DRC should disclose sale to Glencore unit

Published by MAC on 2015-06-26
Source: Bloomberg

DRC should disclose sale to Glencore unit

Franz Wild & Michael J. Kavanagh

Bloomberg

26 June 2015

The Democratic Republic of Congo should live up to its pledge to improve transparency in the mining industry by publishing the terms of the recent sale of a copper permit to a Glencore Plc venture, the Carter Center said.

Congolese state-owned mining company Gecamines and a business partner sold the Kawama copper and cobalt concession to Glencore’s Mutanda Mining in February without announcing the deal. It was first confirmed by Glencore and Israeli billionaire Dan Gertler’s Fleurette Group, which owns a 31 percent stake in Mutanda, this month.

“The government should publish the terms of the Kawama deal and all other outstanding natural resource contracts,” Phyllis Cox, field office director in Congo for former U.S. President Jimmy Carter’s Atlanta-based center, said in an e- mailed statement Friday. It should “reassure the public that this and similar transactions are carried out in a transparent manner that safeguards the public interest.”

The International Monetary Fund in 2012 canceled a $551 million loan program halfway through because Congo didn’t publish a similar Gecamines deal, breaching the program’s transparency conditions. Congo holds vast resources of copper, gold, diamonds and tin, yet is ranked by the United Nations as the world’s second-least developed country.

Under a May 2011 government decree, any contract transferring rights to Congo’s natural resources must be published within 60 days of execution.

Keeping Vows

Congo should respect its promise for the “full transparency of revenues accruing to state-owned companies,” according to the Carter Center, which has a mining transparency program in Congo.

Gecamines holds a 30 percent stake in Chabara, the company which sold Kawama. The rest is owned by Dino Steel International, a unit of Congolese company Bazano Group.

Mutanda paid $30 million for Kawama, with $10 million going to Gecamines and the rest to Dino Steel, according to a person with knowledge of the transaction, who asked not to be identified because the details of the deal aren’t public.

Chabara’s joint-venture agreement states that a simple decision can be taken by a majority, while it requires a three- quarter majority to pass a decision to increase or decrease shareholding in the company, if the statutes are modified or if there is a merger with another company. If the company’s “objective” changes, 80 percent of voters need to agree, according to the contract.

Independent Miners

Congolese Mines Minister Martin Kabwelulu didn’t answer several calls or respond to text messages seeking comment. Gecamines Chairman Albert Yuma said he had “nothing to say” about the sale when contacted on his mobile phone on Friday.

Thousands of independent miners who scrape a living by burrowing treacherous tunnels to extract ore have scoured Kawama for years. “Despite the small size of Kawama’s concession area, the permit is potentially very valuable,” the Carter Center said.

Gecamines in 2011 sold its stake in the two concessions Mutanda already owns to Gertler — a friend of Congolese President Joseph Kabila — without announcing the deals. Based on analyst valuations of Glencore’s assets before its public listing that year, the sales were at below market value. When the IMF discovered that Gecamines also didn’t publish the contract for the sale to Gertler of its 25 percent stake in a copper project next to Mutanda, it canceled the loan program.

‘Secret Transactions’

“Five recent similar cases of state-owned mining companies selling assets below market value in secret transactions involving Gertler reportedly cost the DRC over a billion dollars,” the Carter Center said.

The loan-cancellation came on top of criticism from former United Nations Secretary-General Kofi Annan’s Africa Progress Panel and London-based transparency campaigners Global Witness, who called for the veil to be lifted on these deals.

Kabwelulu at the time said the IMF’s move was “unconsidered” because the government had published all the information the IMF requested. Gertler has said he is Congo’s biggest investor and has helped the country develop. Fleurette, in an e-mailed comment on Friday, denied it had acquired its stake in Mutanda for below market value.

The IMF in February said it’s ready to lend Congo as much as $1 billion after learning more about the earlier mining deal, though the Congolese government hadn’t made a formal request.

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DRC’s Gecamines discloses deal with Glencore unit

Michael J. Kavanagh

Bloomberg

30 June 2015

The Democratic Republic of Congo’s Gecamines said one of its joint ventures sold a copper-mining permit to Glencore’s Mutanda unit because the site was overrun by independent diggers and difficult to develop.

The state-owned company was criticized last week by the International Monetary Fund and the Atlanta-based Carter Center for not announcing the sale as required by Congolese law.

Gecamines and its partner, Dino Steel International, sold the permit on Feb. 18 after failing to develop the concession because it was “overrun in a permanent way by artisanal diggers,” Gecamines said on its website. The state company was paid $10 million for its 30 percent stake in the venture. It didn’t publish any contract for the deal.

Mutanda, a joint venture between Baar, Switzerland-based Glencore and billionaire Dan Gertler’s Fleurette Group, now controls the mining license.

The mine site was already surrounded on all sides by land held by Mutanda, which produced 197,100 metric tons of copper last year and was Congo’s second-largest producer of the metal.

A May 2011 government decree requires the government to publish contracts for any cession, sale or rental of natural resources within 60 days of their execution.

When Gecamines failed to publish all the details of a similar deal in June 2011, the IMF canceled the final installments of a $551 million loan program with the country because it broke transparency conditions.

Congo is world’s biggest and cobalt miner, Africa’s largest copper producer and holds resources of gold, diamonds and tin, yet it’s ranked by the United Nations as the world’s second- least developed country.