Zijin Mining Group Co.’s bid for 49.5 percent of Ivanhoe Mines Ltd.’s Kamoa copper project in the Democratic Republic of Congo requires government approval before it can move forward, the mines minister said.
Ivanhoe announced the $412 million deal with Zijin, based in China’s Fujian province, on Tuesday. Because Congo has a 5 percent stake in the project, Mines Minister Martin Kabwelulu said the company should have contacted the government about the sale through the portfolio or mines ministries. Ivanhoe says it doesn’t need approval for the share sale and has been in touch with the appropriate government authorities.
“This sale cannot take place without prior arrangement from the government,” Kabwelulu said by phone Wednesday from Tokyo. “The government is open to discussing the prerequisites to a sale.”
Zijin’s proposed purchase of the Kamoa stake helps Ivanhoe, the explorer founded by Robert Friedland, develop mines in Africa and comes after the Chinese company was blocked from entering Congo five years ago. The first phase of Kamoa entails developing a 100,000 metric-ton copper mine at an estimated cost of $1.4 billion. A smelter will be constructed in a second phase in addition to other expansions that will take annual output of blister copper to 300,000 tons.
Kabwelulu said neither he nor Portfolio Minister Louise Munga Mesozi had authorized the deal. Munga Mesozi declined to comment when reached by phone Wednesday.
“We are a shareholder in Kamoa,” Kabwelulu said. “A minority shareholder, certainly, but we have the right to be contacted and we cannot authorize this.”
Ivanhoe Chief Executive Officer Lars-Eric Johansson said no approval is required by the government because the state’s 5 percent shareholding “or a potentially larger future shareholding in the DRC company will not be affected.”
Ivanhoe previously has offered to sell an additional 15 percent of the Kamoa project to the government at market rates.
“Ivanhoe Mines is continuing to engage with the DRC government and the ministry of mines about any questions or issues they may have,” Johansson said in an e-mailed response to questions Wednesday. “We are confident, based on previous experience and engagement, that any questions or issues the government may have will be resolved before the transaction is completed.”
Ivanhoe expects the sale to Zijin to close on or about July 31, following Chinese regulatory approval.
The mines ministry is asking Ivanhoe officials to meet on June 3 to discuss the sale as well as a proposal for the government to increase its stake in the project to as much as 15 percent, Valery Mukasa, Kabwelulu’s chief of staff, said in an e-mailed statement on Wednesday.
Moise Ekanga, who heads Congo’s Office for the Coordination and Oversight of the Sino-Congolese Program, was in meetings and couldn’t immediately respond to questions when reached by phone Wednesday. Ekanga’s office, which answers directly to President Joseph Kabila, handles Congo’s relationship with China and controls a $6.2 billion minerals-for-infrastructure contract between the two countries.
Zijin has an option to buy an additional 1 percent stake upon arranging project financing for 65 percent of Kamoa’s first phase of development, the company said Tuesday in a joint statement with Ivanhoe. Should it exercise that option, Zijin will arrange project financing for subsequent development phases, the parties said.
Ivanhoe shares jumped as much as 17 percent after the news of the deal on Tuesday. The stock fell as much as 3.2 percent to C$1.21 and closed trade at $1.22 in Toronto on Wednesday. The company is also planning a platinum mine in South Africa.