KINSHASA – The Democratic Republic of Congo’s State-owned copper producer signed over millions of dollars in future payments to an offshore company owned by billionaire Dan Gertler, according to advocacy group Global Witness.
Congo’s Gecamines, which holds a 25% stake in the Kamoto project of Katanga Mining , instructed the Glencore unit in January 2015 to transfer the state mining group’s royalties to Africa Horizons Investment , Global Witness said Tuesday by e-mail. Africa Horizons is a unit of Gertler’s Fleurette Group.
“The contract we have seen provides no reason for Gecamines giving away these royalties,” Pete Jones, a campaigner at the London-based advocacy group, said in the statement. “Neither Gecamines nor Gertler’s representatives have told us whether Gecamines received any payment in return.”
Africa Horizons bought the royalty stream from Gecamines, Fleurette said by e-mail, while declining to elaborate on the particulars of the deal, citing a confidentiality agreement.
Gecamines said it couldn’t comment in response to e-mailed questions.
GLENCORE SATISFIED
Glencore was contented with the arrangement to pay Gecamines’s royalties to Africa Horizons, the company said by e-mail. It took “reasonable measures in accordance with its procedures to satisfy itself that the sale was authorised by Gecamines and that there was an underlying basis for the sale.”
Gecamines has faced criticism in the past five years from the International Monetary Fund and advocacy groups including Global Witness for selling assets in non-transparent procedures. In April, it sold its 25% share of Eurasian Resources Group’s Metalkol tailings project without disclosing the transaction, as required by law.
The Congo expelled two researchers with Global Witness from the country in July.
A close friend of President Joseph Kabila, Gertler has operated in Congo for almost 20 years. He originally traded in rough diamonds before buying stakes in copper, cobalt, gold and oil projects.
ROYALTY MILLIONS
The Kamoto copper project was the country’s third-biggest producer in 2014, shipping 158 026 metric tons and paying more than $63-million in royalties to Gecamines, according to declarations made to the Extractive Industries Transparency Initiative.
The potential royalties for Gecamines over the lifespan of the mine, which could produce until at least 2030, could have been as much as $880-million, Global Witness said. Fleurette said this figure was inflated and that the contract only provides for Africa Horizons to receive the royalty stream until “early 2019.”
“Independent international financial institutions advised both sides, and the transaction was priced in accordance with the valuations provided to the parties,” according to Fleurette’s e-mailed statement.
Glencore suspended operations at the mine in Sept. 2015 to invest in modernizing processing facilities and production will restart in 2018. The shutdown means Africa Horizons doesn’t expect to receive any further payments from the royalty agreement before the end of the contract in 2019, Fleurette said, and declined to explain the reasons behind the arrangement, the total value of the contract or what Gecamines had received in return.
LOAN REPAYMENT
In 2013, Fleurette was in advanced negotiations to acquire Gecamines’ stake in the Kamoto project before the deal was blocked by the government, which criticized the state-owned miner for not informing the Ministry of Mines or Ministry of Portfolio of its intentions and questioned the reasons for the proposed sale.
Earlier in 2013, Fleurette loaned Gecamines $196-million to acquire the untapped Deziwa and Ecaille C mining concessions, which it now plans to develop in a joint venture with China Nonferrous Metal Mining Group. Information regarding the loan only became public in April 2014.
Fleurette said it stood to suffer a “huge loss” on the royalty transaction due to the suspension of production at Kamoto and declined to confirm whether the deal was intended as repayment for the Deziwa loan.