Europe's biggest copper producer, Aurubis AG, has been hit by a significant scam involving shipments of scrap metal used in its recycling business. The company announced that it had discovered a major metal shortfall, leading to a plunge in its shares by as much as 18%. As a result of the fraud, Aurubis no longer expects to meet its profit forecast for the year.
The scam appears to involve manipulation of details about the raw material supplied by some of Aurubis's recycling suppliers. These suppliers, in collaboration with employees in the company's sampling department, allegedly hid the shortfall from Aurubis. The company relies on suppliers to provide estimates of the metal content, which are then analyzed and paid for accordingly. However, during the production process, it was discovered that the metal was missing. Such discrepancies take time to identify as processing can take several weeks.
A thorough investigation of metal reserves is currently underway and is expected to be completed by the end of September. Germany's state office of criminal investigation is assisting in the process. The losses resulting from the scam are projected to be in the "low, three-digit-million-euro range," and Aurubis will not achieve its operating earnings before taxes forecast for the 2022-23 financial year.
The incident raises concerns about Aurubis's security controls, particularly following the revelation earlier this year that the company had uncovered a theft ring targeting products containing precious metals. However, Aurubis has stated that the two incidents appear to be separate.
The global metals industry has been plagued by scandals in recent years, including Trafigura Group's revelation that it fell victim to a massive alleged nickel fraud. In another shocking incident, the London Metal Exchange discovered that some bags of registered nickel in their warehousing network were filled with stones instead.
Despite the severity of the fraud, Aurubis remains committed to its expansion plans and strategic priorities. The company assures that the impact of the incident will be absorbed within the current fiscal year. The investigation and measures to mitigate future risks are ongoing.