China Eximbank provides $68 million loan to Serbia Zijin Copper Doo Bor for its working capital needs

Project narrative

In 2016, Serbia’s then Prime Minister Aleksandar Vučić told the media he would kneel before Chinese Prime Minister Li Keqiang to urge China’s most powerful companies to take over Rudarsko-Topioničarski Basen RTB Bor Doo (or ‘RTB Bor’), a Serbian state-owned copper mining and smelting complex located in Bor, Serbia. In 2017, Vučić went even further, pledging that if the government could finalize an agreement, he would celebrate by jumping into the Sava or Danube rivers in front of the media. Then, on September 17, 2018, Zijin Mining Group Co., Ltd. — a Chinese state-owned mining company — entered into a strategic partnership agreement with the Government of Serbia. Under the terms of the agreement, Zijin Mining Group Co., Ltd. agreed in principle to purchase a 63% ownership stake in RTB Bor for a cash consideration of $350 million. Zijin Mining Group Co., Ltd. also agreed in principle to invest $1.26 billion (inclusive of the $350 million capital increase) in the technological upgrade, expansion or construction of RTB Bor’s four low-grade porphyry type copper (gold) mines — the Majdanpek (MS) mine, Veliki Krivelj (VK) mine, New Cerovo (NC) mine, and Jama (JM) mine — and smelter plant. The acquisition agreement was part of the Government of Serbia’s broader efforts to sell-off indebted state-run companies to help spur growth and relieve pressure on the budget, as recommended by the International Monetary Fund (IMF). As part of the agreement, Zijin Mining Group Co., Ltd. promised to assume responsibility RTB Bor’s outstanding debts (worth approximately $200 million) and keep 5,000 jobs at the Bor copper and gold mining and smelting complex. On December 18, 2018, Zijin Mining Group Co., Ltd. completed its acquisition of a 63% ownership stake in RTB Bor. Bank of China provided a $210 million M&A loan to Zijin Mining Group Co., Ltd. to facilitate the acquisition. The borrowing terms of this Bank of China loan are unknown. Chinese banks subsequently issued a series of loans to Serbia Zijin Copper Doo Bor (塞尔维亚紫金铜业), a special purpose vehicle and joint venture of Zijin Mining Group Co., Ltd. (63% ownership stake) and Rudarsko-Topioničarski Basen RTB Bor Doo (37% ownership stake). In 2020, the Serbia Branch of Bank of China issued a $200 million loan to Serbia Zijin Copper Doo Bor to support its operational needs. The borrowing terms of this Bank of China loan are unknown. Then, in 2021, the Paris Branch of China Eximbank and Serbia Zijin Copper Doo Bor signed a $68 million term facility (loan) agreement (as captured via Record ID#92703). The borrowing terms of this China Eximbank loan are unknown. However, it is known that the borrower was expected to use the loan proceeds for its working capital needs. It is also known that Zijin Mining Group Co., Ltd. (‘Zijin’) issued a corporate guarantee in support of the loan. Then, in 2022, a syndicate of banks (including Bank of China as lead arranger) issued a $278 million ESG loan to Serbia Zijin Copper Doo Bor. The borrowing terms of the loan are unknown. However, it is known that the borrower was expected to use the proceeds of the loan to support the ‘technological upgrade’ of the copper and gold mining and smelting complex located in Bor, Serbia. By 2021, the Bor copper and gold mining and smelting complex was generating annual economic output worth approximately 3 percent of Serbia's GDP. In 2022, Serbia Zijin Copper Doo Bor’s business revenue reached about $968 million and its net profit reached $259 million in 2021. According to public data, in 2022, Serbia Zijin Copper Doo Bor had 5,724 employees, and the average monthly salary was 100,000 RSD (900 USD). Both Zijin management and local and national officials often emphasize how the company’s activities benefit the inhabitants of Bor and Majdanpek. The official statistics from the end of 2022 show that the average net income in September 2022 was 76,850 RSD (roughly 690 USD) in Majdanpek and 88,961 RSD (800 USD) in Bor, both of which are higher than the national average net income, which is reported to be 74,981 RSD (approximately 675 USD). However, the higher average incomes in Bor and Majdanpek do not necessarily translate to a higher quality of living for the towns’ inhabitants. For example, even though the Bor municipal government’s budget has increased due to Zijin’s investment, the authorities failed to properly manage the local heating system, resulting in a suspension of heating provision during the winter of 2023 that left private homes, hospitals, and schools unheated at a time when the temperature dropped below zero. When it comes to labour issues, local and workers from outside have faced increasingly different conditions. Before the sale of RTB Bor, a collective agreement was signed that stated that the new buyer would not be allowed to enforce a new collective agreement that gave fewer rights than the current one. This collective agreement expired on June 21, 2021 and Zijin offered a new agreement that drastically reduced the rights of workers and cut their wages. According to the Nezavisnost (‘Independence’) union, Zijin removed a provision guaranteeing the indexing of salaries to the decisions of the Social and Economic Council of the Serbian Government. The company also wanted to enforce work performance scoring to determine earnings at the end of each year—a provision in conflict with Serbia’s Labour Law, which mandates that there must be equal pay for jobs of the same level and the same qualification structure. Also, the unions announced that the company intended to reduce compensation for nightshift, overtime, holiday, and weekend work, decreasing an average monthly salary of 875 USD by 240–330 USD. Union representatives also claimed the collective agreement discriminated against older workers close to retirement by assigning them to the lowest paid jobs—such as, for women, gardeners, and for men, samplers, transport workers, and so on. At the same time, they alleged that Zijin would not hire new workers over 40 years of age. The company denied the union’s claims and said it had already changed its rules of procedure ‘in accordance with a great number of the requests of the trade unions’. Management also noted it had met union demands on holiday and paid leave, increased wages, severance pay on retirement, and other awards, and said that salaries would be increased, not reduced. After negotiations between the trade union, the Ministry of Mining and Energy, and Zijin, new bylaws were adopted that were identical to those in the previous collective agreement, while the collective agreement itself was left to be negotiated between the company and workers. During negotiations, the company unilaterally proposed a new collective agreement that, as the workers and the unions reiterated, would decrease the rights and pay of employees. In late December 2022, after workers protested in front of the company’s central offices, new rules were introduced that did increase workers’ rights to some extent but did not meet other crucial demands. In January 2023, the unions organized a protest walk in Bor, after which representatives told the press that the company was ‘making lists’ of the employees who took part in public protests to intimidate them and discourage others from joining the demonstrations. Later that month, workers from Bor staged an eight-hour blockade of the company’s transportation points, while workers in Majdanpek organized their first protest. In early February, with mediation by government representatives, an agreement was finally reached on a new collective agreement. Far less is known about the conditions for foreign workers, who are presumably from China—though even this is not confirmed. Official figures indicated that, as of March 15, 2023, there were 5,300 Chinese nationals residing in Bor, though this number is likely inaccurate due to undeclared departures and the presence of Chinese nationals who have not formalized their stay in Serbia. As ethnographic fieldwork and experience demonstrates, the majority of foreign workers live in secluded barracks on the outskirts of the towns of Bor and Majdanpek. On several occasions, Serbian media reported on the poor living and working conditions of the workers and their protests during the Covid-19 pandemic. The media also reported on mass street brawls involving Chinese workers employed by the subcontractor Hongda in June 2022. The authorities only became involved after footage of the street fighting went public, in September 2022. According to local media reports, a Chinese citizen suspected of causing the fight had been placed under house arrest, while seven other participants were expelled from Serbia. The acquisition of RTB Bor initially went smoothly and did not trigger any major social conflicts. The earliest protest in front of the headquarters of Zijin was in May 2019 by the inhabitants of Veliki Krivelj, a village endangered by the mine even before the arrival of the foreign investor. The protest was about the environmental, financial, and safety concerns of the villagers in relation to the Cerovo and Veliki Krivelj open-pit mines. The villagers requested the local authorities become involved in the development of the Special Spatial Plan of the Bor–Majdanpek Ore Basin and demanded access to the documentation submitted by RTB to Zijin about their obligations towards village residents. In the city of Bor itself, the first major dissent was related to the increased concentration of PM10 particulates and sulphur dioxide. The Bor smelter, a much celebrated 250-million-EUR investment by the Government of Serbia, was inaugurated in 2014 by Blagoje Spaskovski, then director of RTB Bor, and Aleksandar Vučić, then prime minister. Upon the acquisition of RTB Bor, Serbia Zijin Copper increased production considerably, resulting in significant pollution during the summer of 2019. The first pollution protest was organized in July 2019. A second occurred in October the same year, when protesters blocked access to Zijin’s headquarters in Bor. A politically diverse group of local actors—including city assembly member Saša Stanković from the right-wing Dveri political party, president of the civic association ‘Loud for Youth’ Vladimir Stojičević, and member of the civic association ‘The Choice Exists’ Marko Janjić, together with president of the local branch of the Party of Freedom and Justice Irena Živković—filed a criminal complaint against Bor Mayor Aleksandar Milikić, then minister of ecology Goran Trivan, as well as others from Zijin. However, due to the Covid-19 pandemic, public gatherings were limited, and no protests have taken place since March 2020. A particularly grave problem is the amount of arsenic in PM10. Based on readings performed at measuring stations, there has been a noticeable increase in the concentration of arsenic particles in the air since the arrival of the Chinese investor. The target average annual value according to Serbia’s Regulation on Monitoring Conditions and Air Quality Requirements is 6 nanograms (ng) per cubic meter. Although there has been no official explanation for the increase in arsenic concentrations, academic circles see it as a complex issue. In addition to the smelter, the tailings ponds are also considered to be important factors in pollution. Because ore in the Timok metallogenic zone, of which Bor is a part, has higher than usual concentrations of arsenic, any increase in production will release more arsenic into the environment. Zijin Copper continues to increase the capacity of its excavations, as well as the flotation plants, and the smelter. Zijin is now expanding the capacity of the smelter from 80,000 tonnes to 150,000–200,000 tonnes of ore per year. As the head of the Department of Environmental Protection at the Technical Faculty in Bor, Professor Snežana Šerbula, explained: ‘In Bor, we have been poisoned for years because arsenopyrite is an adjoining mineral of the copper ore. The bigger the production in Bor is, [and] the more copper, gold, precious metals we export, the bigger the concentration of arsenic will be in the air.’ Even though it has repeatedly breached environmental laws, Zijin has been fined on only two occasions. In October 2020, Zijin Copper and the company officials responsible were convicted, in the first instance, by the Commercial Court in Zaječar for pollution caused in 2019 and the beginning of 2020. The company was fined 400,000 RSD (3,600 USD), while the responsible person from the smelter facility was fined 50,000 RSD (450 USD). Both parties appealed the ruling, which resulted in a verdict by the Commercial Court of Appeal in November 2021 that deemed the original fine too mild and ordered Zijin Copper to pay 1 million RSD (9,150 USD). The second fine came in 2022, when the Commercial Court in Zaječar fined Zijin Copper 200,000 RSD (1,800 USD) and the responsible person 30,000 RSD (280 USD) for initiating work on the expansion of the smelter’s capacity without conducting a mandatory environmental impact assessment. In the same process, the company was also found to have carried out activities without an ‘integrated permit’—the most important environmental protection permit in the Serbian legal system. For this offence, the company was fined 250,000 RSD (2,250 USD) and the responsible person 30,000 RSD (280 USD). The expansion of the Veliki Krivelj (VK)surface mine requires the relocation of the eponymous village, with a population of about 1,300 people, as well as the expropriation of villagers’ land. Locals have complained about the poor communication from the company. In February 2022, the Ministry of Mining and Energy endorsed the plan to relocate the village and, in May 2022, it submitted the resettlement plan to the local community. As if early November 2023, the process of relocation is still in its early stages. Zijin’s expansion of mining operations has met fierce resistance in Majdanpek since June 2022, when the company began blasting Starica Mountain, which forms a natural barrier between the town of Majdanpek and the mine site. Local grassroot activist group Ne Dam/Nu Dau movement installed an improvised camp on the mountain to stop Zijin from what they claimed was illegal blasting that would further endanger the health of the town’s inhabitants. Local activists and politicians outside the ruling party have been requesting in vain clarity about the exact boundaries of the mine. Since the start of the protests, Zijin’s management, local SNS-aligned politicians, and Serbian government officials have argued that they are not ‘blasting’ the mountain, but rather ‘ameliorating’ it to protect the local population. This explanation did not convince the activists, who continued to occupy the mountain over the summer of 2022 and insisted on access to the legal documents on landownership and those relating to mine planning and approval. In September 2022, after a visit by then Serbian Minister of Mining and Energy Zorana Mihajlović, who supported Zijin management, the situation escalated sharply. A drilling machine owned by Jinshan Construction, a Zijin subcontractor, was set on fire and its Chinese operator allegedly beaten, which the local police blamed on the Ne Dam/Nu Dauactivists. The police detained the leaders of the protests and charged them with ‘[jeopardizing] security and instigating national, racial, and religious hatred and hostility’. The activists rejected the charges and argued it was a politically motivated legal prosecution to clear the way for a resumption of blasting on the mountain. The activists’ argument seems to be supported by the fact that this criminal charge has rarely been used in Serbia—even though it could cover widespread phenomena such as hate speech, violence, and instigation of national, racial, and religious hostility. In addition, some activists testified that during questioning they were subjected to police brutality and were forced to sign false statements and confessions. The activists also suffered physical violence on the mountain during the summer of 2022, when they were threatened and harassed by members of a private security company hired by the subcontractor Jinshan. In late December 2022, after not being paid for their work, members of this private security company reached out to the media. They said they had been hired to beat people (reportedly mostly those of Roma ethnicity) who were trespassing on Zijin-owned land and were encouraged ‘to truncheon’ and use force to compel the activists to move their improvised camp 300 meters away, so the company could continue blasting work. As one of the security workers testified in front of the media, they were paid 100 EUR per beating and asked to hand over the videos of the violence to their superiors. At the time of writing in the northern autumn of 2023, the blasting of Starica Mountain continues, with one entire ridge already removed. The Chinese head of the Majdanpek branch of Serbia Zijin Copper stated that ‘the landslide zone of the Mountain Starica is still being treated, but land recultivation has already begun on the parts of the mountain that have been improved’. He also claimed that ‘the mountaintop has already been greened, [and] now the grass there is just like on a football field’. What is still missing are official documents showing the boundaries of the mine, public information and debates about the impacts of removing the natural barrier between the town and the open mine pit, as well as plans for the future of the town. A legal breakthrough for the activists came at the end of June 2023 when a local court confirmed what the activists had claimed from the beginning: that cadastral plot no. 624/1—a large piece of land that includes parts of Starica Mountain and that Zijin had claimed as its own—was owned by the state and not by the Chinese mining giant. In addition, in mid July 2023, the Administrative Court in Belgrade, acting on a lawsuit by the Regulatory Institute for Renewable Energy and the Environment, annulled the decision by the Government of Serbia allowing Zijin Copper to drastically expand the flotation plant capacity of the copper mine in Majdanpek without assessing its environmental impact. As of November 2023, the activists had been released from house arrest and their electronic police surveillance and movement restrictions had ended, but the charges against them for ‘[jeopardizing] security and instigating national, racial, and religious hatred and hostility’ had not been dropped.