ArcelorMittal threatens to sue Bosnia over sale of Ljubija mine to Israeli rival

ArcelorMittal threatens to sue Bosnia over sale of Ljubija mine to Israeli rival
By Denitsa Koseva in Sofia May 14, 2017

Global steel maker ArcelorMittal has warned that it will cancel a planned investment in Bosnia & Herzegovina and file a claim with an international court, if the sale of the government’s stake in the Ljubija mine to Israeli Investment Group - Overseas Inc goes ahead. 

ArcelorMittal is a major investor in Bosnia, and has expressed an interest in acquiring the 49% stake in the ore mine held by Ljubija for several years. Together with Ljubija, it jointly owns the ArcelorMittal Prijedor ore mine, where it holds a 51% stake. 

In April, Republika Srpska’s government decided to sell the stake in the open pit Ljubija mine to the Israeli company for BAM92mn (€47mn), after it outbid ArcelorMittal’s BAM63.6mn offer. The deal has to be approved by Republika Srpska’s parliament, but is facing objections from the opposition due to fears that this would mean an end to relations with ArcelorMittal. On May 11, the economy committee of the entity’s parliament postponed the debate on the deal.

“Unfortunately, this [the completion of the deal] would inevitably lead to large-scale job losses in Prijedor, and also in the Zenica steel plant, where production would be switched to using Electric Arc Furnace, which requires no iron ore,” the company said in an emailed reply to bne IntelliNews.

It added that, in case the deal is completed, it will abandon planned investments worth over BAM120mn (€61.4mn) in the integral production based on iron ore in Zenica and that the company would “take all appropriate actions to protect the interests of its shareholders and employees, including action in the appropriate international courts if necessary”.

The steelmaker has also sent a letter to the Bosnian authorities warning of its plans for legal action if the government sells its 64.9% in the mine to the Israeli group, reported on May 13.

The letter from Lakshmi Mittal, the owner of ArcelorMittal, to Bosnia’s state-level presidency and government and to the government of Republika Srpska, says the completion of the deal would have a very negative effect on the entity’s economy.

In a response to the information on a possible arbitration, Republika Srpska’s President Milorad Dodik said that the entity will also seek arbitration, claiming that ArcelorMittal has not completed its investment pledges in Bosnia, also reported.

Previously, Republika Srpska initiated the sale of its stake in the Ljubija iron ore mines in 2014 and signed a deal with Israeli Investment Group – Overseas Inc for BAM36.5mn (€18.7mn) in March 2014. However, the procedure was annulled as the two sides failed to reach an agreement.

In June last year, local media reported that the government eventually decided to sell its stake to the Israeli company for an undisclosed sum, which prompted ArcelorMittal to initiate a series of meetings with Republika Srpska government representatives, seeking to acquire the stake instead. Republika Srpska’s government then decided to ask the two companies to file new offers by July 1, 2016.

Since 2014, the steel giant has invested over €154mn in the modernisation of the Zenica plant in Bosnia, which has been out of operation since 1992. In March this year, the company launched three new investment projects worth a combined €12.4mn. The Zenica plant provides jobs to 2,400 employees, and is engaging around 300 local companies as subcontractors or suppliers.

The Ljubija mine is estimated to have around 347mn tonnes of oxite and carbon reserves. It stopped working in 1992 when the Bosnian war erupted and resumed operations 12 years later when ArcelorMittal signed a strategic agreement with the mining company to set up a new company to run it.