Foreign firms challenge Poland over access to mine concessions

Fri Nov 21, 2014 8:27am EST
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By Adrian Krajewski and Anna Koper

WARSAW (Reuters) - Two foreign-owned mining firms have challenged the Polish government over what they see as the unfair allocation of copper and potash extraction permits to state-controlled miner KGHM KGH.WA.

Poland's environment ministry, which allocates concessions, denied it gave preferential treatment to KGHM over Canadian Miedzi Copper, which has filed a lawsuit, or British firm Darley Energy, which has submitted an appeal.

KGHM, Europe's second-largest copper producer and an industrial champion for Poland, is 31.8-percent owned by the state. It said it did not limit competition.

Whatever the outcome, the row could rattle foreign investors at a time when Poland's resource sector, struggling with low prices on the world market, badly needs investment.

The government is also anxious to bring investors into shale gas, which it hopes will reduce its reliance on imported Russian gas. But a number of firms have pulled out, citing difficult geology and unclear regulations.

The founders of Darley also control 3Legs Resources 3LEG.L, which earlier this year sold its Polish shale gas business in which it was partnered with ConocoPhilips (COP.N: Quote).

Miedzi Copper told Reuters it had filed a case with a local court after two copper concessions were awarded to it and then withdrawn following a challenge from KGHM.

The ministry said the bidding would be rerun as bidders had insufficient information. KGHM said the permit granted to Miedzi Copper was part of a deposit it had previously invested in.   Continued...

Miners ride an elevator to the underground in a pit-shaft at Polkowice-Sieroszowice mine in Polkowice near Lubin, southern-western Poland July 29, 2011.  REUTERS/Kacper Pempel