The International Monetary Fund asked two Democratic Republic of Congo state-owned mining companies to explain recent unannounced asset sales at prices below their estimated market value.
Congo’s Gecamines sold its stakes in two mining projects run by Baer, Switzerland-based Glencore International Plc to companies associated with Israeli businessman Dan Gertler earlier this year, according to a Glencore prospectus published in May. Gecamines didn’t announce the deal publicly at the time.
In March, state-owned Sodimico sold its 30 percent stake in two mines formerly held by First Quantum Minerals Ltd. of Canada to two companies registered in the British Virgin Islands.
The sales are being scrutinized by Congolese and international organizations because of the secrecy surrounding the deals and the amounts the properties were sold for. IMF country representative Samir Jahjah couldn’t immediately comment on the documents when contacted by phone today.
Congo’s government published responses dated Sept. 16 by Sodimico and Gecamines to the IMF’s inquiries on the Mines Ministry’s website. The Central African nation is in the second year of a three-year, $561 million loan program backed by the IMF to reduce poverty and spur economic growth.
Gecamines sold its 20 percent share of the Mutanda copper and cobalt project earlier this year for $137 million, according to its submission to the IMF. The stake was bought by Rowny Assets Ltd., a British Virgin Islands-registered entity “associated” with Gertler, according to the Glencore prospectus.
According to calculations by South African consulting firm Golder Associates included in the prospectus, the entire project is worth an estimated $3.1 billion. That valuation would make the stake Gecamines sold to Rowny worth more than $600 million, excluding royalties and other payments.
Gecamines told the IMF it relied partly on a valuation of Mutanda by BNP Paribas SA from April 2010. BNP Paribas didn’t immediately respond to an e-mailed request for comment today.
The Glencore prospectus also announced that Gecamines had sold its 25 percent stake in a neighboring copper and cobalt project known as Kansuki to another British Virgin Islands entity associated with Gertler. Kansuki has “the potential to be a bigger producer” of minerals than Mutanda, Deutsche Bank AG said in a June 6 report on Glencore.
The price Gecamines received for Kansuki wasn’t disclosed in the answers submitted to the IMF.
In March, Sodimico sold its 30 percent stake in Frontier and Lonshi mines, previously owned by First Quantum, for $30 million. The properties have a combined total value of more than $1.6 billion, according to estimates by brokerage houses Numis Securities Ltd. and Oriel Securities Ltd. in London.
Sodimico’s Chief Executive Officer Laurent Lambert Tshisola Kangoa said on July 28 the decision to sell the stake was “political” and that it was “debatable” if the $30 million purchase price was a proper valuation.
Neither Gecamines nor Sodimico went through an open tender process because their partners in the ventures had the right of first refusal, according to their responses to the IMF questions.
Gecamines disagreed with an IMF question suggesting that the proceeds from the Mutanda sale should be transferred to state coffers in accordance with Congolese law. After the copper and cobalt miner became a commercial company in December, such laws didn’t apply, it said.
Sodimico has already transferred $10 million from its asset sale to the state, the company said in its response to the IMF.