Congo's Government Says First Quantum `Smear Campaign' Hurting Investment
Congo’s government accused First Quantum Minerals Ltd. of conducting a “smear campaign” that is discouraging foreign investment in the Central African nation.
The Vancouver-based miner is fighting efforts by the Congolese state and courts to close one of its copper and cobalt projects in the country and take away the rights to two others. First Quantum in a statement on May 24 described the actions as an “orchestrated attack” on its more than $1 billion worth of investments in Congo and said the government’s objectives were “questionable.”
“I have never seen a company going against a host government in a smear campaign like this,” Bene M’Poko, Congo’s ambassador to South Africa, said by phone from Johannesburg on July 5. The company is “giving a bad name to the country in which it wants to operate,” he said.
Congolese President Joseph Kabila has charged M’Poko with coordinating the government’s response to the First Quantum case, the ambassador said.
First Quantum President Clive Newall said in an e-mail late yesterday he wasn’t immediately able to respond to M’Poko’s comments because he is traveling.
The uncertainty caused by the First Quantum dispute has resulted in a 40 percent increase in political risk insurance in Congo, according to the African Trade Insurance Agency. It’s also earned the country criticism by the Group of Eight nations about Congo’s business climate and a moratorium on new investment by the World Bank’s International Finance Corp. The IFC is a minority investor in First Quantum’s $750 million Kingamyambo Musonoi Tailings Sarl copper and cobalt project.
Debt Relief
The dispute with First Quantum also threatened a decision on Congo’s request for debt relief at the World Bank and International Monetary Fund last week, after Canada asked for a delay in the vote and tried to link Congo’s debt relief to improvements in governance and the management of its resource sector. The $8 billion debt relief package eventually passed on July 1, with Canada abstaining.
The conflict between First Quantum and the government began during Congo’s two-and-a-half year revision of all of its mining contracts, M’Poko said. The review was meant to “level the playing field” so that all projects adhered to a new mining code and benefited the country, he said. Many of Congo’s mining contracts were signed while the country was at war or under a transitional government.
“The KMT people are the only ones who refused to renegotiate,” M’Poko said. “They refused with a lot of arrogance.”
Negotiated Settlement
The government canceled the KMT contract in August. On Feb. 1, First Quantum, IFC and a third partner, South Africa’s Industrial Development Corp., took the case to international arbitration in Paris. The group continues to call for a negotiated settlement.
First Quantum and its partners will be paid for the investments they’ve already made in developing the site, M’Poko said.
“My government is not in the business of expropriating private assets,” he said. “They’ll be properly compensated, but we haven’t reached that stage yet.”
To contact the reporter on this story: Michael J. Kavanagh in Kinshasa at mkavanagh9@bloomberg.net.
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