Leaders at Aurubis believe the company may have been ripped off to the tune of $194 million worth of metal, and insurance proceeds and restitution are unlikely to fully compensate the smelter company.
The Hamburg, Germany-based company on Sept. 19 provided an update on its investigation into missing metal inventories at its Hamburg smelter. Aurubis uncovered an organized plot to manipulate samples in its scrap recycling area, according to the release.
The company on Aug. 31 had disclosed that a review found a shortfall in its metals inventory. The missing metal was an indication that the thefts Aurubis discovered in June had gone deeper than previously known or that the company had again become a heist target since then.
Aurubis initially estimated the metals inventory might be valued in the “low, three-digit-million-euro range,” and it ordered up a more thorough audit to determine the damages. The company now says the audit found a precious metals shortfall of about 185 million euros, or about $194 million based on today’s exchange rate.
“We are working closely with the investigative authorities and at full speed to get to the bottom of the criminal activities. We have pulled all of the necessary internal resources together and are using external forensic specialists,” Aurubis CEO Roland Harings stated in the press release. “At the same time, based on the findings of the investigation, we are immediately and comprehensively improving the level of protection against professional crime.”
The latest release noted there was manipulation of the shipments and samples of scrap with high contents of valuable metals.
“The shipments did not contain the metals in the amounts expected based on the manipulated samples, and inflated invoices were paid as a result,” the release noted. “It was apparently possible to manipulate these input materials despite the high security standards, customary for the industry, in place at Aurubis.”
Based on initial recommendations from a security task force that’s been set up, Aurubis has placed additional restrictions on who can access sensitive areas, particularly the sampling areas, and increased checks of individuals and vehicles, as well as provided more extensive surveillance, the release notes.
Insurance proceeds and seized assets may ‘partially compensate’
One of the world’s biggest copper recyclers, Aurubis said it expects to file claims with its insurance providers amounting to about 30 million euros ($31.5 million), and that criminal cases currently being pursued by German authorities could yield seized assets that serve as restitution for Aurubis, “which could partially compensate for the negative effect on earnings.” But the company still expects the organized criminal activities to have damaged its operating earnings before taxes (EBT) for the 2022-23 fiscal year.
As a result of the thefts and more recent economic trend data, the company has revised downward its forecast for earnings for the fiscal year, from 450 million to 550 million euros ($473 million to $578 million) down to 310 million to 350 million euros ($326 million to $368 million), according to the release.
Aurubis is building a large smelter in Georgia that will take in e-scrap. The company indicated the criminal activities will not affect its growth.
“The implementation of our growth strategy remains unaffected by current developments because Aurubis is in a financially robust position with sufficient liquidity,” Harings stated in the release. “Recycling is the core of our strategy, along with expanding the circular economy as a significant contribution to conserving resources. So we will do everything in our power to ensure the recycling industry as a whole is not undermined.”