Should Romania privatize its copper?

We’re holding an olympic blog series these couple of weeks focussing on gold, silver and copper mining in resource rich countries as well as on gold, silver and copper mining companies.

In celebration of Romania’s two bronzes, Andra Bucur from Soros Foundation Romania has blogged about the current debate in Romania surrounding the privatization of its copper.

The mismanagement of the national agencies exploiting natural resources and the losses registered by the state have led to privatization plans, under the Romania-IMF agreement. But the rapidness of the privatization process and the whether it’s in the public interest have cast a doubt regarding its success.

One of the main mineral resources exploited in Romania is copper. The national strategy for the mining industry for 2008-2020 states that 900 million tons of copper can be exploited with the current technology. Cuprumin Abrud is the national agency in charge with the exploitation and delivery in the area with the biggest copper reserves.

In April 2012 the Canadian company Roman Copper won the auction regarding the privatization of Cuprumin Abrud. After 10 days of negotiations the deal wasn’t closed and the auction was ultimately cancelled.

On one hand, according to the declarations of the minister of Economy, the privatization didn’t happen because the private company didn’t have the environment permits, didn’t agree to the payment in 30 days and didn’t agree to a deposit of about 33 million euros as a guarantee for meeting the environmental requirements.

The public debate, however, was focused on the fact that the price of the national agency didn’t take into consideration the copper resources in the region, only the patrimony of the institution, selling public resources too cheap. The resources can’t be sold as they are public property so this discussion should have been around royalties.

The debates continued until the delay for making the contract expired, without reaching a clear conclusion regarding the necessity and benefits of a possible privatization. This clearly proves that impact studies need to be made and that mining strategies should be explained to regular citizens.

In April 2012, one of the charges brought against the government (right wing) in the motion that lead to its dismissal concerned the privatization of national agencies without public consultations, in opacity and breaching the law. This was also the case Cuprumin Abrud. The agency is profitable and the copper resources administrated are estimated at about 5,6 billion euros. The Canadian company did not prove that it had the necessary technical and financial capacity. Months later the left wing government didn’t do anything to make the exploitation of natural resources more transparent.

Privatization brings investment, better management, new technology, competitiveness on the market, products tailored to the client’s needs and more income to the state budget. On the contrary, a private company aims for profit and doesn’t care so much about the public interest, the quality may suffer because the aim is profit and the privatization may not be easily reversed in case of lack of success. These are the major pros and cons for privatization in general, but to what extent they apply in the Cuprumin case remains unclear.