Gecamines of Congo to Get $269 Million After Court Decisions
Gecamines, the Democratic Republic of Congo’s state-owned copper miner, will pay off debts, boost output and seek new financing after two court decisions released $269 million due to it, Chairman Albert Yuma said.
Gecamines will receive more than $94 million in blocked payments after the top court for Jersey in the Channel Islands on July 17 rejected an attempt by a creditor to collect a debt owed by the Congolese state through the mining company. Another decision against the creditor in Hong Kong last year will release $175 million in signing-bonus money “in the coming weeks,” all of which is destined for Gecamines, Yuma said.
“Between debt and investments, Gecamines needs almost a billion dollars,” he said in an interview in Kinshasa, the capital, on July 20. “The money from Jersey will enter into the restructuring plan of Gecamines and pay down the debt and we’ll still look for money to finance investment.”
Gecamines, which sits on the world’s biggest deposits of cobalt, is trying to increase production after decades of dictatorship and war left its infrastructure destroyed and cash reserves depleted. The company will produce about 35,000 metric tons of copper this year, Yuma said, compared with 476,000 tons in 1986. By 2015, output may reach 100,000 tons, he said.
Officials from the Development Bank of Southern Africa will travel next week to Lubumbashi, where Gecamines is based, to discuss a possible financing agreement, he said. Any accord may be complicated by a $561 million International Monetary Fund loan program with Congo, which forbids state-owned companies like Gecamines from taking on new debt at non-concessional rates.
Gecamines shouldn’t be subject to the agreement because it is becoming a commercial company, Yuma said.
The IMF has brought pressure to bear on Gecamines to increase transparency after a series of unannounced sales of its mining assets last year. The assets were sold at below their market value to companies linked to a friend of Congolese President Joseph Kabila, according to anti-corruption campaigners Global Witness.
Non-government organizations “have a way of seeing things and I think that NGOs haven’t developed a single country in the world,” Yuma said. “And especially not an African country.”
In May, Bloomberg uncovered another unannounced sale of Gecamines’ stake in a project known as Comide Sprl, which is run by London-listed Eurasian Natural Resources Corp. Yuma said he’d never heard of the disposal.
Details of the sale were published in Comide’s company minutes, which were signed by Gecamines Chief Executive Officer Ahmed Kalej. Gecamines hasn’t published the Comide sales contract, even after requests from the IMF and a decree signed last year by the prime minister and mines minister to publish all mining contracts. Most of the country’s contracts are now available on government websites.
Gecamines will begin “in a few weeks” to take back undeveloped mining concessions, Yuma said. “It will be done legally, with the agreement of former partners,” he said.
The company’s strategic plan from August 2011 says it will “take back mining titles from joint ventures in which partners haven’t upheld their contractual engagements with Gecamines.”
Gecamines is also looking to certify reserves on its existing concessions and attract new partners, he said. The company is a minority partner in nine joint ventures already in production, Yuma said, with companies including Glencore International Plc (GLEN) and Freeport-McMoRan Copper & Gold Inc. (FCX)
“If we start a new project, Gecamines will no longer be a minority partner,” he said. “The order the president gave me is to make Gecamines a world-class, independent operator.”
The company has begun an audit of its existing joint ventures to ensure costs and production correspond with what was signed in their contracts, Yuma said. The audit could result in Gecamines receiving dividends more quickly, he said.
“If dividends come quicker, we won’t need to go looking for financing,” he said.
Yuma also cautioned against Congo’s Mines Ministry increasing taxes abruptly in planned revisions of the country’s 10-year-old mining code.
“We’re in the investment phase in most of the mining companies,” he said. “You must be careful to allow the investments to be realized and production to increase before making the tax pressure too strong.”
Congo produced about 520,000 tons of copper last year, and is aiming for 1.5 million tons a year by 2016, according to the Mines Ministry.
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