Congo Miner Said to Get $100 Million to Clear China Moly BuyBy
Funds paid four days after state miner agreed to drop cases
Freeport, Lundin sold stakes in copper mine for $3.8 billion
The Democratic Republic of Congo’s state mining company received $100 million as part of a settlement to drop its objections to the sale of the country’s biggest copper mine to Chinese buyers, according to people with knowledge of the agreement.
The cash payment was made last month after state-owned Gecamines agreed to abandon legal cases to block the sale of Freeport McMoRan Inc. and Lundin Mining Corp.’s interests in the Tenke Fungurume mine, the people said, asking not be identified as terms of the arrangement aren’t public. China Molybdenum Co. and Chinese private-equity firm BHR Partners bought the stakes for a combined $3.8 billion.
The settlement marks the end of a nine-month dispute between Freeport, Lundin, the Chinese buyers and Gecamines over whether the sales, which were a transfer of ownership in an offshore holding company, should have been subject to preemption or approval by the state-owned miner. Gecamines owns 20 percent of local operating unit Tenke Fungurume Mining.
Gecamines has received other one-off payments in the past to approve similar deals and from the sale of its own assets, but has rarely published details of the transactions. Freeport said last month it paid Gecamines $33 million as its share in the settlement. The contributions of the other parties and the total sum paid have not been made public.
“Gecamines is a closed book, we have very little idea where its money goes,” Pete Jones, a campaigner at London-based advocacy group Global Witness, said in an e-mailed response to questions. “Payments to Gecamines must be done with complete transparency, especially at this time where Congo says it is desperately short of cash to organize overdue elections.”
Gecamines didn’t immediately respond to a request to comment on the Global Witness statements.
Congo’s government is currently running a budget deficit of more than $400 million and says it’s struggling to finance an election that was supposed to take place in November 2016.
“Transparency on what happens to such payments to state-owned enterprises would naturally be part of any discussion of international economic support to the Congolese government,” British Ambassador to Congo Graham Zebedee said in a statement on his Twitter account on Wednesday.
Communications Minister Lambert Mende said by phone on Wednesday he wasn’t aware of the Gecamines payment or the statement by Zebedee and couldn’t comment.
Lundin will disclose terms once the sale of its stake to BHR closes, which is expected in the first half of the year, the Toronto-based company said Monday in an e-mailed response to questions. China Moly declined to comment, while BHR Partners didn’t immediately respond to an e-mailed request for comment. Freeport declined to comment on the full amount and referred to its $33 million share of the settlement announced in a Jan. 25 quarterly earnings report.
The payment is a windfall for Gecamines. The company had debts of $1.58 billion as of June, while its copper production dropped 15 percent last year to 14,260 metric tons despite plans since 2010 to boost output to more than 100,000 tons and reestablish the company as an important independent producer. At its peak in 1986, Gecamines produced 476,000 tons of copper.
In addition to the cash payment, Tenke Fungurume Mining will also provide a $30 million loan to Gecamines, once the local court action it initiated in December ceases, the people said.
Congolese Mines Minister Martin Kabwelulu, who in January confirmed an agreement had been reached, referred questions relating to the details of the settlement to Gecamines, when contacted Feb. 20 by phone. Gecamines declined to comment on the payment.