions, devastating unemployment and financial disputes with landowners are just some of the features of this rip-roaring yarn.
"In the past 12 months we've suffered fire, flood and pestilence," Anagnostaras-Adams smiles ruefully as he shows his guests around what is now a virtually disused quarry.
Huge boulders, some maybe nine feet high, hint at how poorly the area was mined under the co-operative. They are the results of explosions used to break the rock into smaller pieces so that they can be put into the now-disused crusher, but they are far too big to be processed.
The co-operative was led by a management team that included Carlos Estevez. When the mine failed as a result of the collapsing copper price, Estevez formed a company called Mantesur SA (MSA) to have another crack at making Riotinto profitable. However, he couldn't get permission from the Spanish government to reopen.
An Australian company, Oz Minerals, took an interest in the mine but decided that it was based too far away to oversee the project. Oz pointed the project in Anagnostaras-Adams's direction and now has a stake in Emed.
Emed is a small company; big-name groups simply wouldn't take a look, particularly as Europe was no longer committed to mineral production. "Majors won't go near it until a permit to produce is issued. There are too many political problems," says John Meyer, a mining analyst at Fairfax. "The irony now is that the politicians are on the side of the mining company because of the mess made by a failed Spanish co-operative." Anagnostaras-Adams assembled a team with experience of treacherous physical conditions, such as working in the thin air of the Andes Mountains, and politically turbulent countries including Guatemala.
The physical dangers at Riotinto are demonstrated by the highly acidic pools of water that have developed in the years the mine has lain idle. A human's skin would burn off should they fancy a swim, poisoned by the several million dollars' worth of copper that has dissolved into the water.
A huge natural fire took out acres of nearby grassland last year, while the heaviest rainfall in the region's history caused floods that turned much of the area into a muddy marsh. The plant and equipment will also require a thorough scrubbing, costing $50m to bring back into use.
The political and legal problems are even more complicated. According to Anagnostaras-Adams, Emed's agreement with Estevez was conditional on him not interfering with the project and providing any information the company required.
Emed terminated the contract early last year, arguing that Estevez had breached those conditions. The situation has since turned nasty, with Emed commencing a criminal prosecution against Estevez alleging fraud among other charges. Estevez is involved in associated legal wrangles with the government and commodities trader MRI, which was the main creditor to MSA and is now an Emed shareholder.
"There are legal legacy issues and he is doing his darnedest to get back into the project," claims Anagnostaras-Adams. "With a guy that pulls no punches you have got to hit them back quite hard."
Estevez is the "pestilence" of the past 12 months to which Anagnostaras-Adams refers. Estevez counters that "everything published by Emed is crazy" and that the legal matters make it "difficult to talk" about this "complicated project".
Emed managers have also found themselves attacked on internet chatrooms. One critic, calling himself tartessusdruid, essentially questioned their suitability to run the mine given problems they have had in the past.
Anagnostaras-Adams was chief executive of Gympie Gold, an Australian group that fell into receivership in 2004 after a devastating fire at a coalmine that was its major source of cash. He brought several former Gympie colleagues with him to Europe, including Emed's head of exploration, Ron Cunneen.
"It is a fact that the coalmine was a failure," admits Anagnostaras-Adams. "But we picked ourselves up and got on with it. There were no injuries and personnel were paid out in full and Gimpney's receiver was even a seed investor [to Emed]."
When he was in charge, Estevez also sold large tracts of land in and around the mine to two vehicles, Rumbo 50 and Zeitung Construction. Between them, the duo owns 56 per cent of the tailings dam, vital to any mining project as it cleans up the waste material from mineral extraction.
If a financial settlement cannot be reached, Emed will invoke a regulatory process leading to a compulsory purchase. Much like the legal proceedings, this could take several years to sort out, though Emed should still be clear to start production by late next year.
Most importantly, the government has been supportive and last month Emed finalised a repayment to the Department of Social Security for one of the project's historic debts. And with youth unemployment at 50 per cent, the local population is desperate for production to start – 3,500 people have already written to Emed about applying for the 350 or so jobs that will be available.
"We're on the home stretch of the shenanigans," concludes Anagnostaras-Adams. "We're now down to chatrooms and criminal prosecutions."
At any other project, those would seem like huge ordeals in themselves.
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