Gecamines of Congo Studies Selling Stake in Glencore MineMichael J. Kavanagh
Gecamines, the Democratic Republic of Congo’s state-owned mining company, may sell its 20 percent stake in Glencore Xstrata Plc’s Kamoto Copper Co. to raise money for other projects, said Chairman Albert Yuma.
“We’ve been in discussions with 14 groups who’ve gone through a tender and the process is ongoing,” Yuma said in an Oct. 3 interview in the Congolese capital, Kinshasa. Glencore’s Katanga Mining Ltd., which owns 75 percent of KCC, would have right of first refusal of any sale, he said.
KCC’s copper output may climb to 300,000 metric tons by the end of next year, according to Glencore’s 2012 annual report, which would make it Congo’s biggest miner. The company produced 93,000 tons of copper in metal and concentrate form and 2,100 tons of cobalt last year, it said. A January Bank of America Merrill Lynch report on the merger between Glencore and Xstrata Plc valued Katanga Mining’s stake in KCC at $5.2 billion.
Yuma said KCC missed production targets for the past five years and has too much debt after investing in an underground mine and plant expansion to be profitable for Gecamines. The company’s shares in KCC “are not strategic,” he said. “The value today of KCC is now negative.”
Glencore spokesman Charles Watenphul declined to comment.
Israeli billionaire Dan Gertler’s Fleurette Group is among the 14 bidders for Gecamines’ stake, Yuma said. He did not immediately provide the names of other bidders. Gertler already has shares in Katanga Mining and bought Gecamines’ stakes in Glencore’s Mutanda Kansuki mining project in 2011.
“We don’t comment on speculation,” a spokesman for Fleurette said in an e-mailed response to questions.
Gecamines may halt the sale if it can find financing for its $2.75 billion reorganization plan, Yuma said. The company wants to build a coal-fired power plant and new processing factories to begin exploiting several fully owned mining sites it recently bought from former partners.
In 2011, Export-Import Bank of China requested that Gecamines use its stake in KCC as collateral for a possible $200 million loan deal, according to board minutes published on the company’s website. Gecamines did not receive the financing.
Congolese Mines Minister Martin Kabwelulu said he had no response to Gecamines’ proposal in a Oct. 4 mobile phone message. Congo’s government is the sole shareholder of Gecamines, which is legally a commercial company.
To make the company more attractive to investors, Gecamines is spinning off its minority stakes in joint ventures and creating a new offshore company, Yuma said.
Payments from its partners including royalties and dividends will flow through the subsidiary, which “will be disconnected from Gecamines’ debt” of about $1 billion, he said.
“This revenue flow will be a guarantee for the borrowing we’ll do on the markets,” he said. “If we can raise the financing through our subsidiary, that would be worth more” than selling assets, he said.
Renaissance Capital, the Russian investment bank controlled by billionaire Mikhail Prokhorov, is advising Gecamines on the plan, Yuma said.
Last year, the International Monetary Fund canceled its loan program with Congo after the government failed to provide requested information about a 2011 Gecamines deal with Gertler for a stake in London-based Eurasian Natural Resources Corp.’s Comide copper project. Congo lost about $225 million in IMF loans because of the cancellation.
Gecamines’ other partners include Phoenix, Arizona-based Freeport McMoRan Copper & Gold Inc. and Australia’s Tiger Resources Ltd.
Congo is the world’s eighth-largest producer of copper and the biggest source of cobalt, which is used in rechargeable batteries. Copper prices have fallen 9.2 percent since the beginning of the year and traded 0.8 percent lower at $7,204.25 a ton by 3:35 p.m. in London on Oct. 4.