Aug. 17 (Bloomberg) -- Sodimico, a Democratic Republic of Congo state-owned miner, said it sold its share in two copper projects formerly run by First Quantum Minerals Ltd. for $30 million, less than a sixteenth of the stake’s estimated value.
The company’s 30 percent stake in Frontier and Lonshi mines was disposed of in an unannounced sale in March, Sodimico Chief Executive Officer Laurent Lambert Tshisola Kangoa said. He declined to name the purchaser of the projects, which have a combined value of more than $1.6 billion, according to estimates by Numis Securities Ltd. and Oriel Securities Ltd. in London.
“Sodimico is a state-owned company and it was a political decision to resolve certain problems and re-launch production at Frontier,” Kangoa said in a July 28 interview in Kinshasa, Congo’s capital. “It was not an economic decision by Sodimico.”
Sodimico repossessed the Lonshi and Frontier projects from First Quantum after Congo’s Supreme Court decided in May 2010 that the Vancouver-based company illegally obtained the rights to the concessions, which previously belonged to Sodimico. First Quantum is fighting the cancellation at the International Centre for Settlement of Investment Disputes in Washington, D.C.
A copy of Sodimico’s contract for the properties on Congo’s Mines Ministry’s website doesn’t include the March deal. A June 2010 agreement gave 70 percent control of the mines to a Hong Kong-registered company called Fortune Ahead Ltd. Bloomberg was unable to locate contact information for the company’s director named on the contract, a Brazilian passport holder named Saul Valt with an address in Gibraltar.
Kangoa said Valt wasn’t involved in the most recent sale.
Whether the $30 million purchase price was good value for Sodimico’s stake was “debatable,” Kangoa said. Now that the Lubumbashi-based company has divested from the projects, it won’t receive royalties or dividends.
Numis Securities valued Frontier at about $1.6 billion and Lonshi at $400 million in a research note last year, while Oriel Securities in September valued Frontier at $1.4 billion and Lonshi at $250 million. Both brokerages have since removed Frontier and Lonshi from their valuations of First Quantum.
Frontier, which shipped about 94,000 metric tons of copper in 2009 and had $439 million in revenue, hasn’t operated in a year. First Quantum refused to turn over information on how to run the mine and prevented the new owners from using the company’s equipment because “they didn’t want us to benefit from their loss,” Kangoa said.
First Quantum hasn’t been on site since the mine closed and wasn’t asked for advice on the operation of any equipment, the company said in an e-mailed response to questions on Aug. 2.
More than 1,200 people lost their jobs when Frontier closed in August 2010, and the state is losing hundreds of millions of dollars in revenue, Kangoa said. The operation was Congo’s largest taxpayer in 2009, generating $55 million for the state Treasury, according to First Quantum public filings.
First Quantum says it invested more than $300 million in the low-grade, high-tonnage Frontier mine and was exploring the possibility of extracting ore from the underground section of Lonshi’s depleted open-pit mine when its license was revoked.
In a separate court case, Sodimico sued First Quantum for more than $17 million in lost revenue and $40 million in damages for using studies of the Frontier and Lonshi site the state-owned miner carried out before First Quantum took over the licenses in 2000.
A Lubumbashi-based commercial court ruled in favor of Sodimico on March 12. First Quantum is appealing the case, arguing that it discovered the deposits and only used publicly available information.
In two letters to Congolese Mines Minister Martin Kabwelulu and central bank Governor Jean-Claude Masangu Mulongo, Kangoa said Sodimico hasn’t received its full share of a $30 million signing bonus for the original deal with Fortune and was asked to make a $10 million payment to the Treasury to help finance upcoming elections after the recent share sale. Bloomberg News received a copy of the letters from the National Assembly’s Economic and Financial Committee and Kangoa confirmed their content.
Sodimico is in the process of transforming itself into a commercial company, a proposition made more difficult by the sale of its properties over the years, Kangoa said.
The company, whose assets mainly consist of minority shares in joint ventures, is in negotiations with South Korea’s Posco and Taejoo Synthesis Steel Co. about a partnership to exploit a copper mine in the southeastern province of Katanga, Kangoa said.
Sodimico also has a 23 percent stake in a copper venture with Metorex Ltd., the Johannesburg-based company that China’s Jinchuan Group Co. plans to acquire, Kangoa said.