19 11 11 Bloomberg - Congo Loses $5.5 Billion by Underselling Mines, U.K. MP SaysBy Franz Wild and Michael J. Kavanagh(Updates with Joyces comment on U.K. in 18th paragraph.)
Nov. 18 (Bloomberg) -- The Democratic Republic of Congo has
lost $5.5 billion through the “questionable” underselling of
mining assets, British Member of Parliament Eric Joyce said.
Forty-five companies, mainly based in the British Virgin
Islands and “cloaked in anonymity,” have profited from the
sales at the expense of the country’s impoverished population,
Joyce said today in an e-mailed statement, citing at least four
multi million-dollar deals in the past few years. Joyce chairs
the U.K. Parliament’s Great Lakes of Africa Group.
“Elements of the DRC government, in particular the current
president, Joseph Kabila, have sold vast mining assets at knock-
down prices to various offshore ‘shell’ companies,” Joyce said,
citing documents in his possession. “Complex arrangements
between their own government and various BVI shell companies
mean that a few are enriched at the terrible cost of the many.”
The central African nation is depending on revenue from
mining some of the richest veins of copper and cobalt, as well
as vast gold, tin and tantalum reserves to rebuild a $14-billion
economy, destroyed by years of war and corruption.
While some miners like Phoenix-based Freeport-McMoRan
Copper & Gold Inc. and Glencore International Plc have succeeded
in building productive copper and cobalt mines in the southern
Katanga province, others such as First Quantum Minerals Ltd.
have foundered as their concessions have been confiscated by the
Congo’s Mines Minister Martin Kabwelulu declined to comment
on the statement, saying only that “this is based on a
conspiracy against the DRC and we don’t want to be involved in
this debate anymore.”
State-owned Congolese copper and cobalt miner Gecamines
sold its 20 percent stake in Glencore-operated Mutanda Mining
Sprl to Rowny Assets Ltd., an entity “associated” with Israeli
mining investor Dan Gertler, according to Glencore’s May
prospectus. Biko Invest Corp., another Gertler-linked entity,
bought a quarter of neighboring Kansuki Sprl, it said.
Gecamines said it received $137 million for the two stakes,
while Mutanda alone may be worth more than $800 million,
according to calculations using a valuation conducted by
consulting firm Golder Associates in Glencore’s prospectus.
Three First Quantum mines collectively worth in excess of
$4 billion according to London-based Numis Securities Ltd. were
also sold on for a total of $120 million.
Joyce also cited a 2010 deal between Gecamines, Gertler and
Eurasian Natural Resources Corp. in which Congo may have missed
out on a sale price at least $60 million higher. In February
2010, Gecamines agreed to sell its 50 percent interest in a
copper project known as SMKK to a BVI-based company called
Emerald Star Enterprises Ltd. for $15 million, according to
minutes from the Gecamines board.
Gecamines said the asset’s “economic viability was weak,”
a view they said was confirmed by a valuation by BNP Paribas SA,
according to the minutes.
Four months later, Emerald Star sold the stake to ENRC for
$75 million, according to a Nov. 11, 2010 filing by ENRC.
Emerald Star is “an entity controlled by the Gertler family
trust,” London-listed ENRC said in a March 23 filing.
ENRC had won control of the other half the SMKK project in
2009 when it bought Central African Mining & Exploration Co., a
company Gertler also had shares in. Camec bought that stake for
$85 million, according to an October 2008 company filing.
Albert Yuma, head of Gecamines’ board, last month said he
couldn’t comment because the deal was done before he became
Three members of ENRC’s board interviewed in June and July
said they were unaware of the deal, probably because deals that
small didn’t need board approval.
Joyce called on the International Monetary Fund and the
U.K. government to pressure Congo to stop breaking transparency
guidelines it committed to in exchange for development aid.
Congo is in the second year of a three-year, $561 million
IMF loan program to promote economic growth and reduce poverty.
The government agreed to disclose all natural resources
contracts and revenue under the accord. The U.K. is planning to
spend more than $1 billion on development aid in Congo over the
next four years.
“It is now for the U.K. government to act to stop the
great Congolese give away of state assets,” Joyce said. “This
evidence shows that U.K. taxpayers’ money is being poured into a
country where billions in tax revenue and mineral assets are
being diverted from the people.”
The IMF in September wrote to Gecamines and Sodimico,
another Congolese mining company, asking them to explain why the
deals weren’t announced publicly and what had happened to their
revenue. Gecamines last month said it got a fair return for its
stakes in Mutanda and Kansuki as the purchase prices matched a
valuation by BNP Paribas.
Robert Stanfield, a spokesman for the U.K.’s Department for
International Development, said it may comment later. Samir
Jahjah, the IMF representative in Congo, hadn’t seen the
statement and couldn’t immediately comment when contacted by
Lior Chorev, a spokesman for Gertler, said he may comment
For Related News and Information:
Stories on Congo’s mining industry: TNI CONGO MNG <GO>
Today’s top Africa news: AFTO <GO>
--Editors: John Viljoen, Randall Hackley