Business
Congo Copper-Cobalt Deal in the Light
By Barry Sergeant, Mineweb 20/8/10
Aug 24, 2010 - 8:25:38 AM

London-listed ENRC, one of the world's top 20 miners by market value, on Friday announced the USD 175m acquisition of control of a batch of copper-cobalt assets in the Democratic Republic of the Congo, increasing its presence in the country.

ENRC has acquired 50.5% control of Camrose, a BVI entity with a Gibraltar address, from the Gertler Family Trust. One of the assets within Camrose is subject to international arbitration that is yet to commence.

ENRC has separately agreed to loan USD 400m to Camrose, which holds 64% of Toronto-listed Africo, 56% of Comide, which holds exploration licences adjacent to Kalukundi, Africo's main asset, and the Highwind Group, a group of BVI companies with Gibraltar addresses. Highwind, the most valuable asset in the deal, comprises an indirect 70% stake in Kingamyambo Musonoi Tailings (KMT).

In September 2009, ENRC announced the acquisition of London-listed Camec, for GBP 584m, mainly for its cobalt-copper mine Mukondo, in Katanga Province, where Camrose's assets are situated. The Gertler family was the major shareholder in Camec at the time of the acquisition. In February, ENRC announced the USD 300m acquisition of 90% of Chambishi Metals, a Zambian copper and cobalt producer.

Few known assets in Katanga Province are without history; in the case of KMT, Toronto- and London-listed First Quantum, one of the world's leading copper miners, on 2 August was advised that its project at KMT was being "liquidated".

First Quantum, in a September 2009 announcement, confirmed suspension of work at the 75%-complete KMT project, after it was shuttered by government agents. For First Quantum, the carrying value of the KMT development project was USD 787m, after adding initial acquisition costs of USD 388m to capital expenditures, to date, of USD 399m.

First Quantum last week announced a USD 689m impairment related to KMT. Camrose acquired its stake in the Highwind Group in January 2010, for an undisclosed amount.

Reacting to ENRC's deal with Camrose, DRC mines minister Martin Kabwelulu slammed First Quantum, alleging that in its hands, KMT "was unsuccessful. In the past months, as a result of First Quantum's public denigration campaign, the DRC has been forced to clarify that First Quantum committed a string of serious breaches of its key obligations under the 2004 partnership agreement".

First Quantum was the pioneer, from the mid-1990s, in redeveloping the DRC-Zambia copper belt, where operations had been ruined by decades of nationalisation and looting. Kabwelulu today added that First Quantum "filed a number of claims in the DRC courts in August and September 2009 and later commenced an international arbitration on this matter. The DRC will in due course demonstrate the lawfulness of the termination of the 2004 partnership agreement before the arbitrators".

First Quantum is resolute, stating last week that "the company believes there is no legal basis for the cancellation of KMT's exploitation permit, the sealing of the KMT facilities, Gécamines' cancellation of the Contract of Association, or the decision of the local court and local appeal, and as previously noted, that CMD and the KMT project's other contributing partners, the IFC and the IDC, continue to have a valid and binding contract with the DRC and Gécamines".

The World Bank last month approved a USD 50m grant to the DRC "to increase transparency and accountability in the mining sector so that the income from natural resources will be used for inclusive and sustainable growth".