Bosnia’s Federation government said it gave its approval on June 13 to an agreement it has earlier reached with Mostar-based Aluminij on resolving a 16-year long ownership dispute at the company. The potential agreement is expected to help Bosnia's sole aluminium smelter continue production and clear the way for seeking financing from international institutions.

Earlier this month Aluminij announced it is going to start shutting down its production capacities on June 17 as it can no longer survive in the existing market environment of lasting unvafourable international prices of electricity and primary aluminium. 

Its director general Ivo Bradvica has said Aluminij has been in a deadlock over the unresolved ownership issue, adding the company is in an urgent need of fresh funding, which it cannot seek without its ownership structure problem resolved. Furthermore, Bradvica said a potential agreement on the matter was reached with the Federation’s cabinet back in April – but the deal has remained idled since then and he has been completely unable to get in touch with the government on the urgent issue.

This week’s reaction of the Federation government to Aluminij’s problems probably comes as a result of some pressure exercised by the government of Croatia, which also has a stake in the Bosnian firm. Straight after the news for the possible shutdown, the government in Zagreb said it would intervene to help Aluminij out of the dire situation and initial talks with the Federation.

Thus on June 13 the Federation government approved an annex to the agreement on the open issues between it and Aluminij – and authorised the Federation’s PM Nermin Niksic to sign it. The annex determines the ways for solving the three key problems that have been holding up the relations between the two parties for years – the shareholder structure, the compensations of former employees and the government support for sustainable operations of the company, the government said in a statement.

Under the annex, the government and Aluminij’s small shareholders each get a 44% stake in the company and the remaining 12% remain in the hands of the Croatian government (Croat state-owned firm TLM).

The annex also stipulates that the programme for subsidizing Aluminij’s production will be determined by a government decision.

In November 1997, Aluminij was registered at the Mostar’s court registry as a joint stock company with the following ownership structure: 64% small shareholders, 24% – the Federation’s government and 12 % foreign capital.

This capital structure, however, is disputed by the Federation’s security registry which refuses to proceed with the registration of Aluminij’s shareholders as required by law. The company has launched a legal procedure against the security registry in order to resolve the issue.

Aluminij said it has been rolling monthly losses of BAM 9.7mn (EUR 5mn) since the start of 2013. The company recorded a EUR 33.6mn loss in 2012, well exceeding the initially targeted BAM 10mn loss. The loss was mainly due to higher electricity tariffs and falling prices on the metal market. In July 2012, the aluminium maker already shut down 12.5% of its production capacity as a result of continuous financial constraints. 

A closure of Aluminij would mean the loss of 900 jobs in Bosnia and will put under threat the operations of Croatian firms TLM-TVP and TLM-TPP, which relay on the Bosnian company for their raw material supply. These companies buy billets and slabs from Aluminij as these products are not produced in Croatia.