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  • Disambiguate Disambiguate Sep 23, 2009 1:21 PM Flag

    Mineweb Article: A week of Fits in Congo

    From Mineweb:

    A week of fits in the Congo

    Strange rumblings continue around Freeport McMoRan's Tenke Fungurume, and unofficial pockets of resistance appear around ENRC's friendly bid for Camec.

    Author: Barry Sergeant

    Posted: Wednesday , 23 Sep 2009


    It has been a stranger than strangely normal week in and around southern Katanga Province, Democratic Republic of the Congo, following First Quantum's announcement that it had suspended work at the 65%-complete US$600m Kolwezi tailings project, and ENRC's friendly £584m cash bid for London-listed Camec.

    Katanga Province, which hosts some of the world's biggest and highest grade copper deposits (with cobalt as byproduct) employs a general prosecutor, who sealed Kolwezi tailings, an action described by First Quantum as "illegal". Early in August, First Quantum received a letter from the DRC' prime minister, which loosely translated from the French referred to the "impossibility to pursue this partnership".

    First Quantum ranks as the second biggest foreign investor in Katanga Province, after Freeport-McMoRan, operator and holder of 58.8% of Tenke Fungurume; Lundin holds 24.8% and DRC parastatal Gécamines (La Générale des Carrières et des Mines) the balance of 17.5%. The first phase at Tenke cost US$1.8bn to build, and produced its first copper cathode earlier this year.

    Since April, in particular, there have been increasingly strong rumours that Tenke was going to be sealed. This week it was rumoured that Freeport McMoRan had been served a letter similar to the one dumped on First Quantum for Kolwezi tailings. After cross checks, it emerged that most likely Gécamines had leaked a "draft" letter to put pressure on Tenke. This goes back awhile, all right.

    In February 2008, the DRC's mining minister sent a letter to Freeport McMoRan seeking comment on proposed "material modifications" to the mining contracts for the Tenke Fungurume concession, including the amount of transfer payments due to the government, the government's percentage ownership and involvement in the management of the mine, regularization of certain matters under Congolese law and the implementation of social plans.

    Freeport responded to the letter, indicating, in its own words, that "its mining contracts were negotiated transparently and approved by the government of the DRC following extended negotiations, and Freeport believes they are fair and equitable, comply with Congolese law and are enforceable without modifications. Freeport is continuing to work cooperatively with the government to resolve these matters while continuing with its project development activities".

    Gécamines enjoys an undilutable carried interest in Tenke and is not responsible for funding a cent of project costs. In accordance with the terms of the underlying agreement, Gécamines is to receive asset transfer payments of US$100m, which had been paid down by 70% during 2008.

    It seems that Tenke may escape the wrath unleashed on Kolwezi tailings; Freeport is advised by the Snowcroft Group, out of Washington DC. As one veteran Congolese hand puts it: "Walter Kansteiner handles Freeport's affairs. The DRC would be on a collision course with the US government if they attempted to whip Tenke away from Freeport just like that . . . " Kansteiner founded the Snowcroft Group.

    While Tenke remains under something of a cloud, whether it likes it or not, questions are being raised in the DRC about aspects of ENRC's proposed friendly takeover of Camec.... [Article continues but does not relate to Tenke.]



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