ENRC Defends Congo Mining Rights Buy After Previous Owner Threatens to Sue
Eurasian Natural Resources Corp., the mining company that last month bought rights to the Democratic Republic of Congo’s Kolwezi project, defended the acquisition after previous owner First Quantum Minerals Ltd. said it may sue the company.
“ENRC undertook an extensive due-diligence process” before making the purchase and remains “fully satisfied” with the findings, Chief Executive Officer Felix Vulis said today in a statement. If First Quantum takes “adverse actions, ENRC reserves all of its rights against FQM and its subsidiaries,” the company said.
The Congolese government shut the copper and cobalt project last September after saying First Quantum hadn’t fulfilled its contractual obligations. London-based ENRC said Aug. 20 it acquired a license to Kolwezi by purchasing 50.5 percent of Camrose Resources Ltd. for $175 million, which it will manage with Cerida Global Ltd., owned by Israeli investor Dan Gertler.
First Quantum, already in international arbitration with Congo over the withdrawal of the license, said Sept. 6 it’s considering seeking compensation of more than $1 billion from ENRC to cover financial losses at Kolwezi.
“We’re looking at our options for taking action against ENRC,” Clive Newall, president of the Vancouver-based company, told reporters in London. A decision will be made before the end of the year, he said.
Shares Slump
First Quantum has sunk 22 percent in Toronto trading this year, while ENRC is down 6.7 percent in London. ENRC shares declined 0.6 percent to 854 pence at the 4:30 p.m. close on the London Stock Exchange today, while First Quantum traded down 1.7 percent at C$62.90 as of 12:36 p.m. Toronto time.
“At the very least, FQM now has the ability to delay the final phases of construction at Kolwezi by playing hard-ball on the details/price of the infrastructure,” Liberum Capital Ltd. wrote in a note to investors today. A potential “legal liability is likely to overhang ENRC’s shares.”
ENRC’s purchase doesn’t give it the right to equipment, infrastructure or a feasibility study at Kolwezi, Liberum said. “A likely outcome is that some form of settlement with FQM in relation to hard assets on site will be required,” it said.
A Congo court on Aug. 4 appointed a liquidator for the Kolwezi project. Congo also last week revoked First Quantum’s permits for the separate Frontier and Lonshi mines, Newall said.
“Any dispute that First Quantum has is with the relevant DRC authorities,” Vulis said in today’s statement. “ENRC is not a party to arbitration or legal proceedings with First Quantum. If proceedings are issued, ENRC will defend its legal position vigorously.”
Kolwezi is part-owned by the World Bank’s International Finance Corp. and the Industrial Development Corp. of South Africa.
To contact the reporter on this story: Amanda Jordan in London at ajordan11@bloomberg.net
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