ENRC defends DRC acquisition, hits back at First Quantum

9th September 2010 By: Loni Prinsloo

JOHANNESBURG (miningweekly.com) – London-listed Eurasian Natural Resources Corporation (ENRC) on Thursday defended its acquisition of a majority interest in Camrose Resources, which owns copper rights the Democratic Republic of Congo (DRC), including the disputed Kolwezi project.

ENRC was responding to a threat of legal action from First Quantum, which warned that it might demand compensation for lost market value after the DRC government took away the Kolwezi licence and ENRC bought the rights to the project.

ENRC CEO Felix Vulis pointed out that no proceedings have been issued against the company to date, but added that it would "vigorously" defend its legal position.

"Prior to the acquisition of Camrose, ENRC undertook an extensive due diligence process, and ENRC remains fully satisfied with the findings."

Vulis said that the licence was withdrawn by the DRC government in August 2009, and that the Court of Appeal confirmed that the withdrawal was lawful.

"ENRC is not a party to arbitration or legal proceedings with First Quantum; any dispute that First Quantum has is with the relevant DRC authorities."

ENRC also clarified that its acquisition did not include any infrastructure or equipment on the Kolwezi site, stating that any concerns of First Quantum about the use of infrastructure or equipment was misplaced.

Liberum Capital analysts said in a note that First Quantum had the ability to delay the final phases of construction at Kolwezi by "playing hard ball" on the details or price of infrastructure on the site.

"First Quantum has spent C$750-million developing the assets thus far, a proportion of which will represent hard assets on the ground for which they will require compensation by ENRC," it stated.

Meanwhile, Felix warned that should First Quantum continue to make statements against the company, it would "reserve all its rights against FQM and its subsidiaries".

The miner noted that it had tried to engage in dialogue with First Quantum, but that it was rejected.

"First Quantum did not respond to a previous letter from ENRC, suggesting a dialogue. Instead of accepting that offer, First Quantum has made statements to try to discredit ENRC and to interfere with ENRC's rights to develop the Camrose joint venture and the Kolwezi tailings project," the company stated.

Last month, ENRC announced that it had paid $175-million for a majority stake in Camrose.