Christian Orthodox Metallurgy

It seems that the Mitilineos holding company of Greece, one of the most prosperous of its kind in the country, has a keen interest in Serbia's economy. At a recent convention in Belgrade attended by many Serbian-Yugoslav and Greek officials, its representatives signed a deal with the RTB Bor mining basin. The deal, known as the agreement on general co-operation, contains six separate chapters determining and regulating relations between the two sides for a seven-year period. Sources say that the deal will bring a total turnover of one billion dollars. Mitilineos has been doing business with Trepca for years. Last year, the Greek company and the biggest lead producer in Europe signed a contract worth 517 million US dollars. Some officials said that Mitilineos and the National bank of Greece would form a consortium aiming to buy 90 percent of the shares owned by the Slavija bank of Belgrade.

The Greek company is interested in buying a few more Yugoslav enterprises, such as the Jagodina cables producer. Mr. Evangelos Mitilineos, the joint owner and managing director of the company, is personally in charge of the negotiations. He spoke a number of times on television on behalf of the Greek OTE telecommunication company, so some newspapers thought he was one of the OTE managing directors.

The inflow of foreign capital for a monopoly on exploiting the natural resources of any country is big news uner normal circumstances. Yugoslav industrial "giants", in debts up to their necks, have made commitments they are unlikely to fulfill. Trepca owes over 20 million German marks for water, electricity and tax bills and is already late with deliveries to its Greek partner. Its contract with Mitilineos includes a clause saying the Greek side has the first pick in buying the company in case of its privatisation, meaning that it can take Trepca's shares in exchange for the debt. It is still uncertain whether the same clause applies to RTB Bor, because the details of the contract have not been disclosed. However, it is hard to imagine that a company like Mitilineos would settle for anything less, especially in a country like Serbia.

The Greek side can't own the mine (it can only get a time limit on its exploitation), but can buy the Bor mining complex and the one in Trepca. Apart from the mining shafts, the two Yugoslav firms have mining equipment, processing machines, factories, institutes and quite a few other assets. Hence the exploitation of Bor and Trepca will include their owners too, whoever they are.

The deal signed by Mitilineos and Bor stipulates a 44 million-dollar credit to be provided to the Yugoslav side by the Greeks. The sum is part of the means required to modernise and expand the Bor complex. The remainder of the 120 million US dollars needed is to be provided by the Serbian government and other foreign investors. The works should end by the year 2001, while the money will be sent in three cuts. This year the Greek company will provide 10 million dollars, and another 17 million will be allocated next year and again the year after. Apart from this, the Greeks will allocate another 10 million dollars as Bor's capital assets and up to 1.5 million a month for machines and spare parts. All together, Mitilineos will provide 72 million dollars for Bor's recovery, as well as 100,000 tons of copper extract and 3,500 tons of zinc annually.

So what's the deal here?

The world copper market has slumped, prices have been falling consistently since last summer. Unfavourable developments on the Hong Kong stock market have prompted China, the world's biggest copper buyer, to reduce its demand for the red metal. Many world copper plants have therefore cut down their outputs. World experts predict a temporary rise in the price of copper this year, from 1,700 to 2,000 dollars per ton. However, they say that the price will eventually drop to a mere 1,400 dollars per ton. A final recovery of the copper market and the new growth period is expected in the year 2001, when the modernised and expanded RTB Bor copper complex is due to start operating. Now, when the price of exploiting coal is low and still dropping, it is possible to buy a large portion of the cake to come in the year 2001 for peanuts.

RTB Bor should start paying off the credit in the year 2,000 and finish by the year 2005. However, the firm's managing director Ninoslav Cvetanovic said while signing the deal that RTB Bor will start repaying the credit much sooner, by exporting 1,600 tons of copper per month! This amount of copper costs at least two million dollars even at the current prices on the world market, meaning that RTB Bor could provide Mitilineos with 48 million dollars in the two years when no credit repayment is stipulated. It would also provide the Greeks with gold silver, side-products in copper exploitation, while the Greeks would invest a total of 55 million dollars only in the Yugoslav firm in the same period. RTB Bor would still have to repay the entire credit under the agreed terms starting with the year 2000. Even so, RTB Bor is unable to produce the stated amount of copper at the moment. The firm is one of Yugoslavia's five biggest exporters and its second biggest importer, because it imports copper extract for service processing. The mine plans to step up its production of copper extract this year. The extract contains about 26 percent copper, and a planned output of 32,000 tons a year would be a 50 percent rise in production. In order to keep his promise, Cvetanovic must somehow bring RTB Bor's annual output of copper extract to 70,000 tons. The board of directors declined to say what exactly their commitments are, but it is more than certain that Bor will share Trepca's fate if they fail to keep up with them.

The deal signed last May by Trepca was its third with Mitilineos. The first was signed in December 1995, under which Trepca exported 51 million dollars' worth of goods to the Greeks by the fall of 1997. Midway through 1996, another 136 million-dollar deal was signed, but it is still unknown how far it got. This time round, Trepca is to export 350 million dollars' worth of products in the next five years and process 150 million dollars' worth of lead extract in the same period.

However, Trepca is not living up to expectations. Last year, the daily Vecernje Novosti brought a series of articles saying that the Greek partners have been waiting in vain for their lead and zinc. Although Trepca's managing director Novak Bjelic says the firm is able to produce three times the amount agreed with the Greeks, the truth is that its account has been blocked for seven years due to enormous debts, so all business is done through the account of another firm, Fagar of Podujevo. The 1996 losses were estimated at 39 million dollars. The firm's 1986 output stood at 600,000 tons of zinc, while the output in 1994 was merely 30,000 tons. Trepca will get 35 million dollars if it comes through with the deal its managers signed with the Greeks, but it needs twice as much for the recovery of its non-existent production.

The situation is therefore hopeless, especially with a potential escalation of clashes in Kosovo, which would badly affect production. Even now, Trepca is desperately short of labour, because ethnic Albanian workers were fired some time ago while the Serbs are gone. Both Trepca and RTB Bor are on the Serbian government's privatisation list. So are the Jagodina cables producer and the Sevojno aluminium and copper plant, also targets of Mr. Mitilineos's interest. Bearing in mind that Trepca and Mitilineos have signed a deal on the production of batteries, it is more than likely that Mitilineos will talk to sulphuric acid producers too. It so happens that these producers operate within the RTB Bor enterprise, because sulphur dioxide, another asset needed for the production of batteries, is also a side product in copper exploitation. What it comes down to is that Greeks will sell to their RTB Bor partners Trepca-made zinc and to their Trepca partners RTB Bor-made sulphuric acid.

After starting a business with sulphuric acid, Mr. Mitilineos will sooner or later knock on the doors of the Prahovo chemical plant, built to make use of Bor's sulphuric acid in the first place. The Prahovo plant is on the Serbian  government's privatisation list too. Having made so many investments in Serbia, Mr. Mitilineos will most definitely need a bank here. The Slavija bank appears to be his choice, as negotiations with its managers are well in progress. The chief mediator in the talks is none other than Borka Vucic, the president of the Belgrade banking group that was in charge of the Slavija bank's financial collapse. Mr. Evangelos Mitilineos, the president of a once unknown Greek company - whose business inexplicably picked up and soared to unseen heights since the outbreak of the Yugoslav crisis in the early nineties, and Borka Vucic, the manager of the Beobanka Cyprus branch at the time, met on December 9th last year at a celebration marking Trepca's 70th anniversary. That is romantic indeed, for the Latin name for copper, cuprum, comes from Cyprus, where the production and exploitation of copper started in the second millennium BC, effectively ending the stone age. There is no reason for the story on Serbian copper to have a different ending. Serbia doesn't need copper anyway, because it's heading straight back to the stone age.